Can rubber meet The Road? Reassessing US and Indo-Pacific allies' infrastructure responses to China'

Can rubber meet The Road? Reassessing US and Indo-Pacific allies' infrastructure responses to China'

Key points

Despite concerns about China's Belt and Road Initiative, there remains no credible Indo-Pacific alternative. Other regional infrastructure groupings include the United States, Australia, Japan, India and New Zealand among their members. However, their on-the-ground progress has been slow.

This report recommends the US and its regional allies and partners:
  • increase the flexibility of their offering
  • prioritise strategically important infrastructure
  • proactively forecast needs and respond, and
  • coordinate rather than jointly deliver projects.

1. China's flawed but still attractive infrastructure offering

China excels at building infrastructure and has for thousands of years. From the Great Wall to the Tiangong Space Station, infrastructure is one of the defining characteristics of Chinese civilisation. China's proclivity for enterprise has been turned into a powerful foreign policy weapon in the form of its Belt and Road Initiative (BRI).

China's BRI spending is eye-watering. Since launching the first BRI project in 2013, China has partnered with 147 countries and committed to spend US$1 trillion in total by 20271. In 2022 alone, it has already shelled out $28 billion on BRI projects around the globe2.

For most developing countries, the BRI's pros outweigh its cons. China's loans are low-interest and easy to access and major projects such as bridges, railways, roads, and ports are quickly concluded3. The BRI is far from perfect; it is plagued by poor-quality construction, exorbitant debt, corruption, elite capture, and negative environmental impacts4. But, for developing countries, the temptation of delivering on immediate infrastructure needs is usually enough to ignore the potential pitfalls.

The BRI concerns the US and its Indo-Pacific allies for several reasons. They fear China may use civilian infrastructure, such as ports circling the Indian Ocean, for military purposes5. They're concerned BRI agreements undermine good governance6. This notably occurred in 2016 in Malaysia when China offered to help cover up alleged corruption by then-Prime Minister Najib Razak and bail out a company also accused of corruption in exchange for million-dollar projects. Western countries also see some Chinese infrastructure loans as reinforcing negative norms and standards, such as polluting coal-fired power plants in Southeast Asia8.

For the above reasons, as well as overarching geostrategic competition, the US and its allies want to divert developing countries away from the BRI. However, they have not been able to create a joint infrastructure program that can compete with the BRI's scale and speed.

2. US and allies combine effort but generate few results

The US, its allies and partners have sought to collaborate to counter the growing influence of the BRI, but with limited success. The US and Japan have been in the Indo-Pacific infrastructure game for decades. They're working increasingly with Australia and are seeking to co-opt India. Since 2018 a plethora of partnerships and schemes have sought to implement joint projects.

So far, the US and its allies have started or announced three joint Indo-Pacific-focused infrastructure projects: an electrification project with Papua New Guinea and two undersea fibre optic cables involving Palau9, Nauru, Kiribati, and Micronesia10. All three projects rely on public funds and are limited to the Pacific. Ideally, private finance would be flowing to infrastructure projects region-wide. But several factors complicate US and partner infrastructure delivery.

Firstly, US and allies' domestic agencies have different country and sector priorities, making cooperation complicated. Secondly, their infrastructure priorities don't always match those of developing countries or the private sector. Thirdly, some strategically important infrastructure lacks commercial viability, meaning a public-private partnership is unlikely. So, there are complications to working collectively, their offering isn't directly tailored to potential partners, and the basis for their funding model is flawed.

Reliance on private sector finance to supplement offerings is problematic. Business can be put off by pre-planning and preparation costs, sovereign risk, and other financial risks11. Beyond these, business operates in a competitive marketplace. Companies want to protect their advantage, so can be unwilling to share information on investment environments with governments or competitors12. Moreover, companies in the US and allied and partnering countries could be competing for the same infrastructure projects, creating winners and losers within their business communities.

The US has been using the prospect of increased market opportunities for American companies to justify its overseas infrastructure program13. However, in a free market economy, Japanese, Australian or other businesses could have more competitive bids. How these countries working collectively would deconflict competing private sector bids remains unclear. In the meantime, their private sector finance model is slow and reduces competitiveness with China.
  • QUAD Leaders' Meeting Tokyo 2022 via Wikimedia.
  • Joe Biden speaks at a 'Build Back Better' clean energy event in Wilmington, Delaware, in July 2020. Photo" AFP / Oliver Douliery (creative commons).
  • Coal-fired power plant in Thailand.
  • Chinese warship in the port of Dijbouti, 2016.
  • Savusavu, Fiji: Customers shop at a Digicel store, 2017.

