The recent gathering of finance chiefs from the Group of Seven (G7) advanced economies in Niigata, Japan, has brought attention to their efforts in addressing China’s increasing global influence. While the G7 did not explicitly single out China as a threat in their communique, it is evident that the world’s second-largest economy will play a significant role in the upcoming summit in Hiroshima.
Outreach to Emerging Nations
During the three-day meeting, the G7 finance chiefs made their first outreach to emerging nations in 14 years. The objective was to engage countries such as Brazil, the Comoros, India, Indonesia, Singapore, and South Korea. The focus of these discussions primarily revolved around tackling issues such as debt and high-level infrastructure investment. These initiatives can be seen as a tacit counter to China’s ambitious Belt and Road initiative, which has been expanding its influence across various regions. It is worth noting that these discussions reflect the changing global order, where the dominance of the United States has diminished, and no clear grand design has emerged in the shifting power dynamics.
Japan’s Initiatives
As the host of the G7, Japan successfully convinced its counterparts to launch a new program by the end of 2023 aimed at diversifying supply chains for strategically important goods away from China. The G7 comprises the United States, Britain, France, Japan, Italy, Germany, and Canada. However, the finance chiefs’ closing communique did not explicitly mention a U.S.-proposed idea for narrow restrictions on investment in China. This omission suggests a potential rift within the group regarding the extent to which they should pressure Beijing. While the idea was discussed in Niigata, Japanese officials chose not to disclose further details due to the sensitivity of the matter.
Balancing Interests
It is crucial to recognize that China remains a vital market for most G7 countries, particularly for export-reliant economies such as Japan and Germany. China-bound exports account for a significant 22% of Japan’s overall shipments. Consequently, both Japan and the United States aim to win over countries, including those in the Global South, by offering promises of foreign direct investment and aid. This strategy aligns with U.S. President Joe Biden’s efforts to strengthen alliances with African nations in the face of China’s growing presence on the continent. Similarly, Japan’s Prime Minister Fumio Kishida embarked on visits to Egypt, Ghana, Kenya, and Mozambique this month to solidify partnerships.
Addressing Debt Vulnerabilities
In a joint statement issued on Saturday, the G7 finance chiefs emphasized the urgency of addressing debt vulnerabilities in low- and middle-income countries. They specifically mentioned Zambia, Ethiopia, Ghana, and Sri Lanka. Although China was not directly mentioned, the statement highlighted that foreign investments in critical infrastructure “may pose risks for economic sovereignty” and must not undermine the economic sovereignty of host countries.
Treasury Secretary Janet Yellen expressed concerns in March about Beijing’s lending activities, arguing that they left developing countries “trapped in debt.” The United States is actively working to counter China’s influence in international institutions and lending. Discussions regarding China’s economic coercion against other countries took place during the G7 finance leaders’ meeting, according to a Japanese finance ministry official. As a result, it is likely that the G7 summit will hold a special session to address this issue.
The Challenge of Influencing the Global South
Atsushi Takeda, the chief economist at the Itochu Economic Research Institute, emphasizes the challenge faced by the G7 in attempting to sway the Global South. Emerging economies in this region carefully weigh their best interests and find it difficult to align themselves solely with the West or China.
The G7’s attempt to influence the decision-making process of the Global South is met with cautious consideration. These emerging economies understand the importance of maintaining a delicate balance between their economic interests and geopolitical relationships. They are aware that aligning too closely with one side may have repercussions on their autonomy and sovereignty.
China’s rise as a global economic powerhouse has presented these countries with new opportunities for trade, investment, and infrastructure development. Many nations in the Global South have benefited from China’s Belt and Road initiative, which has brought much-needed investment in critical sectors such as transportation, energy, and telecommunications. However, they also recognize the potential risks associated with growing dependency on China.
The G7’s outreach efforts aim to present an alternative vision, one that offers economic cooperation, investment, and assistance while upholding principles such as transparency, sustainability, and respect for the rule of law. By engaging with countries in the Global South, the G7 hopes to demonstrate that they can provide a viable and mutually beneficial partnership that fosters economic growth, stability, and development without compromising their sovereignty.
Nevertheless, the G7 faces several challenges in winning over these nations. The Global South countries are aware of the complexities of international relations and the need to navigate the competing interests of major powers. They carefully evaluate the benefits and risks associated with partnerships, considering factors such as economic growth, technological advancements, and political influence.