The Asian Infrastructure Investment Bank (AIIB) is a regional financial institution proposed by China, headquartered in Shanghai. The new bank’s stated aim is to provide finance to infrastructure projects in the Asia region, ie roads, ports, telecommunication networks, and electricity. As of April 15, 57 nations, including Bangladesh, have joined as founding members of this giant organisation.
The AIIB is seen as a challenge to the post-World War II economic order set up by the IMF, the World Bank, and the Asian Development Bank according to various New York-based newspapers. All these institutions are dominated by the US. The initiative of the AIIB appeared first in October 2013 as a reaction to the Chinese government’s failure to increase voting shares in the institutions mentioned above.
It is believed that the ADB’s report in 2009 (Asia would require $8tn in infrastructure to achieve stable growth in the next decade) accelerated the initiative taken for the AIIB. The bank was established with $50bn in capital provided by China, making it $100bn in collaboration with the other member countries. Beijing confirmed that the Bank would commence its regular activities at the end of 2015.
US analysts strategically evaluate the establishment of the bank in the following ways: China, as the world’s second largest economy, has established the AIIB, taking into consideration its strong presence in the international arena as a superpower and enhanced regional role in the economic and political arena. It desires to wield more control over the funding of projects in Asia as well as in the global arena due to the sizeable gap in infrastructure financing in Asia. Its move demonstrates its ongoing efforts to establish the Renminbi, the Chinese currency, as a global reserve currency on par with the US dollar.
The establishment of the AIIB and the BRICS Development Bank is deemed as China’s largest soft power success through which it has proved that it is willing to take on more leadership and responsibility in the region. Through the bank, Beijing has stretched its active role within developing nations under the name of infrastructural development due to which other powers would compete less with it for its economic influence in the AIIB.
China has already invested in Latin America, the Caribbean, Africa, and Central Asia. Trade between China and Africa rose to $200bn in 2013, which is more than double of that of the US, and foreign direct investment has also increased six-fold since 2005.
On the other hand, Washington has been against the initiative from the very beginning, warning its allies to refrain from joining. It opposed the AIIB with allegations of corruption, maintaining lower standards, environmental and security issues, and maintaining Chinese veto power in the institution.
In the Washington Post, Lawrence Summers, the director of the National Economic Council for President Obama, sees the Chinese-led AIIB as a direct challenge to the traditional sources of international funding such as the IMF, WB and other organisations, which are primarily dominated by the US. American international relations experts have delineated on some issues which are posing a threat to the US foreign policy and its interests which can be analysed in the following three ways:
Firstly, the AIIB is a “direct threat” to the global economic order dominated by the US. Through this economic leadership, it dominates global financial systems and often forces nations to comply with its will, if economic sanctions are applied as was against Iran, North Korea, and Russia. For Beijing, the future of the ADB and America’s economic role in infrastructural and development projects in the region is crucial.
Secondly, despite being cautioned, the US’s traditional allies like the UK, Germany, France, Australia, and South Korea have applied to become founding members of the bank. This turn by its allies, with whom it has played a vital role against China in many international events, is seen as an isolation and diplomatic debacle for Washington, with the global economic tide shifting from Washington to Beijing.
Finally, the bank is deemed as US’s failure to maintain its “pivot of Asia” policy (remaining a global player in the Asia-Pacific region through its economic, political, and military presence). Experts see the AIIB as part of China's attempt to minimise US economic and political influence. They fear a polarisation between the US and its allies as China increases its geo-economic role in the region.
Last but not least, in agreement with the views of liberal US economists Joseph Stiglitz (a Nobel laureate) and Robert Zoellick (former president of the WB), who consider the present world as multi-polar, I argue that in order to ensure global development, the US should congratulate the Chinese initiative and, keeping its own interests in mind, deal with China via a process of engagement.