3. China's model outcompetes US and partner groupings

China's BRI has clear advantages. It's a turn-key operation that offers finance, design, construction and management, and finishes projects quickly14. For example, China built the Qamchiq Tunnel – a 19km tunnel through a mountain connecting China and Uzbekistan – in only three years15. Recipient countries understand they may be saddled with high-interest debt in future years but canÕt resist providing critical infrastructure to their populations within one governmental term16. China's also implementing more checks and balances to its BRI to address criticisms and increase its attractiveness17.

24 May 2013 Field survey conducted
11 July 2013 Project division established
29 July 2013 Contract entered into force
5 September 2013 First blasting initiated
26 March 2015 Tunnel entrance successfully
connected to the first shaft
25 February 2016 All digging completed

In contrast, developing countries perceive US and partner offerings as under-developed, slow, and hard to access. A case in point is the US-led 'Blue Dot Network' (BDN) – a certification initiative intended to identify high-quality projects. Still in development, BDN standards are predicted to be so high as to potentially put approval out of reach for developing countries and reduce profit margins for business.
"Quality should be part of US and allies' competitive advantage but not prohibitive for developing countries and industry." 

OECD currently developing certification standards
OECD expected to recommend 10 separate certification criteria
Criteria may be scaled between 1-3 'dots' reflecting level of compliance
Some existing Australian infrastructure could be considered BDN ineligible19
Business yet to understand BDN value-add as numerous credit ratings already exist

Beyond tough quality measures, the US and allies are limiting their infrastructure offerings in terms of what, and potentially where, they build. These self-imposed restrictions reduce their competitiveness against China's BRI.

As the largest country in rival groupings, the US has considerable influence over the type of infrastructure offered. It favours projects that support its domestic agenda: climate change, clean energy, digital, gender equality, and social infrastructure19. Emphasis on these values could limit the country partners the US chooses to work with. Some analysts have argued that Australia adopt a similar approach and invest in social infrastructure – the kind that strengthens underlying governance and community structures20. But this approach stands to similarly limit what Australia will build, potentially making China's BRI more flexible and attractive.

Not only do US policy settings impose limits but US agencies face structural constraints. The US' overseas financing agency, the International Development Finance Corporation (DFC), is restricted in the type of infrastructure it can build. For example, it can't fund non-renewable forms or energy or even infrastructure to convert heavy fuel oil to natural gas. Conversely, China has built 240 coal-fired power plants in multiple BRI countries21. Although China is phasing out coal, funding for oil and gas projects is increasing22. China's willingness to build fossil fuel projects has been a drawcard for developing countries.

Overall, US and partner policies are too restrictive and don't respond to the immediate infrastructure needs of developing countries. China responds directly to the requests of developing countries, which makes its offering more appealing than the alternatives. Rather than pursuing their own priorities and limiting their offerings, the US and Australia should take lessons from Japan's model, while also modernising their approach.

Japan's strategy has been pragmatic and business-minded, incorporating developing countries' priorities, private sector interests, and a focus on quality23 24. Using this approach, Japan has succeeded in partnering with developing countries across the Indo-Pacific. The Japan Bank for International Cooperation has built a range of projects, from gas power plants in Indonesia, Thailand, and Bangladesh, to coal-fired power plants in Vietnam, to a logistics facility in Myanmar25. Like China, Japan is transitioning away from financing fossil fuel infrastructure abroad26, but overall, Japan's model remains flexible and responsive.
"To successfully compete with China's BRI, the US and allies should increase the flexibility of their offering."

4. Identifying goals and infrastructure priorities

So far, the US and allies' infrastructure activities in the Indo-Pacific have lacked a coherent narrative – undersea cables here, electrification projects there. But to be effective, the US and allies need to agree on what they want to achieve through infrastructure. To provide cohesion to their strategy they could choose one of three different infrastructure pathways: 
  • Countering China's BRI harms, such as fixing low quality BRI projects and prioritising strategic infrastructure
  • Responding directly to developing countries' requests, such as providing critical infrastructure or vanity projects for elites
  • Selecting the most commercially viable projects to attract private sector partners. 
Ideally, infrastructure projects would satisfy all three metrics, and some have this potential. For instance, delivering and operating telecommunications systems can prevent China from using this sector coercively, digital connectivity provides developing countries with critical infrastructure, and telecoms can have commercial viability. Energy infrastructure is similar, as it powers communications such as the internet, 5G and 6G mobile services. However, much infrastructure also fulfills basic development needs and lacks a strategic or commercial component. One example is a road in a remote part of a Pacific Island nation that connects communities but has low traffic.

