Shanghai | A reconvened security grouping comprising Australia, the US, India and Japan is seeking to bolster infrastructure lending across the region, in an effort to counter China’s use of major projects to gain influence.
The Australian Financial Review has been told the proposal was discussed when the reformed group met for the first time on the sidelines of the East Asian Forum in Manila last month.
‘‘They want to ensure there is another option on the table to fund infrastructure, not just what the Chinese are offering,’’ said one person familiar with the talks who asked not to be named.
The person said the parties would seek to have the Asian Development Bank and the World Bank increase their funding for infrastructure, rather than create a new body.
‘‘The focus is very much on using existing institutions,’’ said the source.
The infrastructure push by the socalled ‘‘Quad’’ countries is likely to further raise strategic tensions across the region as China and existing powers clash over Beijing’s efforts to project influence into south-east Asia and the sub-continent.
‘‘I think it’s very sensible that Japan is prepared to lead this new push, which also acknowledges there is a strategic element to infrastructure spending and development,’’ said Peter Jennings, executive director of the Australian Strategic Policy Institute. ‘‘I don’t think we should assume infrastructure funding in the Asia Pacific can only come from China.’’
China plans to upgrade transport and infrastructure links across southeast Asia and into Europe via its $US1 trillion Belt and Road Initiative (BRI), which has become one of the country’s top foreign policy priorities. The main funding vehicles being used are its policy development banks and the recently established China-led Asia Infrastructure Investment Bank (AIIB).
Foreign Minister Julie Bishop declined to comment on what was discussed at the Manila Quad meeting, but said: ‘‘Australia, along with the US, Japan and India, supports greater investment in infrastructure in the region in order to enhance economic growth and connectivity.
‘‘The Australian government continues to work closely with the ADB and World Bank in making an important contribution to regional infrastructure funding and policy,’’ she said, noting China’s BRI was complementary to other initiatives.
The Turnbull government was more forthright in last month’s Foreign Policy White Paper.
‘‘Much of the new competition for influence [in the region] is also being played out through infrastructure development,’’ it said.
The Turnbull government has not signed up to China’s BRI, an ongoing point of tension in the relationship.
The infrastructure push by the Quad countries comes at a time when doubts are emerging over Beijing’s capacity to fund and execute deals across the region.
David Dollar, a senior fellow at the Brookings Institute, noted the AIIB had lent just $US3 billion in its first two years of operations and 75 per cent of these loans were in conjunction with established multi-lateral institutions.
‘‘The bottom line: It is too early to make a definitive judgment on whether China’s finance is a challenge to the global economic order,’’ he wrote.
‘‘There are certainly things to worry about such as growing indebtedness of some of China’s big clients and environmental and social safeguards on the ground. But there are also signs of evolution.’’
Mr Jennings said the more he read about the BRI and AIIB the stronger his belief they might not threaten the established global order as much as some had imagined. ‘‘I’m yet to read anything about how well it’s going,’’ he said.
Problems with China’s funding of major projects surfaced last month when Pakistan and Nepal pulled out of separate hydroelectric projects due to overly onerous loan terms.
Key points
The infrastructure push by ‘‘Quad’’ countries is likely to raise tensions in the region.
Doubts are emerging over Beijing’s capacity to fund and execute deals.
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