AIIB Warning: A China-influenced global financing architecture is set to emerge.

22/04/2015


The Asian Infrastructure Investment Bank (AIIB) is an international financial institution proposed by the government of China. The purpose of the multilateral development bank is to provide finance to infrastructure projects in the Asia region. AIIB is regarded by some as a rival for the IMF, the World Bank and the Asian Development Bank (ADB), which are regarded as dominated by developed countries like the United States. The United Nations has addressed the launch of AIIB as "scaling up financing for sustainable development" for the concern of Global Economic Governance.
For a long time, the Chinese government has been frustrated with what it regards as the slow pace of reforms and governance, and wants greater input in global established institutions like the IMF, World Bank and Asian Development Bank which it claims are dominated by American, European and Japanese interests.
In April 2014, Chinese Premier Li Keqiang delivered a keynote speech at the opening of the Boao Forum for Asia and said that China was ready to intensify consultations with relevant parties in and outside Asia on the preparations for the Asian Infrastructure Investment Bank. The Articles of Agreement (AOA) would be finalized and open for signature by Prospective Founding Members (PFMs) from June 2015. The AOA is expected to enter into force and AIIB to be fully established by the end of 2015.
Chinese Premier Li Keqiang affirms AIIB cooperative stance. Up to now, there are 37 PFMs in the region, 20 PFMs outside the region. As of April 15, 2015, almost all Asian countries and most major countries outside Asia had joined the AIIB, except the US, Japan (which dominated the ADB) and Canada.
The deadline for prospective founding members to submit their applications to China’s new Asian Infrastructure Investment Bank (AIIB) came on March 31, leading a flurry of final applications from countries all over the world. When the dust settled, China moved on to selecting who would actually made the cut. Yesterday, the AIIB released its final, approved list of founding members (excluding Taiwan). With 57 countries signed up, the AIIB includes well over a quarter of the world’s nations. Even more interestingly, 16 of the world’s 20 largest economies are on board (with the U.S., Japan, Mexico, and Canada as the holdouts).
The AIIB is a creation whose aim is to challenge the hegemony of institutions dominated by the United States, Western Europe and Japan. Unlike the BRICS Bank, whose main shareholders may face coordination problems due to the equal distribution of voting shares, the AIIB faces no such difficulty since China will provide the largest share of resources.
China’s Asian Infrastructure Investment Bank (AIIB) has met with nothing but opposition from the United States. Officially, the objection cited by the United States is a lack of clarity about AIIB’s governance, as well as concerns about whether the AIIB will adhere to strict environmental and labor standards in its operations. It is clear, however, that U.S. opposition also derives from fears that the AIIB — spearheaded by China and part of China’s “New Silk Road” strategy — will diminish U.S. leadership in the region.
Despite its efforts, the United States has been unable to keep its allies from joining the AIIB. Earlier this year, Saudi Arabia applied for membership. The AIIB also has great representation in Europe. Nearly all of Western Europe (save Belgium and Ireland) officially signed up for the new bank. It’s a different story in Eastern Europe, where countries generally don’t have the excess capital to invest in an extra-regional bank (and thus Eastern European countries are not involved with the Asian Development Bank either). Meanwhile, the interest in AIIB from Western Europe marks a stark contrast between that region and North America. The U.S., Canada, and Mexico all declined to sign on, with Washington being particularly critical of the new project (including pressuring its friends and allies not to join). The United Kingdom announced that it would join as a founding member — a move that received a rare, public rebuke from the White House. Following it, a trio of European powers — France, Germany and Italy — have also applied for membership.
However, the glut of Western European countries involved in AIIB doesn’t mean Europe will be able to play a major role in the bank’s governance. The AIIB’s chief, Jin Liqun, previously said that non-Asian countries will be limited to holding a total of 25 percent of AIIB shares. That means China can claim all of the prestige of having Western Europe join its new pet project without actually have to share control.
It also means that Asian countries with governance concerns (including Australia and South Korea) will have to be more vocal about these issues to ensure AIIB actually lives up to international standards. China has announced that negotiations over the AIIB charter will take place in April and May, with the signing of the charter scheduled for the end of June.
Strategically, the United States cannot keep on shoring up an obsolete economic order in Asia. China is not withdrawing from the Washington institutions, it is supplementing them. Unlike certain other aspects of China’s policy, this development is properly seen in the context of the “peaceful rise” which China’s leaders have proclaimed. This is a case for accommodation, not confrontation.
China is leveraging off legitimate concerns. Developing countries are frustrated with the unfair governance standards and ineffective aid policies of the IMF and World Bank as well as their interference in local policy making. The pressure on South Korea and Indonesia to open specific domestic industries to foreign investments in return for financial assistance during the Asian Financial Crisis in 1997 has not been forgotten.
There's also China's strategic interest looking for multilateral legitimacy and funding. Global participation in China-led projects, it hopes, will dilute China's reputation in parts of Africa and Asia (e.g. Myanmar), of being abrasive on development and for demanding market access and natural resources in return.
But the real, unstated tension stems from a deeper shift: China will use the new bank to expand its influence at the expense of America and Japan, Asia’s established powers. China’s decision to fund a new multilateral bank rather than give more to existing ones reflects its exasperation with the glacial pace of global economic governance reform.
The AIIB is a small step by itself, of little importance during the next few years. From a long-term perspective it’s another step on the road to replacement of the US as global hegemony by a multi-polar system. The bank has become a key factor in deciding whether Beijing or Washington will hold the upper hand in deciding economic and trade issues in Asia in the coming decades./.
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All comments [ 16 ]


Quốc Cường 22/4/15 19:32

A China-led lender aiming to provide loans to fund infrastructure projects in developing Asian countries.

Huy Lâm 22/4/15 19:33

Also aiming to control other countries through it.

Quốc Kiên 22/4/15 19:36

I doubt China's true intention, they want to influence other nations, and AIIB will become a tool for them.

Phạm Hiếu 22/4/15 20:15

Britain’s decision to join angered the US, with President Barack Obama slamming the UK’s “constant accommodation” of China.

Lê Tín 22/4/15 20:19

Creating a competitor to the World Bank — the AIIB — required signing on many major nations.

Huy Quốc 22/4/15 21:17

So pity for America, so alone, left by their allies.

Hoàng Lân 22/4/15 21:18

The Obama administration is concerned the new bank will compete with Western-led institutions like the World Bank and the International Monetary Fund

Vân Nhàn 22/4/15 21:18

The AIIB, as it's called, will be a chance for China to extend its influence by financing big infrastructure and development projects throughout Asia.

Hùng Quân 22/4/15 21:20

Don't believe China, they say and do inconsistently.

Quân Hoàng 22/4/15 21:26

US government officials understood the importance of stopping China’s first steps, and strongly pressured our allies to not participate.

Mai Du Con 23/4/15 14:37

I agree with Hung Quan! China also say and do quite difference!!

Phu Chem 23/4/15 23:07

almost countries have realized that AIIB is just china's tool to expand it's influence in the area and over the world.

Rực Rỡ 23/4/15 23:12

so why have many nations still joined AIIB?

Thị Trinh 23/4/15 23:19

all due to economic interests, some countries are ready to exchange political dependence for immediate benefits

so far both the US and Japan haven't yet joined AIIB because they have worried about China 's increasing influence that could threaten to position of a superpower of the US.

Tứ Long 24/4/15 23:17

AIIB and "silk road" are all aimed at China 's political intention, so countries must be viligant.

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