The West can learn from China’s investment approach

FOR more than a decade, China’s Belt and Road Initiative has framed how development, infrastructure investment and geopolitical influence are discussed.

Responses – from the EU’s Global Gateway to Japan’s “quality infrastructure” agenda – have largely followed the same logic: mobilise alternative financing, co-finance through multilateral banks and mitigate risk for private capital.

What has been almost entirely missed is a more powerful alternative – one that does not rely on exporting capital at all. China’s appeal lies not only in the scale of its financing, but also in the concreteness of its offer: visible assets, execution and speed.

Yet this debt-led model carries well-known risks, including rising public liabilities, opaque contracts, imported labour and long-term dependency.

The irony is that advanced economies already possess a development model that avoids these pitfalls, but have failed to articulate it as a strategic proposition. That model is balance-sheet-led development.

From financing to balance sheets

Balance-sheet-led development starts from a simple observation: In most countries, public commercial assets – land, infrastructure, utilities, real estate and state-owned enterprises – constitute the largest asset class in the economy, often exceeding annual gross domestic product.

Yet, development strategies, fiscal frameworks and geopolitical debates continue to focus almost exclusively on liabilities.

Rather than financing development through new borrowing, a balance-sheet approach seeks to improve public net worth by strengthening governance, transparency and professional management of public assets. Investment is financed through value creation rather than leverage, attracting private capital without increasing public debt.

In practice, this approach reduces reliance on external borrowing, mobilises domestic labour and firms, builds institutional and managerial capacity, and strengthens long-term fiscal resilience.

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It is development through balance-sheet empowerment, not debt accumulation.

Why this matters geopolitically

Seen through a geopolitical lens, the contrast with Belt and Road is stark.

Debt-led models export capital and frequently import labour, firms and standards, creating dependencies that persist beyond project completion.

Balance-sheet-led models, by contrast, finance investment through domestic assets and institutions, reinforcing economic sovereignty.

Put simply: China exports capital; the West could export capacity. This is not an argument against infrastructure investment, nor against engagement with China.

It is an argument that Western and Japanese strategies have been framed too narrowly around finance, rather than around sovereignty-enhancing development.

Japan and the missed opportunity

Japan is a particularly revealing case. It possesses deep expertise in infrastructure, logistics, utilities, urban development and public accounting, as well as strong credibility across much of the global South.

Yet, its engagement has remained largely framed around financing, co-financing and risk mitigation – positioning Japan as an alternative lender rather than as a partner enabling countries to finance their own development.

The same pattern is evident across Europe and North America. Development is still discussed in terms of aid volumes, lending capacity and risk-sharing mechanisms, rather than balance-sheet mobilisation.

As a result, Western offers often appear abstract, while Belt and Road appears tangible – even when its long-term costs are high.

From projects to portfolios

A balance-sheet perspective also changes how development is organised. Rather than focusing on individual projects, it treats public assets as portfolios requiring professional governance, clear mandates and transparent reporting.

This aligns public finance with capital markets logic, rather than political cycles.

Importantly, this approach does not require new institutions or large funding commitments. It requires a shift in framing: from projects to portfolios, from lending to governance and from external finance to domestic capacity.

Elements of this thinking are beginning to surface in technical fiscal discussions, including International Monetary Fund work on net worth-based fiscal anchors.

Yet they remain largely absent from geopolitical and strategic debates about influence and development.

A different development logic

For many countries in the global South, the attraction of Belt and Road is not ideological, but practical. Balance-sheet-led development offers an equally practical alternative – one that builds institutions rather than bypasses them, and sovereignty rather than dependency.

The West already has the tools, what it has lacked is the frame. If the contest around development is understood not as a race to lend, but as a choice between development logics, balance-sheet sovereignty offers a compelling alternative to debt-led influence – and one that advanced economies are uniquely placed to support. OMFIF

The writer is principal of Detter & Co