‘Health Silk Road’ heats up as China and U.S. boost efforts amid coronavirus

23-Jun-2020

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China’s not the only one working on the “Health Silk Road.” 

As Beijing pushes for global health leadership amid the coronavirus pandemic, the U.S. International Development Finance Corporation (DFC) — which came into being just last year — announced a new ‘Health and Prosperity Initiative’ on Monday morning.

“It is encouraging the DFC is increasing its contribution to the global pandemic response at this critical time,” Jonathan Hillman, senior fellow at the Center for Strategic and International Studies, told Yahoo Finance. “To date, rather than being a leading provider of global public goods, the U.S. has mostly been the recipient of global sympathy.”

ZHENGZHOU, March 22, 2020 -- A staff member prepares to load donated materials onto a cargo plane at Xinzheng International Airport in Zhengzhou, capital of central China's Henan Province, March 22, 2020. The first batch of medical supplies donated by China's Henan Province, including 500,000 surgical masks and 100,000 pairs of medical gloves, departed from Zhengzhou on Sunday for Luxembourg by direct airline along the "Air Silk Road" linking Luxembourg with Zhengzhou to help Luxembourg fight the COVID-19. (Photo by Li Jianan/Xinhua via Getty) (Xinhua/Li Jianan via Getty Images)
The first batch of medical supplies donated by China’s Henan Province, including 500,000 surgical masks and 100,000 pairs of medical gloves, departed from Zhengzhou on Sunday for Luxembourg by direct airline along the “Air Silk Road” linking Luxembourg with Zhengzhou in March 2020. (Photo: Li Jianan/Xinhua via Getty)

‘Exactly what the organization should be doing’

The agency is calling for proposals from private sector entities to support the DFC in making health-related investments, which are primarily aimed at helping low- and middle-income countries build sustainable health systems.

DFC is looking to invest $2 billion. Investments are expected to be made all the way along the supply chain — such as with medical equipment, parts, supplies — as well as in vaccines.

“I sincerely believe that this provides us with an opportunity to transform traditional approaches to development, specifically in the global health sector, which has customarily relied on aid and grants,” Nafisa Jiwani, senior advisor and managing director for health initiatives at the DFC, told Yahoo Finance. 

Investment in each specific project will be between $5 million and $500 million, through various financial tools such as equity and debt financing, political insurance, technical development. The agency anticipates the private sector to invest $3 billion alongside that. 

“The United States initiative to try to use the Development Finance Corporation to move into the health space during this time of deep international crisis is exactly what the organization should be doing,” Mira Rapp-Hooper, Steven A. Schwarzman Senior Fellow for Asia Studies at the Council on Foreign Relations, told Yahoo Finance.

Particularly since “it’s become clear in recent weeks that China is making a major bid for global health leadership despite its early missteps domestically, and its hard-edged approach internationally.”

(Source: CSIS, Graphic: David Foster)
(Source: CSIS, Graphic: David Foster)

Part of an ambitious global project

Despite its domestic economy suffering its first quarter of economic contraction since the 1970s, the Chinese government has been forging ahead with its Belt and Road Initiative (BRI), or the new Silk Road.

The BRI — also known as the New Silk Road — is envisioned as a revival of an ancient trading route between China and Europe. Being a signature development finance play launched by Chinese President Xi Jinping, the country has poured billions of dollars into various economies in between — some of which are opaque — to expand influence around the world. 

Through the BRI, China lends funds from government-controlled banks such as the Export-Import Bank of China and the China Development Bank to governments across the world.

The ambitious effect has raised eyebrows in the U.S.

Washington, D.C.-based think tank Center for a New American Security found that when countries take on significant Chinese investment as part of the BRI, there were several risks involved, ranging from whether the projects were financially sustainable for the host country, to whether it would experience an erosion of national sovereignty. 

Democratic presidential candidate Joe Biden also called out the risks of the BRI, particularly its environmental impact.

“China is far and away the largest emitter of carbon in the world, and through its massive Belt and Road Initiative, Beijing is also annually financing billions of dollars of dirty fossil fuel energy projects across Asia and beyond,” Biden argued in one of his plans to address climate change.

HAI'AN, CHINA - APRIL 27, 2020 - Workers in a workshop produce a large building material exported to countries along the "One Belt And One Road" route. Hai 'an City, Jiangsu Province, China, April 27, 2020.- PHOTOGRAPH BY Costfoto / Barcroft Studios / Future Publishing (Photo credit should read Costfoto/Barcroft Media via Getty Images)
Workers in a workshop produce a large building material exported to countries along the “One Belt And One Road” route. Hai ‘an City, Jiangsu Province, China, April 27, 2020. (Photo: Costfoto/Barcroft Media via Getty Images)

Coronavirus and the New Silk Road

The coronavirus pandemic has caused disruptions along BRI.

A recent report by Reuters noted that China was concerned about anti-China sentiments sparked by the coronavirus could threaten BRI investment projects, which could propel Washington into that space to financially and militarily support its allies.

And several reports have indicated that China been trying to merge the infrastructure-focused BRI into a ‘Health Silk Road.’

The term itself isn’t new — in August 2017, Tedros Adhanom Ghebreyesus, the China-backed WHO director-general, had given a speech commending the creation of a Health Silk Road — Rapp-Hooper said, the intention to “resurrect” it as part of the BRI was, as it trying to do more “health-related infrastructure building and international cooperation under the aegis of his preexisting initiative.”

For instance, China’s Xi Jinping referenced the term in a call with Italian Prime Minister Giuseppe Conte in mid-March, as per Chinese state newswire Xinhua: “China is willing to work with Italy to contribute to international cooperation in combating the epidemic and to the construction of a Health Silk Road.” 