Given the sheer scale of infrastructure needs across the region, the US and its allies should focus on their primary motivation for delivering infrastructure: countering the strategic harms of China's BRI. Although there are genuine concerns about the BRI's impact on governance and stability, as well as the environment and social cohesion, the BRIÕs most urgent challenge to the US and its allies is military and strategic.
"The US an its allies want to prevent China from establishing more military bases and controlling strategic points in the Indo-Pacific."

In recent years strategic concerns over the BRI have become more pronounced as China has established a naval base in Djibouti, taken control of Sri Lanka's Port of Hambantota28 , is building a deep-water port in Cambodia29, and looks poised to establish a defence base in the Pacific . In the immediate term, the US and its allies should focus on providing strategic infrastructure. Specifically, they should upgrade dual-use facilities including ports and airfields and provide digital connectivity and the energy backbone to sustain it.

5. Forecasting over whack-a-mole

In the past, Australia has spent public funds to acquire regional critical infrastructure service providers at risk of Chinese ownership. In 2021, Digicel Ð the dominant mobile service provider in Papua New Guinea and other Pacific Island countries – approached Australia claiming a Chinese company had sought to acquire it31. The Australian Government was concerned China could use Digicel for espionage or as a financial asset to influence or corrupt elites. It thus provided privately owned Australian company Telstra with US$1.33 billion to purchase Digicel32. Public capacity to acquire private companies is finite, so maintaining this strategy long-term is impossible.

Other Indo-Pacific countries have recognised critical infrastructure as an area of geostrategic competition and are using this as a pressure point. For example, in August 2022, Timor-Leste approached Australia to resolve delays by Australian company Woodside Energy in developing the Greater Sunrise gas pipeline. Timor-Leste warned it could turn to China for finance if the Australian Government couldnÕt find a solution33. However, it is uncertain how the government will be able to address both the concerns of Timor-Leste and Woodside as a private company seeking the most commercially viable solution.

The above examples are instances where Australia must choose the infrastructure projects it will support to prevent Chinese influence. In both instances, Australia is on the back foot.
"Until now, Western countries have been chasing China's lead on infrastructure: this needs to change."

To get out in front, the US and its allies could create a forecasting unit to predict and respond to regional infrastructure needs.

A US and allied regional infrastructure forecasting unit could collect data, make assessments about urgent infrastructure and strategic priorities, identify potential partner countries and approach them proactively. For example, the US and its allies could collect information on the age and quality of telecommunications facilities across the region, identify their priority countries for investment, and reach out to those governments with infrastructure deals. This activity could be replicated with other strategic assets such as power grids, port facilitates, and airstrips. To be successful, this strategy would require Western countries to identify their country priorities ahead of time and allocate sufficient resources to make a forecasting unit useful.  

6. Coordinate rather than cooperate

Combining US and allies' infrastructure programs appears logical. They can pool resources, reinforce the same standards, leverage strengths, and streamline delivery. In practice, however, jointly delivering infrastructure is currently too complex.

Western infrastructure projects have been delayed due to wrangling multiple domestic agencies' interests. Australia has two agencies primarily responsible for overseas infrastructure: the Department of Foreign Affairs and Trade and Export Finance Australia. Japan has at least three: the Japan Ministry of Foreign Affairs, Japan Bank for International Cooperation, and Japan International Cooperation Agency. The US has several1, each with its own priorities and resource allocation for infrastructure abroad. But there is no central point of coordination for overseas infrastructure, making it very complicated for allies to cooperate with the US.

Allied experiences in delivering infrastructure are also mixed. Independently, Japan, the US, and Australia have been building infrastructure abroad for years, with Japan the most accomplished34. The US, Australia and other development providers such as New Zealand and India have varying levels of experience, capacity, and readiness to deliver infrastructure. Given the challenges of cooperation among and within countries, the US and its allies could build infrastructure faster by coordinating rather than cooperating.

