Congress has just a few weeks left to decide the fate of a little-known but pivotal agency: the International Development Finance Corporation (DFC). Established in 2019 to counter China’s global investment offensive, the DFC is America’s development bank, meaning it aims to spur private investment in developing countries with tools like loans, equity investments, and political risk insurance. But its potential is far greater. Done right, it could be an engine of U.S. industrial strategy – shaping global supply chains, fueling American innovation, and building U.S. leadership in the industries of the future. On Oct. 6, the DFC’s authorization terminates, forcing a choice about its fate.
Meanwhile, China is racing ahead. Since 2013, China’s Belt and Road Initiative has poured more than $1 trillion into 150 countries. Last year alone, Beijing’s contracts and investments abroad totaled $122 billion– more than double the DFC’s entire active portfolio. While that’s not a perfect comparison, as the BRI encompasses State-owned enterprises and several State banks, the gap in scale is nonetheless undeniable.
The BRI has enabled China’s dominance in telecommunications and clean energy, secured inputs for its manufacturing sector, and expanded export markets for Chinese firms. In contrast, the DFC has a staff of less than 700 — including only a dozen staff overseas — and expires every seven years unless Congress renews it. The China Development Bank, meanwhile, has a staff of 10,000, 11 offices overseas, and is not temporary. The imbalance is striking.
But there is movement, albeit late, in Congress. Senate Foreign Relations Committee Chairman Jim Risch submitted an amendment to extend and update DFC, as a part of this year’s defense authorization bill, which is set for a vote on the Senate floor in the coming days. The House Foreign Affairs Committee may consider its own legislation this month, and the two measures would then need to be reconciled.
The Risch amendment would raise the DFC’s portfolio cap, sharpen its strategic focus, and allow investment in advanced economies. These changes could enable the DFC to take on more consequential projects, help shift critical supply chains to trusted U.S. partners, and bring the United States a step closer to competing with the scale and scope of China’s state-backed finance. But the amendment also layers on new reporting requirements, certifications, and congressional consultations.
In government, more process means more delay. As deputy assistant secretary of state, I routinely saw promising projects suffocated in bureaucracy, some created by the executive branch but much also instigated by Congress, however well-intentioned for oversight and accountability. Infrastructure projects are hard and slow under the best circumstances, and U.S. government processes make them infinitely harder. Deals that private firms or Beijing could close in months would take the U.S. government more than a year.
At the DFC, every transaction over $10 million triggers a congressional notification, obstructing even modest projects (in infrastructure terms) for months. Staff, fearing litigation, stack duplicative reviews on top of already rigorous safeguards on labor, environment, and anti-corruption. Country labor requirements, tied to a trade-preference law that lapsed five years ago, still restrict where the agency can operate. Each layer of process is another day the United States falls behind. Instead, raising notification thresholds and authorizing safe-harbor protections would give staff the confidence to move at the speed of global competition — without compromising safeguards.
Even when the DFC has the right tools, they are shackled. Equity investments, in which the U.S. government takes an ownership stake in a company or project abroad, are scored in the federal budget as though they will be a guaranteed loss to taxpayers, even when they generate profits. Political-risk insurance – protecting companies against theft or instability – faces the same problem. Even though many policies never result in a payout, the budget treats them as though they always will. Simply put — by overpricing equity and political-risk insurance, the DFC’s already limited budget is squeezed even tighter, forcing it to ration two of its most powerful tools. If budget accounting instead reflected reality — what equity and political risk insurance are actually expected to cost over the long-term — the DFC could invest far more across the world without additional costs to the taxpayer.
The DFC is also risk-averse in sectors where risk-taking is essential. Since the DFC was created to catalyze private-sector investment, it cannot make sovereign loans — direct loans to governments — and sharply limits support for state-owned enterprises (SOEs). Yet governments and SOEs are often critical actors in sectors such as minerals and digital infrastructure. China recognizes this and regularly finances them, consolidating power in key sectors. For instance, China financed a $6 billion minerals-for-infrastructure deal with the government of the Democratic Republic of the Congo, cementing its grip on critical minerals supply chains. Other financing by China enabled telecom giant Huawei’s expansion across Africa, including through direct loans to African governments. In response, a pilot sovereign-lending program and more flexible support for SOEs – tied to strong safeguards – could make the DFC better able to compete.
These challenges lead to the same conclusion. America’s development bank was built to be cautious. But that’s a losing strategy. The DFC needs to move quickly, deploy its tools at scale, and embrace risk in strategic sectors. The choices before Congress could determine whether the DFC remains a cautious agency on the sidelines – or a central player on the frontlines — in the contest for global economic leadership.
