"The U.S. is increasingly concerned about China's efforts in the region, the types of investments they are making, what it's doing to different economies and what it's doing for China's strategic interests," echoed Clete Willems, special assistant to the president for international trade, investment and development at the National Security Council. "We want to find a way to provide a clear choice and a clear alternative and that's really what this is all about."
The IDFC's size is set to be more than double the Overseas Private Investment Corporation, the current instrument for development finance that has a ceiling of $29 billion. Unlike its predecessors, the IDFC would boast the ability to make equity investments abroad.
The proposed institution looks to employ local workers and catalyze private sector money in a transparent fashion that will boost economic growth. Its model is a clear response to some of the biggest criticisms behind Belt and Road: a reliance on Chinese workers and unsustainable loans that many participating nations cannot afford in the long term. If unable to pay, indebted countries may be forced to sell strategic state assets to Beijing, as was the case with Sri Lanka — a phenomenon that's been dubbed debt-trap diplomacy.
Such problems arise from China's use of government-to-government agreements, said Conor Savoy, director of policy and advocacy at investment firm Global Innovation Fund. Private investment, as promoted under the IDFC, is more sustainable, he added.