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Asian infrastructure bank could be boon for the US
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RECENTLY, Beijing and 20 other countries signed an MOU, agreeing to establish the Asian Infrastructure Investment Bank (AIIB), which will be funded mainly by China and headquartered in Beijing.
The AIIB is widely seen in Washington and Tokyo as competing against the World Bank and the Asian Development Bank. It was reported that the US pressured Australia not to join the bank. Is the AIIB going to be a real threat to the US, and more generally, to the US-led Bretton Woods system?
Probably not.
China is not using the large amount of AIIB’s authorized capital (US$100 billion) for building aircraft carriers. Instead, that money will be lent for building bridges, roads and railways across Asia.
A widely quoted ADB report estimated that the region will need US$8 trillion in infrastructure investment by 2020. There is a wide gap between what the existing multilateral development banks can offer and the actual needs in infrastructure construction. Considering the great infrastructure needs, the World Bank and ADB would only be complemented by the AIIB, instead of being replaced or compromised.
Silk Roads
Chinese President Xi Jinping proposed the AIIB idea during his visit to Jakarta in October 2013. Instead of challenging the existing global financial structure, the AIIB is closely related to Xi’s Silk Road initiative, which aims for improving connectivity in Asia.
Xi has proposed two Silk Roads. One, which is called the “Silk Road Economic Belt,” links China’s western provinces with the rest of the Eurasian continent, including Central Asian countries, Russia, Turkey, Central and Eastern Europe. Finally, it reaches the Atlantic Ocean.
The other is the Maritime Silk Road, which covers southeastern Asian countries, Sri Lanka, India and cuts across the Indian Ocean and the eastern coast of Africa. These two huge projects require gigantic amounts of financing. The AIIB will help finance all the construction projects along the silk roads.
It is in the American interest if the Eurasian and Asia-Pacific region prosper economically. The AIIB can be of great help in helping war-torn countries, including Iraq, Syria and Afghanistan.
India, Vietnam and the Philippines all have serious territorial problems with China. But that does not prevent them from joining the AIIB as founding members. These countries probably will be in a better position to influence China when they are inside the collective decision-making body of the AIIB. Past experiences show that it is much easier to influence and shape from within and from the outset.
It is problematic to say that China will challenge the existing international financial structure. The World Bank, the IMF and the multilateral trading system still play a fundamental role in global economic governance. No other single institution can challenge that.
Good record
China made up its mind in 1978 to be a participant, instead of a revolutionary. China’s track record in the IMF, World Bank and WTO is, in general, not bad. Moreover, China has expressed its support for the countries outside Asia, including European countries and America, to join the AIIB. It is a welcome step for China to uphold an open and inclusive regionalism. It would be even better if China would allow Western companies to participate in the bidding process for contracts funded by the AIIB and other China-led development banks.
As a completely new institution, the AIIB will surely need a large number of experienced talents from across the world. It will also need to seek consultancy and advice from experienced countries and institutions.
With more international exposure and participation, the AIIB would probably be a spur for more of China’s opening up and capital account relaxation in the future. Therefore, the US should think about joining the AIIB instead of staying outside.
The author is an associate professor in the Department of International Relations at Wuhan University and now a visiting scholar at the School of Advanced International Studies at Johns Hopkins University. His e-mail address is xtzhang@whu.edu.cn. Shanghai Daily condensed his article. To read the original version, please visit: http://www.whuced.com/show_select.action?id=435&language=english
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