The news about China the last few days is about how it is scoring a diplomatic coup d’état against the U.S. vis-a-vis Europe. On March 12, Chancellor of the Exchequer George Osborne announced that the U.K. had applied to join the Asian Infrastructure Investment Bank (AIIB) as a founding member. If accepted, Britain would have been the first major Western country to become a member.
A few days later, Germany, France and Italy also announced that they too would join. South Korea and Australia soon also switched their stance and are now on the verge of joining.
Japan appears to be the odd-power out in Asia now. Given its history of deference to the U.S. (e.g. Plaza Accord) and its current diplomatic row with China, my money is on Japan not joining at this stage. But even nationalistic and deferential Japan has not has not ruled out the possibility of joining at the founding stage.
The editorial board of the NYT today penned an editorial titled “U.S. Allies, Lured by China’s Bank.” The notion that China is “luring” U.S. allies seems to me … err … funny – even laughable.
The AIIB is created to liberate Asia from the tight politicized strings attached to the “loans” and/or “grants” from current institutions such as the IMF, World Bank and Asian Development Bank. Many parts of Asia (and Africa) have already benefited from China’s infrastructural investments, without having to answer to Western concerns couched in Orwellian (double-speak) terms of “debt sustainability,” “environmental concerns,” and “societal responsibility.”
Note that I am not saying that as societies develop, there are no concerns about impact of development on society or environment. Of course there are. But the truth is that there are often no clear answers to balancing the many competing needs of a developing society. When such concerns arise, they are best addressed locally, and not unilaterally or even multilaterally addressed by rich, far-away foreigners.
As colonialism and religious inquisitions of the last few centuries have shown, no matter how “well intended” a group of people want to shower another (e.g., “white man’s burden,” to save the unbelievers’ souls, etc.), much of the worst historical wrongs have been perpetrated by one group upon another in the context of “helping” another.
For the AIIB to be effective, China does not necessarily need U.K., or France, or for that matter Japan or Australia to join as founding members. Hey, why share the glory with former colonialists and current vassal states of the U.S.?
After all, even with the rich powers from Europe joining, the initial capitalization for the bank is estimated to be still at most somewhere between US$50-$100 billion. Compare that against the fact that the capital needs for infrastructure projects in Asia in the next decade alone is estimated to be US$8 trillion.
The notion that China intends to use the AIIB to challenge the West appears even more groundless when one notes that the AIIB is actually puny compared to existing institutions such as the World Bank and Asian Development Bank. For example, the World bank has a capital of around US$220 billion and the Asian Development Bank at US$175 billion, 1 and the International Monetary Fund of around US$760 billion 2.
If the goal is to subvert, wouldn’t China contribute more (a lot more) than US$50 billion?
The fact that the U.S. feels threatened by a project as modest as the AIIB from China tells us much about how possessive the U.S. sees itself in suppressing world affairs and development. I myself yearn for a day where if there has to be a dominant power in the world, it would care more about the welfare of the world than the influence it can extract from the world…
[Update on 3/31/2015: Here is a quick chronology backgrounder on the AIIB from Xinhua]
N.M.Cheung says
U.S. should worry about AIIB. It’s not about the total capitalization, which understandably is small at present, but I would think will grow as more members join. It’s also about the convertibility of Yuan and her influence eventually as a reserve currency challenging dollar. China has at present $4 trillion foreign reserve mostly at low interest treasury bills. It behoves for China to utilize this reserve better while helping China building infrastructure needs for other countries such as high speed rails and ports. Unlike World Bank which U.S. has veto power, China gives up any such power play and the rest of the world likes it.
Allen says
@N.M.Cheung
On the notion that China was seeking or has given up “veto” power to attract European support, China appears to be denying it outright. See, e.g., http://economictimes.indiatimes.com/news/international/business/china-dismisses-reports-of-seeking-veto-power-in-asian-infrastructure-investment-bank/articleshow/46691671.cms.
I don’t quite understand the link between AIIB and a supposed challenge to the Dollar. A challenge to the Dollar can be hypothesized given China’s growing economy, and the setting up of trade pacts that trade in Yuan, but I don’t see how the AIIB is another challenge. Can you or someone else link a good article to enlighten me on that aspect of it?
Allen says
As 3/31/2015 deadline for becoming “founding members” approaches and passes, xinhua has this to say: