The AIIB Pivot
China has invited itself into the international economic system, at the risk of shaking it up. The Asian Infrastructure Investment Bank (AIIB) is one of the main creations of Xi Jinping since his arrival as President of China. Although it has triggered less comments than the “Chinese dream” whose objectives and framework are not clearly defined and less reactions than the fight against corruption which has sponsored fear among the CPC executives, this bank is just as ambitious and could topple the global economic and financial balance. In the same way China’s joining the WTO in November 2001 provoked few comments because of the international context characterized by the fight against terrorism and the Afghan war, the creation of the AIIB will have profound repercussions on the power struggle between the great economic powers and confirms China’s growing influence and role. In this sense, we are faced with a genuine turning point.
13 avril 2015
This project was first brought up by the Chinese president during a visit to Indonesia in October 2013 and was officially created one year later and based in Beijing. To become a founding member, states had until March 31st (the deadline was then postponed to April 15th) to express themselves and join the bank. The bank now counts fifty-seven members, mainly Asian and European countries, plus Brazil, South Africa, Iran, Egypt, United Arab Emirates and even Saudi Arabia. On a continental scale, the Chinese initiative was met with immediate success as underlined by the participation of the ASEAN, Central and Southern Asia, among which India and even Russia, and South Korea (which expressed itself last April 11th). Chinas’ going on the offensive with an investment bank is not a big surprise. Beijing has one of the largest capital reserves in the world and has increased its investments towards emerging countries for the last decade, and its initiatives inside the BRICS group have been the first sign of its willingness to impose new rules.
This bank is first and foremost a blow to Japan, primary actor of the Asian Development Bank (ADB) created in 1966 which despite having its headquarters in Manila, has had Japanese presidents for fifty years. This bank which originally relied on thirty-one members now counts sixty-seven members. For its part, China joined it in 1986. AIIB is imposing itself as the main challenger to ADB, and its creation coincides with China’s growing weight inside the Asian economy to the detriment of Japan. Actually, alongside North Korea and Taiwan whose applications were denied, Japan is one of the rare countries in Asia to have not joined this new bank. The question now lies in how the ADB will resist this new competitor. With China’s strike capabilities and its relations with numerous Asian countries (notably the Asean-China Free Trade Area, relations with central Asia, ties to countries in Southern Asia and China’s role in the APEC), Beijing has many advantages on its side. It is therefore not surprising to see Tokyo showing interest in AIIB membership, which on the short term is inevitable.
The creation of the AIIB also represents a dilemma for Washington. The United States has not only refused membership but has also tried to convince their closest allies to not join the AIIB, such as the United Kingdom and Australia. The fact that London and Canberra won’t listen to Washington’s request reveals not only a declining American influence but also an increasing Chinese attractivity. With Canada’s application being looked at, only Japan and the United States will remain as the only G20 members not affiliated to the structure. This is in itself a small but noticeable feat considering that Washington has a leading role in all of the economic and financial international institutions.
The dilemma is further revealed by the Obama administration’s arguments. The United States has expressed legitimate reserves concerning the creation of the AIIB, arguing that it doesn’t sufficiently insist on good governance. Their refusal to join the new institution is based on the Washington consensus. Should the fact that eighteen members of the G20 have joined the AIIB be taken as an affront to this consensus? Without a doubt. pragmatism above all everything.
The American president of the World Bank, Jim Yong Kim, has made known that the needs in terms of infrastructures in developing countries are so big that all initiatives are welcome. This is a way of not losing face (while waiting for Washington to join the AIIB, which will happen sooner or later, albeit too late regardless) but also of insisting on the fact that no one can renounce to growing involvement from China, even if it means following rules defined by it.
Taiwan’s application for membership has been rejected for now, but Beijing has kept the door open for future membership.
Translated by Emilia Capitaine and Elie Khoury, students at IRIS Sup’.