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To Counter China, U.S. Looks to Invest Billions More Overseas (#GotBitcoin?)

White House hopes to expand Overseas Private Investment Corp., a little-known agency it wanted to eliminate a year ago. To Counter China, U.S. Looks to Invest Billions More Overseas

The U.S. is finalizing plans to double funding for big infrastructure projects around the world, seeking to counter China’s growing influence.

Congress is working to resolve the last barriers to passing a bill that would boost the U.S.’s role in international development. It would combine several little-known government agencies into a new body, with authority to do $60 billion in development financing—more than double the cap of the current agency that performs that function. The measure, supported by the Trump administration, easily passed the House this summer; it faces its biggest test in the Senate.

The new agency would have broad authority to go toe-to-toe with China in offering countries financing options for major infrastructure and development projects.

The bill’s momentum reflects growing bipartisan concern in Washington about the scale of China’s ambitions to restructure global trade routes so that all roads lead to Beijing. Senators have become especially concerned with China’s global investment plan known as the One Belt, One Road Initiative. China, which has flexed development muscle across the globe since it announced its plan in 2013, is thought to be willing to spend and lend trillions of dollars on projects like superhighways, railroads, harbors and ports.

“People are waking up to what China is doing and see that we have to counter that,” said Rep. Ted Yoho (R., Fla.), one of the House co-sponsors of the bill, which was introduced with bipartisan sponsorship in both chambers, with Sens. Bob Corker (R., Tenn.) and Chris Coons (D., Del.) in the Senate, and Mr. Yoho and Adam Smith (D., Wash.) in the House.

Passage is “achingly close,” Mr. Coons said this month. “We are down to just a few holds in the Senate and I remain optimistic that, given the engagement of the White House and persistent work, we will get this done.”

The legislation represents a sharp reversal for the agency that currently promotes U.S. investment abroad, the Overseas Private Investment Corp. In President Trump’s first budget in 2017, the agency was proposed for elimination—with the administration saying it provided “unnecessary federal interventions that distort the free market.”

But as trade tensions rose with China, so did focus on the extent—and consequences—of China’s infrastructure binge. The government of Sri Lanka could not make payments on a Chinese-funded super port, and ended up granting China a 99-year lease, giving Beijing a key foothold in the Indian Ocean. Pakistan, with $62 billion in Belt and Road projects, is seeking out bailout options to manage its payments.

Officials on the White House’s National Security Council and in the Office of Management and Budget decided to throw White House support behind a new development agency, and the president’s budget released in February 2018 put forth a proposal for combining and beefing up U.S. development finance.

The main body of the new agency would be OPIC, founded by President Nixon in 1971 to help American businesses invest in developing and emerging markets in order to further U.S. foreign-policy goals. The new agency would also take over several programs run by the U.S. Agency for International Development, the biggest of which is known as the Development Credit Authority.

Like many technocratic White House budget proposals, which often go nowhere, the odds of passage appeared remote. But the legislation has a number of features with appeal across party lines. Since it would combine several government agencies into a single one called the U.S. International Development Finance Corp., it’s attractive to those who favor streamlining government programs.

Another source of the bill’s popularity is OPIC’s track record: It has been profitable every year for the last 40 years and has contributed $8.5 billion to deficit reduction.

The agency has a portfolio of $23 billion, with its business consisting of loan guarantees, direct lending and political-risk insurance. Projects it has financed or insured include a toll road in Colombia, a geothermal power plant in Honduras, cellphone towers in Uganda and a nuclear-fuel storage facility in Ukraine.

Trump administration officials say they have heard repeatedly that countries in need of infrastructure would rather go with American-led financing, but China has been the one making offers.

Yet OPIC has been limited by a congressional cap on its portfolio size and a prohibition on owning equity stakes in projects—issues addressed by the new legislation. China’s effort faced no such hurdles in expanding its investments at a pace some consider reckless.

“Their projects economically don’t make a lot of sense,” said OPIC President Ray Washburne, a former Trump fundraiser who congressional aides say has been crucial in making the case that the agency can put forward a market-oriented American alternative. “It’s a loan-to-own program the Chinese are doing.”

Mr. Washburne sees his agency’s model as a sharp contrast.

“We come in with projects that make economic sense, because we’re not an aid organization,” Mr. Washburne said. “We’re for the free trade of goods. We’re for private businesses.”

The main obstacle to the new agency is in the Senate, where Majority Leader Mitch McConnell (R., Ky.) has been spending his time confirming judges and racing to pass spending bills in order to avert a partial government shutdown at the end of September. Because of the Senate’s procedural rules, each such vote can take days, meaning that legislation to take on China, which isn’t a top priority, doesn’t neatly fit into the schedule.

