The key legal framework for the China-initiated regional multilateral institution – the Asian Infrastructure Investment Bank (AIIB) – was inked by representatives of the bank’s 57 founding members in Beijing last Monday. After European and Asian countries supported establishment of the bank, attention focused on whether the US, the world’s only superpower and the largest economy, would also join.
Since the birth of the Chinese-led investment bank the US has publicly voiced support for the idea of an Asian infrastructure bank but has cited standards of governance as a key concern. To intensify matters, it was reported that the US pressured key transatlantic and Asia-Pacific allies, including but not limited to the UK, Australia and South Korea. In the eyes of US, its allies’ attempts to engage in the Chinese initiative represented “a trend toward constant accommodation of China, which is not the best way to engage a rising power,” an anonymous US official was quoted as saying by the London-based Financial Times.
After the aforementioned US allies and partners joined the bank, the US’s own failure to seek membership was described as a “miscalculated” decision by former US Secretary of State Madeleine Albright. It seemed that “all of a sudden everybody was in” except the US, she was quoted as saying.
Ever since China integrated with the current world system, its role as a rising power has been the subject of serious discussion and careful worldwide scrutiny. One of the criticisms made of China was that it was “a free rider” in the existing international system, as US President Obama stated in a 2014 interview with the New York Times. The fact is that China was urged to play a larger and more responsible role in regional and world affairs for many years, but as soon as China put forward its own vision – AIIB – with a view to enhance regional connectivity and upgrade infrastructure, the US opposed it. As Fred Bergsten, director emeritus of the Peterson Institute for International Economics and assistant treasury secretary in the Carter administration, put it, US opposition to the bank was “illogical,” not to mention the fact China invested about US$ 30 billion in the initial stage.
Even after the AIIB agreement was signed, US deputy spokesman Mark C Toner noted at a daily press briefing that the US wanted to see “the AIIB be an organization that employs the kind of high standards and governance reflecting the way international financial organizations like the World Bank and the IMF have operated over the past 70 years.” That said, the US was still quite cautious about joining the bank.
By contrast Takehiko Nakao, president of the Japan-sponsored Asia Development Bank (ADB), immediately congratulated AIIB on key progress and declared his bank as “committed to working closely on cofinancing with AIIB, and will continue sharing necessary information and look into specific projects that could benefit from cofinancing.”
Jim Yong Kim, president of the World Bank Group (WBG), the key institution of the US-dominated Bretton Woods system, stated WBG viewed the AIIB “as an important new partner that shares a common goal: ending extreme poverty,” and WBG expected AIIB to adopt “strong environment, labor and procurement standards” with other development banks.
No single development bank alone can meet the growing needs of infrastructure financing here in Asia. According to ADB’s 2010 assessment, the region requires about US$800 billion annually between 2010 and 2020 for infrastructure investment and upgrade. The World Bank spent US$24.2 billion and the Asia Development Bank spent US$21 billion on infrastructure during the 2014 financial year, according to World Resource Institute sources.
What also needs to be underlined is that China has adopted a quite open and inclusive attitude in responding to doubts and criticisms of the AIIB. Chinese finance minister Lou Jiwei made it public in 2014 that AIIB will fully respect and learn best practices from existing multilateral development banks including ADB and WBG, with a view to formulating and implementing feasible high standards.
Perhaps a more pragmatic approach for US policymakers would be to recognize that a zero-sum mentality towards the AIIB is of no help to US interests, a view shared by many Americans. In the recently concluded US-China Strategic and Economic Dialogue, both leaderships reaffirmed their desire to strengthen pragmatic cooperation. The AIIB is not about win-lose. A win-win result can be achieved if both sides are more open-minded. An even more important suggestion for the US leadership is that US concerns about governance standards cannot be best addressed by maintaining its opposition to the bank.