As geopolitical tensions rise and global development strategies collide, infrastructure diplomacy has become a central arena for strategic competition. The US’s Build Back Better World and the EU’s Global Gateway initiatives — launched in response to China’s Belt and Road Initiative (BRI) — aim to offer high-quality, transparent alternatives to Beijing’s expansive infrastructure push. Yet as these Western-led programmes gain traction, a critical question looms: can they compete effectively in regions where China has already established deep economic and diplomatic footholds?
Recent research has begun to elucidate the BRI’s impact on recipient countries, highlighting its influence on foreign direct investment, trade flows, and economic growth (Du and Zhang 2018, de Soyres et al. 2019, Bird et al. 2020, Todo et al. 2025). However, much less is known about how the BRI affects the strategic interests of rival infrastructure providers, and particularly those from Western or Western-allied nations. Japan, with its long-standing infrastructure presence and direct competition with China in Asia, offers a revealing case study.
In a new study (Nishitateno and Todo 2025), we examine how the BRI has reshaped Japan’s overseas infrastructure engagement and diplomatic relations with BRI-participating countries. Using panel data from 138 low- and middle-income countries between 2001 and 2020, we apply an event-study framework based on a staggered difference-in-differences design to assess the dynamic effects of BRI participation on four outcomes: Japanese infrastructure projects, official development assistance (ODA), outbound visits by Japanese leaders, and inbound visits by foreign leaders to Japan.
The results are striking. The BRI significantly crowded out Japanese infrastructure projects and reduced the frequency of foreign leaders’ visits to Japan, and particularly those from countries in East Asia including the Pacific and South Asian regions where Sino-Japanese competition is most intense. Specifically, the BRI led to a decline of 369 Japanese infrastructure projects (41%), corresponding to an estimated loss of $12 billion. The most affected countries include Cambodia, China, Mongolia, Thailand, and Indonesia. Additionally, the BRI reduced the cumulative duration of foreign leaders’ visits to Japan by 463 days (42%).
Table 1 The Belt and Road Initiative’s (BRI) effects on Japanese overseas infrastructure projects and foreign political leaders’ visits to Japan in East Asia and the Pacific and South Asia
Importantly, these effects were not uniform. Japanese official development assistance commitments and outbound diplomatic visits remained largely unaffected, indicating that the BRI’s influence is concentrated in areas where competition is most direct: namely, infrastructure contracting and inbound diplomacy. This pattern underscores the strategic nature of the BRI: it is not merely a development initiative, but a tool for reshaping bilateral relationships and regional influence.
Japan’s experience offers valuable lessons for Western policymakers. Despite launching the Partnership for Quality Infrastructure in 2015 and pledging over $200 billion in financing, Japan was unable to prevent significant displacement in key markets. This suggests that alternative initiatives like Build Back Better World and Global Gateway may face similar challenges unless they are backed by coordinated strategies, rapid deployment mechanisms, and sustained diplomatic engagement.
Moreover, the decline in diplomatic visits to Japan highlights a less-discussed dimension of infrastructure competition: its impact on political visibility and influence. Infrastructure projects often serve as gateways to broader diplomatic relationships, and losing ground in this domain may have long-term consequences for foreign policy leverage. For Western initiatives to succeed, they must integrate infrastructure finance with strategic diplomacy, ensuring that development efforts reinforce political engagement instead of attempting to replace it.
The findings also raise questions about the effectiveness of multilateral coordination. While Japan and China signed a memorandum on third-party market cooperation in 2018, such efforts remain limited in scope. If Western nations hope to counterbalance the BRI, they may need to move beyond bilateral competition and embrace collaborative frameworks that pool resources, share risks, and align standards. This could involve joint financing platforms, co-branded projects, or regional partnerships that offer credible alternatives to Chinese-led development. Responses to this need for deeper collaboration are beginning to take shape. One recent example is India’s Digital Infrastructure Growth Initiative, which is a trilateral effort by the US International Development Finance Corporation, the Japan Bank for International Cooperation, and South Korea’s Export-Import Bank to support India’s digital infrastructure ambitions.
Finally, the methodological approach of this study — namely using staggered treatment timing and accounting for heterogeneous effects — offers a template for future research. Traditional evaluations of the BRI often rely on simple before-and-after comparisons, which may obscure the nuanced ways in which its influence unfolds over time. By leveraging variation in BRI participation across countries and over years, we gain a clearer picture of its strategic impact and the conditions under which rival initiatives may succeed or falter.
In summary, the Belt and Road Initiative is not just reshaping infrastructure landscapes — it is redefining the rules of global engagement. Japan’s experience reveals the depth of this transformation and the urgency of crafting responses that are not only economically competitive but diplomatically strategic. As the US and EU scale up their infrastructure ambitions, they would do well to heed these lessons and design policies that match the scope, speed, and sophistication of the challenge ahead.
Editor’s note: The main research on which this column is based (Nishitateno and Todo 2025) first appeared as a discussion paper of the Research Institute of Economy, Trade and Industry (RIETI) of Japan.
References
Bird, J, M Lebrand and A J Venables (2020), “The Belt and Road Initiative: Reshaping economic geography in Central Asia?”, Journal of Development Economics 144: 102441.
Du, J and Y Zhang (2018), “Does One Belt One Road Initiative Promote Chinese Overseas Direct Investment?”, China Economic Review 47: 189–205.
de Soyres, F, A Mulabdic, S Murray, N Rocha and M Ruta (2019), “How Much Will the Belt and Road Initiative Reduce Trade Costs?”, International Economics 159: 151–164.
Nishitateno, S and Y Todo (2025), “Economic and Political Impacts of the Belt and Road Initiative on Western Nations in Infrastructure Investment Competitions”, RIETI Discussion Paper 25-E-034.
Todo, Y, S Nishitateno and S Brown (2025), “The Impact of the Belt and Road Initiative on Foreign Direct Investment from China, the United States, and Major Investor Countries”, Journal of the Japanese and International Economies 77: 101365.