Asia Politics

New US spending in Asia won't match China but it's significant in other ways

Key Points
  • The U.S. infrastructure investment for Asia-Pacific announced on Monday has been interpreted as an alternative to China's Belt and Road.
  • The $113 million venture pales in comparison to China's trillion-dollar initiative, but it's significant because it provides emerging nations with more choices while reinforcing American interest in the region, experts said.
U.S. Secretary of State Mike Pompeo speaks during the Indo-Pacific Business Forum at the U.S. Chamber of Commerce on July 30, 2018 in Washington, DC.
Alex Wong/Getty Images

Washington's new $113 million in infrastructure spending for the Asia Pacific region can't compete with Beijing's massive investments there, but the move reinforces the U.S. commitment to Asian governments.

Secretary of State Mike Pompeo on Monday announced new ventures focused on technology, energy and infrastructure as part of President Donald Trump's Indo-Pacific strategy. They include $25 million to expand U.S. technology exports, $50 million for countries to produce and store energy resources as well as a $30 million assistance network for infrastructure development. Australia and Japan have also joined forces with the U.S. to mobilize investments in the area.

A desire to counter China's rising economic and political influence in Asia, as reflected by the country's continent-spanning Belt and Road infrastructure program, is believed to be a major factor driving Washington's entire Indo-Pacific policy. And many now view the U.S. fund as an alternative to the Belt and Road Initiative.

The U.S. isn't aspiring for dominance but instead looking for partnerships, Pompeo told CNBC on Monday, adding that "others choose to behave differently." Some countries that have engaged in the Belt and Road program "find themselves in a place that they are not happy about, and I think the others are beginning to see that as well," he added, alluding to concerns about China employing debt-trap diplomacy.

The way to convince BRI member countries that America's operating style is better is by showing them how relationships with the U.S. benefit each country, he continued.

But, as it stands, the $113 million American fund pales in comparison to China's trillion-dollar Belt and Road. In Pakistan alone, the world's second-largest economy has $62 billion worth of infrastructure projects.

"This could be the first step of a future pathway to stronger, more sustainable set of alternatives to the Belt and Road Initiative" but current resources "are shallow in comparison to what China can bring to the table," said Brian Eyler, director of the Southeast Asia program at think tank Stimson Center.

American investments in Indo-Pacific could improve US-China ties: CEO
American investments in Indo-Pacific could improve US-China ties: CEO

Still, Pompeo's announcement, coming ahead of his trip to Southeast Asia, carries political clout in a region dominated by Chinese funds.

It signals "that smaller countries drawn to China's economic outreach can rely on the United States," analysts at intelligence firm Statfor said in a note.

"At this stage it is difficult to see this U.S. initiative as an alternative to China's Belt and Road, though this certainly is designed to offer more choices for countries in the region," echoed Chengxin Pan, associate professor at Australia's Deakin University.

A year and a half ago, Washington's engagement with Asia was thrown into question by Trump's exit from the Trans-Pacific Partnership trade deal. Since then, doubts have only grown, especially following Trump's decision to slap tariffs on Asian allies.

Monday's news addresses those concerns, according to Brett McGonegal, chairman and chief executive officer of financial services firm Capital Link International. It's Washington's way of saying that "it hasn't actually lost Asia Pacific" and American leaders are "not walking away from the region," he said.

However, the U.S. may still have more convincing to do.

Despite Pompeo's positive speech, "few of his counterparts believe he is channeling President Trump's own views, which are distinctly unorthodox," warned Daniel Russel, vice president for international security and diplomacy at the Asia Society Policy Institute.

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Not a zero-sum game

Trump's administration may be seeking to balance out China's presence in Asia but that doesn't mean countries in the region must choose between Washington or Beijing.

"The contest in Asia-Pacific is not an either/or between the U.S. and China," said Steven Okun, president of the executive committee at the Asia Business Trade Association.

"Many countries in the region are moving forward collectively on trade without either; both the U.S. and China will be welcome so long as their participation achieves a win-win from the region's perspective," he said.

Deakin University's Pan echoed that sentiment, saying the "enormous and diverse" needs for investment in the region "mean that no single source, be it China or the U.S., is likely to be sufficient on its own."

Possibility of US-China cooperation

Despite ongoing trade frictions, some experts have said the world's two largest economies could cooperate on infrastructure investments in the Indo-Pacific.

"If you end up paralleling a process like Belt and Road, I don't think its too far to imagine the two of them coming together, maybe doing something together ... I think there's a way to get to the table where both parties benefit," said McGonegal.

And since both U.S. and Chinese programs focus on private players, collaboration isn't entirely impossible.

"Private interests in the U.S. and China could be keen to partner and such partnerships would be welcomed in the region ... This kind of coalition investment could produce projects that adhere to higher performance standards delivered by U.S. expectations and practices and private Chinese money," said Eyler.