In jab at China, US development official touts ‘big-hearted’ aid rooted in cooperation, ‘not debt traps’

Private sector crucial to helping Washington advance policy goals in Global South as alternative to ‘never-ending foreign assistance dependence’
Insights shared as US seeks to deepen foothold in Asia, where it is a dominant military power but struggles to match China’s economic leverage

US-China relations

Bochen Hanin Washington

Published: 6:45am, 23 Feb 2024

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American development aid officials sought to portray the US as “big-hearted” and “open for business” in a pitch to curb China’s sway in developing countries at a think tank conference in Washington on Thursday.

The US International Development Finance Corporation “is open for business,” said Naz El-Khatib, a policy official at the agency, launched in 2019 to bankroll international infrastructure projects.

The private sector had a crucial role to play in advancing the US’s development goals, El-Khatib added, stressing that the agency could offer a wide range of financial products directly to companies.

Speaking at the same Atlantic Council event about China’s role in the Global South, Michael Schiffer of the US Agency for International Development (USAID) made clear the agency was not seeking to “weaponise” its development aid for its own benefit.

Schiffer invoked South Korea as an example of mutually beneficial engagement, noting how USAID helped it integrate into the global economy following the Korean war.

USAID pursues “a big-hearted development model”, explained Schiffer, “rooted in cooperation and economic, trade integration and connectivity, not debt traps or never-ending foreign assistance dependence”.

Schiffer’s comments amounted to an indirect jab at China, which has been criticised for “debt-trap diplomacy” – leaving countries saddled with loans they cannot afford.

The remarks came as Washington seeks to deepen its foothold in Asia, where it is a dominant military power but struggles to match China’s economic leverage through investments made as part of Chinese President Xi Jinping’s signature foreign policy plan: the Belt and Road Initiative.

China resets relations with belt and road partners through green investment push

Under the initiative, begun in 2013, Beijing has spent more than US$1 trillion on infrastructure projects around the world.

A report released in November by AidData, a university research lab at William & Mary in Virginia, found that Washington was closing the overseas development spending gap but that China may be better equipped to lead in the long run.

Beijing’s financial pledges under the Belt and Road Initiative have become more modest as it confronts domestic economic woes. Yet less infrastructure lending does not mean strategic contraction, observers have noted.

Recently China is shifting away from large-scale projects to smaller, strategic ones, and implementing more safeguards to avoid both debt fallouts and political backlash.

Italy to terminate China belt and road agreement, ending G7 involvement

As for Washington, it should tell its development story better to reduce the political risk for businesses aspiring to invest in developing countries, according to Simon Littlewood of management consulting firm SDG Global Group.

“Sometimes the US is tying its packages too much to a set of political philosophies that don’t necessarily match the country it is operating in,” Littlewood said on Thursday.

In countries where his company operates, there has been “huge resistance” to the feeling that the US is trying to impose its culture on them, he added.