• Oops!
    Something went wrong.
    Please try again later.

Infrastructure is increasingly becoming 'one of the currencies for international economic competition'

Aarthi Swaminathan and Adriana Belmonte
·5 min read
  • Oops!
    Something went wrong.
    Please try again later.

The U.S. government needs to invest in infrastructure both domestically and internationally to keep pace with China, a former Clinton administration official told Yahoo Finance.

“The Chinese are all over the world in Latin America and Africa and other parts of Asia, building everything from dams and rail systems and communication systems," Henry Cisneros, who served as secretary of Housing and Urban Development (HUD) from 1993 to 1997 in the Clinton administration, told Yahoo Finance. "So infrastructure is becoming one of the currencies for international economic competition.”

China has invested heavily both domestically through modernization and overseas through the massive Belt and Road Initiative (known as the New Silk Road).

China's Silk Road project involves billions of dollars. (Graphic: David Foster/Yahoo Finance)
China's Silk Road project involves billions of dollars. (Graphic: David Foster/Yahoo Finance)

“The Chinese not only have invested in their own infrastructure within the country — everything from high-speed rail, modernized communications, new city developments, in effect new town planning, water supply questions, power supply issues, materials, but they’ve also engaged in a strategy of helping other nations with whom they work have exclusive trading relationships in their development of infrastructure,” Cisneros said.

The U.S. created the International Development Finance Corporation (DFC) to counter that global influence, but the relative lack of investment compared to Beijing means that Washington is playing catch up on 21st century developmental finance.

“There are nations that have made all-out commitments to growth... they have geared their foreign policy, their economic policy, their trade policy, even their military strategies around economic dominance,” Cisneros noted.

President Clinton listens to Housing Secretary Henry Cisneros in the Old Executive Building in Washington Dec. 19, 1994. Cisneros was charged Thursday, Dec. 11, 1997, in an 18-count indictment with conspiracy, obstructing justice and making false statements to the FBI about payments to his former mistress, Linda Jones. Cisneros is the second former member of President Clinton's Cabinet to be indicted on felony charges.(AP Photo/J. Scott Applewhite)
President Clinton listens to Housing Secretary Henry Cisneros in the Old Executive Building in Washington Dec. 19, 1994. (AP Photo/J. Scott Applewhite)

'Chinese development finance has been very welcomed in the world'

Researchers at Boston University’s Global Development Center, which closely monitors Chinese overseas investments, noted that the country provided billions of dollars in loan commitments to Latin American and Caribbean countries since 2005. These include countries like Venezuela, Brazil, Ecuador, and others.

“China’s development finance tends to be concentrated in the infrastructure … [and] given the lack of major new incomes and capital and the lack of attention to infrastructure … Chinese development finance has been very welcomed in the world,” Kevin Gallagher, a professor of global development policy at Boston University, said during a webinar on Feb. 24.

Energy projects are part of that portfolio, which includes coal, oil, gas, hydropower, and other types of energy, the group detailed in a dataset. And while China's investments abroad slowed in 2020, Beijing provided more than $200 million in COVID-19 aid to the Latin American region.

VIENTIANE, June 18, 2020 -- Workers from China Railway No.2 Engineering Group screw the welded seamless rails of the China-Laos railway in the northern suburb of Vientiane, Laos, on June 18, 2020.
  The CREC-2 has welded the first seamless rails for the China-Laos railway in the northern suburb of Lao capital Vientiane on Thursday morning. 
   The seamless rail, also known as continuous welded rail which eliminates rail joints, can improve the duration of steel rails, reduce the maintenance costs of locomotives and tracks, improve the stability and speed of trains, and enhance travel comfort. 
   The China-Laos Railway is a project of the China-proposed Belt and Road Initiative, with a joint effort, aiming to convert Laos from a landlocked country to a land-linked hub. 
   The project started in December 2016 and is scheduled to be completed and open to traffic in December 2021. (Photo by Kaikeo Saiyasane/Xinhua via Getty) (Xinhua/ via Getty Images)
Workers from China Railway No.2 Engineering Group screw the welded seamless rails of the China-Laos railway in the northern suburb of Vientiane, Laos, on June 18, 2020. (Photo by Kaikeo Saiyasane/Xinhua via Getty) (Xinhua/ via Getty Images)

Margaret Myers, director of the Asia and Latin America Program at Inter-American Dialogue, noted that China has pumped a lot of funds into the Latin America region previously, that activity has slowed more recently, according to

Instead, Chinese government banks were addressing pandemic-induced delays in other projects, and the reluctance to lend could also possibly be due to concerns over debt sustainability, Myers added.

“Beyond policy bank lending,” two more Latin American countries — Brazil and Uruguay — have also joined the China-led AIIB, Rebecca Ray, also at Boston University, said.

'We're at a disadvantage'

U.S. agencies are aware of the problem and have been ramping up investments abroad.

President Joe Biden also unveiled his $2-trillion Build Back Better Recovery Plan, a domestic infrastructure plan that Biden described as “a new foundation for sustainable growth, compete in the global economy, withstand the impacts of climate change, and improve public health.”

Cisneros noted that the investments at home and abroad are connected in that the U.S. must improve airports and other travel hubs to compete with ambitious economies like China.

“The other way in which infrastructure’s playing a role in economic competition is the sheer reality that you have to have upgraded systems to function, which means ports that can handle the larger ships, trains that can move people efficiently,” Cisneros said. “We don’t have one single line in the United States that you could call true high-speed rail. The Chinese have 6,000 miles. The Japanese have 1,600 miles. Countries like France and Germany and Spain all have long systems of high-speed rail. We do not.”

WASHINGTON, DC - JUNE 1
The new, next generation Acela train arrives June 01, 2020 in Washington, DC.  The train is one of 28 new trainsets Amtrak has purchased, and are being manufactured in NY. Two prototypes are now being tested, including the one that will arrive in Washington on Monday around noon. The new trains, built by French company Alstom at a facility in Hornell, N.Y., cost about $1.5 billion, paid for with a Railroad Improvement and Financing federal loan. The plan is to roll them out next year.
(Photo by Katherine Frey/The Washington Post via Getty Images)
The new, next generation Acela train arrives June 01, 2020 in Washington, DC. (Photo by Katherine Frey/The Washington Post via Getty Images)

Cisneros noted that the fastest rail in the U.S. is the Northeast Corridor, which runs at approximately 70 miles an hour through Amtrak’s Acela service, which operates between Washington, D.C. and Boston. In comparison, other countries he mentioned can safely run between 150-200 miles an hour through their rails.

In 2017, the American Society of Civil Engineers gave the U.S. infrastructure a D+ grade and predicted that it would cost approximately $4.6 trillion over the next decade to improve roads, bridges, schools, and ports across the country. The report called for infrastructure investment to increase to 3.5% of U.S. GDP by 2025, and increase from the current level of roughly 2.5%.

And while transportation might not seem like an important asset to compete with China for, the former HUD secretary stressed that moving people and information today is as important as moving cargo was in the past.

“My point is all of these are underpinnings of economic competitiveness of the future, where we have slower broadband communications than, say, European countries and Japan and Korea,” he said. “We’re at a disadvantage when our airports are not at the quality of many of the new airports in the Middle East and Europe and Asia. Again, we’re at a disadvantage.”

Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.

Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at adriana@yahoofinance.com.

Read more:

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.