The quickest pathway through the Senate is via unanimous consent, a process that would allow the bill to pass on an expedited basis so long as all 100 senators agree. But if even one senator objects, the Senate can’t use that fast-track method. At least one senator—Republican John Barrasso of Wyoming—could upend such a process. Mr. Barrasso was the lone senator to vote against the bill in June, when it was approved by the Senate Foreign Relations Committee 20-1. He declined to comment about his current thinking during a brief hallway interview last week, and his office hasn’t responded to requests for comment.

China’s Xi Pledges $60 Billion Toward Africa’s Development, Waives Some Debt

The president said that China isn’t seeking ‘political self-interest through its investments in Africa’.

China’s President Xi Jinping pledged $60 billion in financing for Africa’s development and waived some debt owed by the continent’s poorest countries, batting away criticism that Chinese investments may be exacerbating a looming African debt crisis.

Speaking Monday to dozens of African leaders at a Beijing summit, Mr. Xi portrayed China as a responsible power, working with African countries in pursuing economic development, reducing poverty and combating regional security threats.

China “doesn’t seek political self-interest through its investments in Africa,” Mr. Xi said at the two-day summit’s opening ceremony, held in Beijing’s Great Hall of the People. “The Chinese and African people are best qualified to judge whether China-Africa cooperation is good or not.”

Concerns over a looming African debt crisis have simmered since the International Monetary Fund warned in May that 15 out of 35 low-income sub-Saharan countries face serious financial risks from heavy borrowing. Some Western officials have blamed China for exacerbating the problem—even accusing Beijing of pursuing colonial exploitation in Africa—by financing a slew of infrastructure projects through Mr. Xi’s signature Belt and Road initiative.

Many recipient countries have cheered these efforts, though some have voiced concern over debt burdens from Beijing-backed loans. In Kenya, public disquiet has emerged over a $3.2 billion Chinese-built railway line that hasn’t generated expected revenues.

Speaking after Mr. Xi, African Union Commission Chairman Moussa Faki remarked on imbalances such as rising debt, saying there have been calls for Africa “to say no to outside help.” He noted, however, that China’s money is funding regional development in concrete ways.

This week’s summit offers a platform for Mr. Xi to assuage African concerns, said Chinese academics.

“China is now focusing on the quality of investments and moving away from the emphasis on quantity,” said Wang Yiwei, director of the Institute of International Affairs at Beijing’s Renmin University. This means stronger oversight on Chinese investments to minimize wasteful spending and curb corruption, he said.

The $60 billion in financing Mr. Xi pledged for Africa over the next three years matches the commitment he made at a previous summit in 2015, with a hefty chunk coming in the form of investment from businesses.

The new package includes $35 billion in grants, loans and credit lines, a $10 billion development-financing fund and $5 billion for boosting Chinese imports from Africa. Beijing will also encourage Chinese firms to invest $10 billion in the continent and help African financial institutions issue bonds in China, Mr. Xi said.

Nodding to the concerns over debt, Mr. Xi said China will also forgive certain interest-free loans—those maturing this year—extended to the continent’s poorest and most indebted countries. He didn’t specify which countries would benefit.

Speaking at a forum of Chinese and African business executives earlier Monday, Mr. Xi said Chinese resources are being directed at Africa’s “inadequate infrastructure” and are “not to be spent on any vanity projects.”

Chinese officials have rebuffed criticism of Beijing’s contributions to African debt. Vice Commerce Minister Qian Keming told a news briefing last month that “the majority of the debt burden [in Africa] isn’t necessarily created by China.”

Chinese lenders have provided some $136 billion in loans to African governments and their government-owned enterprises from 2000-2017, according to the China-Africa Research Initiative at Johns Hopkins University.

Even so, “Chinese loans are not currently a major contributor to debt distress in Africa,” CARI said in a recent report. Of 17 African countries in debt distress or facing high risk of distress, only three of them—Djibouti, the Republic of Congo and Zambia—count Chinese loans as the most significant contributor to their debt burdens, the report said.

Mr. Xi’s pledges are expected to provide some relief to these countries.

At Monday’s opening ceremony, African leaders acknowledged difficulties in their economic ties with Beijing, even as they welcomed Chinese largess.

South African President Cyril Ramaphosa, speaking after Mr. Xi, said work is needed to “balance the structure of trade between Africa and China,” referring to the continent’s yawning trade deficit with the world’s second-biggest economy.

Debt and unbalanced trade are widely understood legacies of China’s headlong push into Africa. The expectations from African leaders of continued, large-scale Chinese funding make it difficult for Beijing to promise less money, and it is easier to funnel the money into loans, rather than pressuring companies to move more factories to the continent.

“That’s the way China will make the most friends, creating jobs,” said Jeremy Stevens, the Beijing-based economist at South Africa’s Standard Bank Group. “How do you communicate that in a speech when everyone is waiting for a target?”

In his speech, Mr. Xi repeatedly referred to a “China-Africa community of shared destiny” when describing plans for future cooperation, a rhetorical shift from his keynote address at the 2015 summit, when he described what China “will” do in Africa.

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