G7 plans to boost infrastructure investment in developing markets are being hailed by the US as a long-awaited challenge to China’s Belt and Road Initiative (BRI), but experts question whether the private sector has the appetite to make the vision a reality.

In a joint communique issued after June’s annual G7 summit in Cornwall, England, the group of nations vowed “to develop a new partnership to build back better for the world, through a step change in our approach to investment for infrastructure”.

Emphasising the need to support clean and green growth, the communique said development finance tools would be directed towards infrastructure and technology in developing countries, with a focus on health systems, security, digital solutions and the impact of climate change.

The G7 did not provide extensive details on its plans, but a separate statement from US authorities issued after the summit explicitly framed the initiative – which it dubs Build Back Better World (B3W) – as a mechanism for “strategic competition with China”.

Under the plan, development finance tools would be used alongside private sector investment to “catalyse hundreds of billions of dollars of infrastructure investment for low and middle-income countries in the coming years”, the statement said.

The US has increasingly used trade-related tactics to counter the influence of the BRI, which since its 2013 launch has encouraged trillions of dollars in direct investment from China into developing countries while boosting trade flows between those nations.

Writing in the Washington Post ahead of the G7 summit, President Joe Biden argued the case for a US-led competitor to the BRI, a project which he says “requires us to invest in infrastructure”.

“The world’s major democracies will be offering a high-standard alternative to China for upgrading physical, digital and health infrastructure that is more resilient and supports global development,” he wrote.

The June White House statement added that B3W would have a global scope, with different G7 members focusing on preferred countries and regions.

All infrastructure development would be transparent, sustainable and subject to good governance, the G7 communique said. Other guiding principles include enhancing the impact of multilateral development finance while mobilising private capital.

However, the reliance on private sector funding has already raised eyebrows among trade experts.

The Center for Strategic and International Studies (CSIS), a Washington DC-based think tank, says in an analysis of the B3W announcement that the private sector is undoubtedly where “untapped financial firepower resides”.

Wealth and money managers now handle an estimated total of US$110tn, it says, with pension funds, insurers and sovereign wealth funds all seeking reliable long-term returns.

“But only a small fraction of this vast amount is invested in infrastructure, and developing economies, in particular, have appeared too risky for many investors,” it says.

Citing World Bank data for 2015-19, CSIS says private sector investors in G7 countries put around US$22bn towards infrastructure projects in developing countries.

If 80% of private sector capital was mobilised – in keeping with International Finance Corporation targets – that figure would top US$90bn, it suggests.

Dr Yu Jie, a senior research fellow focusing on China at think tank Chatham House, points out that the private sector has often been reluctant to participate in BRI projects and suggests G7 companies are likely to run into similar issues.

“For the B3W, I’m just questioning how the G7 governments will be able to convince the private sector to join this initiative, building a level of sustainable return on investment,” she said during a BBC World Service broadcast following the June summit. “The private sector will find it a hard sell to the shareholders.”

Harry Broadman, managing director and chair of the emerging markets practice at Berkeley Research Group, said during the same broadcast it is not immediately clear how B3W will differ from existing tools available to G7 member countries.

“These are the same countries who are the main shareholders of the World Bank, the IMF, the African Development Bank, and the like, and those institutions already have instruments and investments in place with frankly pretty good governance structures,” he said. “It raises in my mind the question as to what is the ultimate aim here.

“If you look at the communique from the summit, the wording of what the B3W means is really quite vague, which suggests to me this is – at least at this juncture – more of a branding exercise than boots on the ground.”

Meanwhile, there are signs that resources being made available through China’s BRI are dwindling, even as the number of participating countries grows.

Drawing data from China Exim and China Development Bank, CSIS says investment has “plummeted” since a high of 2016, when infrastructure spending topped US$50bn.

In 2019, both infrastructure investment and overall spending dipped below US$10bn for the first time since BRI’s launch, it says.