Coordinating could include information sharing and mapping priority countries and sectors. A mapping initiative could identify each country's strengths, reduce overlap and fill gaps, and spotlight where each should operate. Another coordinating activity could be to burden share on the due diligence associated with China's BRI projects, through funding additional independent consultants to provide advice on the pros and cons of China's proposals. Australia already provides in-country technical advisers to help Southeast Asian countries govern and assess infrastructure delivery35. Australia, the US, and their partners could better coordinate the provision of in-country advisers to improve coverage and availability across the region.

The US has an outsized impact on the success of BRI-rivalling infrastructure initiatives. For this reason, the coordination of US domestic agencies is critically important to the collective effort. This could be improved by establishing an oversight body with Presidential and Congressional backing to coordinate effort across the bureaucracy. Although the US has appointed a Special Presidential Coordinator for infrastructure and energy, this role lacks support from Congress and is insufficient for the task.

The US Government should consider reinstating the infrastructure coordination group active during the Trump Administration. This group, called the Global Infrastructure Coordination Committee (GICC)36, could help join up and focus efforts across the US bureaucracy, including adjudicating competing infrastructure financing and priorities. The GICC could also make it easier for US allies to coordinate with the US.

US agencies with responsibility for delivering overseas infrastructure include the State Department, Commerce Department, USAID, US DFC, US Trade and Development Agency, EXIM Bank, the National Security Council, and Millennium Challenge Corporation.

7. Findings and recommendations

China's BRI can negatively impact recipient nations as well as US and allies' interests. There is scope for an alternate offering in the Indo-Pacific. But, right now, these rival infrastructure programs aren't structured to effectively compete.

The US and its partners should provide flexible over prohibitive and prescriptive offerings. To counter the strategic harms of China's BRI, they should prioritise building strategic infrastructure such as telecommunications, energy, and dual-use ports and airfields. With these priority sectors in mind, a forecasting exercise could help identify countries and projects to proactively target. Coordinating efforts through information sharing, mapping priorities, and burden sharing on BRI due diligence could help the US and its allies offset BRI harms and implement a regional strategy. Finally, the cumulative impact of well- coordinated national programs is likely to be more effective in the short term than a joint initiative.

Through increasing flexibility, focusing on strategic infrastructure, being proactive not reactive, and working individually while also coordinating efforts, the US and its allies stand a greater chance of drawing countries away from China's BRI and reducing its strategic risks.


The Perth USAsia Centre would like to thank the wide range of individuals who have supported the production of this report. In particular, the author would like to thank Dr Patrick Cronin at the Hudson Institute, Mr Conor Savoy at the Center for Strategic and International Studies, and officials and locally engaged staff at the Australian Embassy in Washington DC. Many other individuals – across business, government and academia – kindly offered insights, information and feedback that have enriched the report. Nonetheless, the author is responsible for all content and arguments contained herein.

About the author

Hayley Channer is the Senior Policy Fellow at the Perth USAsia Centre. Based in Canberra, Hayley produces analysis on foreign and defence policy in the Indo-Pacific, engages with key Australian Government agencies and other policy stakeholders, and builds and sustains the Centre's domestic and international network. Hayley has led a diverse career across government, think tanks, and the not-for-profit sector. She previously worked for the Department of Defence producing policy guidance on defence capabilities and international engagement with the United States and Japan.

About Perth USAsia Centre

The Perth USAsia Centre located at The University of Western Australia is a non-partisan, not-for-profit institution strengthening relationships and strategic thinking between Australia, the Indo-Pacific and the USA. The Centre is a leading think tank focusing on geopolitical issues, policy development and building a strategic affairs community across government, business and academia. Since the CentreÕs inception in 2013, we have collaborated with over forty partners to convene more than four hundred programs across sixteen cities in eight countries, engaging a world-class community of over 10,000 strategic thinkers and policy leaders.

About Hudson Institute

Hudston Institute is a research organisation promoting American leadership for a secure, free and prosperous future. Founded in 1961 by strategist Herman Kahn, Hudson Institute challenges conventional thinking and helps manage strategic transitions through interdisciplinary studies in defence international relations.