This picture taken on February 8, 2020 shows Chinese workers building the first rail line linking China to Laos, a key part of Beijing's 'Belt and Road' project across the Mekong, in Luang Prabang. - From an artificial island in Sri Lanka to a bridge in Bangladesh and hydropower projects in Nepal and Indonesia, China's trillion-dollar Belt and Road plan is stuttering under the effects of the deadly coronavirus. (Photo by Aidan JONES / AFP) / TO GO WITH Health-virus-diplomacy-trade-China-SAsia, FOCUS by Poornima WEERASEKARA and Safiqul ALAM (Photo by AIDAN JONES/AFP via Getty Images)
Chinese workers build the first rail line linking China to Laos, a key part of Beijing’s ‘Belt and Road’ project across the Mekong, in Luang Prabang in February 2020. (Photo: AIDAN JONES/AFP via Getty Images)

In early May, Xi made a BRI and health reference again, this time with Portuguese President Marcelo Rebelo de Sousa.

“It is hoped that when the situation improves, the two countries will deepen cooperation in all areas, achieve more progress in the Belt and Road projects, and explore third-party cooperation in public health and other fields,” a press release from China’s foreign ministry states. “These efforts will help advance the comprehensive strategic partnership between the two countries.” 

With these developments in mind, the move by DFC “is really interesting,” Rapp-Hooper stated. 

Sub-Saharan Africa

The first region the DFC has chosen is Sub-Saharan Africa, which includes countries like Nigeria and Uganda, among many others.

“Part of our mandate … [is that] we are to prioritize low- and low-middle-income countries by World Bank standards,” DFC Executive Vice President for Strategy Edward Burrier told Yahoo Finance. “All of Sub-Saharan Africa is going to fit into then category.”

At the same time, numerous countries in the region have also signed agreements for BRI projects, including to build roads and railways. Uganda, for one, has a national debt at over $10 billion in 2018, with nearly a third owed to China, according to one report by the Associated Press.

“The focus on Africa is encouraging — Africa’s needs are immense, including a $100 billion hit to GDP this year, falling remittances, and crippling debts,” said Hillman. Hence, “every bit helps.”

Burrier said that DFC’s announcement wasn’t necessarily formulated as a direct counter to the Health Silk Road.

ADDIS ABABA, April 7, 2020 -- A staff member unloads Chinese medical supplies from an airplane at the Kotota International Airport in Accra, capital of Ghana, April 6, 2020. (Photo by Xu Zheng/Xinhua via Getty) (Xinhua/Xu Zheng via Getty Images)
A staff member unloads Chinese medical supplies from an airplane at the Kotota International Airport in Accra, capital of Ghana, April 6, 2020. (Photo: Xu Zheng/Xinhua via Getty) (Xinhua/Xu Zheng via Getty Images)

“I think about this as a continuation of U.S. global leadership abroad in the health sector,” Burrier said. “I’ve seen those articles about China and their donation diplomacy, which really is an effort to whitewash the pandemic’s origins — rather than something that’s going to be sustainable.” 

Burrier added that since the DFC is working with private sector companies, the healthcare systems it’s planning to build will be long-lasting and also have more transparency than the Chinese efforts.

“Companies that will realize that over the long haul, there’s going to be tremendous opportunities is in this building up with the global health infrastructure,” Burrier said. 

Digital Silk Road comes into play

While modern medicine works on a treatment and a cure for the coronavirus, the containment strategy largely depends on technology.

That presents another opportunity for China to flex its BRI muscles, Rapp-Hooper argued. 

DFC’s Jiwani highlighted about the importance of using digital tools to address COVID-19, such as digital tracing, to control the outbreak. Rapp-Hooper said she would be “unsurprised” if China ended up merging its Digital Silk Road with its Health Silk Road.

“It would not be surprising to see China seeking to then export these pandemic management apps via the Digital Silk Road as part of this helps sell the ‘concept’ as well,” she explained. 

ADDIS ABABA, ETHIOPIA - APRIL 27: Jack Ma, the richest man in China donate medical supplies to Africa for 3rd time to combat the spread of coronavirus (COVID-19) in Africa at Bole International Airport in Addis Ababa, Ethiopia on April 27, 2020. (Photo by Minasse Wondimu Hailu/Anadolu Agency via Getty Images)
Jack Ma, the richest man in China donate medical supplies to Africa for 3rd time to combat the spread of coronavirus (COVID-19) in Africa at Bole International Airport in Addis Ababa, Ethiopia on April 27, 2020. (Photo: Minasse Wondimu Hailu/Anadolu Agency via Getty Images)

The Digital Silk Road refers to projects such as the massive undersea fibre optic cable China is building connecting Asia and Europe overland, or national 5G networks. Experts have been wary of these developments, particularly as China pushes companies like ZTE, Alibaba, and Tencent, which could be underlined by “broader normative and security aims.”

Rapp-Hooper said that “it’s very likely that a lot of those [big infrastructure] projects will stall out … [and] countries are unable to repay their debts to China” so “if China is looking to repurpose the Belt and Road Initiative for a post-pandemic world,” it could merge the Health and Digital roads “as a way to try to save the initiative when it’s otherwise going to be in crisis.”

The DFC, for its part, may not be able to keep up with Chhina’s multi-faceted initiative: Since the DFC is still subject to caps in terms of its funding, “it’s budget just simply isn’t enough to do all that much,” Rapp-Hooper said. Hillman agreed that more money would be required to be effective.

“The reality is that even $2 billion only goes so far,” he said, referring to DFC’s initial pledge for the health initiative. 

The competing initiatives will be nevertheless interesting to watch, Rapp-Hopper added, especially if “Congress is willing to put more muscle behind this initiative.”

Aarthi is a reporter for Yahoo Finance. Follow her on Twitter @aarthiswami.


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