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1 Andrew Chatzky and James McBride (2020), ‘China’s Massive Belt and Road Initiative’, Council on Foreign Relations Backgrounder,
Australian Financial Review (2022), ‘This is where China is investing its billions (and why)’, 29 June
3 Jonathan E. Hillman (2018), ‘China’s Belt and Road Is Full of Holes’, Center for Strategic and International Studies Briefs,
4 Jennifer Hillman and David Sacks (2021), ‘China’s Belt and Road: Implications for the United States’, Council on Foreign Relations,
5 Daniel R. Russel and Blake H. Berger (2020), ‘Weaponizing the Belt and Road Initiative’, Asia Society Policy Institute,
6 Jonathan E. Hillman (2019), ‘Corruption Flows Along China’s Belt and Road’, Center for Strategic and International Studies,
Wall Street Journal (2019), ‘China Offered to Bail Out Troubled Malaysian Fund in Return for Deals’, 7 January
8 Yating Li and Kevin P Gallagher, (2019). ‘The Environmental Impact of China-financed Coal-fired Power Plants in South East Asia’, Boston University Global Development Policy Centre Working Paper 007.
9 DFAT Australian Financing Facility for the Pacific, Palau cable landing, Canberra: Australian Government,
10 ABC News (2021), ‘New undersea internet cable for Nauru, Kiribati and the Federated States of Micronesia will be funded by Australia, the US and Japan’, 12 December
11 Conor Savoy (2022), ‘Future Considerations for the Partnership on Global Infrastructure and Investment’, Center for Strategic and International Studies,
12 Author’s discussions with private sector executives.
13 The White House (2022), Memorandum on the Partnership for Global Infrastructure and Investment, Washington D.C.: US Government,
14 Roland Rajah (2020), ‘Mobilizing the Indo-Pacific Infrastructure Response to China’s Belt and Road Initiative in Southeast Asia’, Foreign Policy at Brookings, Brookings Institution,
15 Global Times (2021), ‘‘President Project No.1.’ in Belt and Road Cooperation’, 19 August
16 Author’s discussions with former official from BRI recipient country.
17 Jamie P. Horsley (2019), ‘Can China deliver a better Belt and Road?’ Brookings Commentary, Brookings Institution,
18 Author’s discussions with Australian Government officials.
19 The White House (2022), FACT SHEET: President Biden and G7 Leaders Formally Launch the Partnership for Global Infrastructure and Investment, Washington, D.C.: US Government,
20 Melissa Conley Tyler and Alexandre Dayant (2022), ‘Changing the conversation on Pacific infrastructure’, East Asia Forum, 28 July
21 Jennifer Hillman and Alex Tippett (2021), ‘The Climate Challenge and China’s Belt and Road Initiative’, The Internationalist Commentary, Council on Foreign Relations, 31 March
22 South China Morning Post (2022), ‘Belt and Road Initiative: China ended coal financing last year, but oil and gas investments tripled, study shows’, 11 February
23 Jonathan Stromseth, (2020), ‘Beyond Binary Choices? Navigating great power competition in Southeast Asia’, Foreign Policy at Brookings, Trilateral Dialogue on Southeast Asia: ASEAN, Australia, and the United States, Brookings Institution,
24 Japan Bank for International Cooperation (2022), Infrastructure, Tokyo: Government of Japan,
25 Ibid.
26 The Japan Times (2022), ‘Japan joins G7 peers with vow to stop fossil-fuel financing abroad by end of 2022’, 27 May
27 Johnathan E. Hillman (2021), ‘The Quad’s Strategic Infrastructure Play’, Center for Strategic and International Studies Commentary, 27 September
28 The New York Times (2018), ‘How China Got Sri Lanka to Cough Up a Port’, 25 June
29 The Washington Post (2022), ‘China secretly building navy facility in Cambodia, Western officials say’, 6 June
30 United States Institute of Peace (2022), ‘China’s Search for a Permanent Military Presence in the Pacific Islands’, 21 July
31 Australian Financial Review (2021), ‘Telstra called in to block Chinese telco bid’, 15 July
32 Minister for Foreign Affairs, Senator the Hon Marise Payne (2021), Telstra decision to acquire Digicel Pacific, Canberra: Australian Government,
33 Australian Financial Review (2022), ‘East Timor plays the China card in Sunrise gas battle’, 19 August
34 Tobias Harris (2019), ‘‘Quality Infrastructure’: Japan’s Robust Challenge to China’s Belt and Road’, 9 April
35 DFAT (2019), Southeast Asia Economic Governance and Infrastructure Facility, Canberra: Australian Government,
36 Congressional Bills 117th Congress, (2021), ‘S. 1169 To address issues involving the People’s Republic of China’, Washington, D.C.: US Government Printing Office.
By Hayley Channer on 01 November 2022

United States | International Relations