America says it welcomes China’s ascent to great-power status, so long as the Chinese respect international norms and play a proper part in the multilateral system.
China suspects that, in practice, America tries to hem it in whenever it does anything on the world stage. In the case of the Asian Infrastructure Investment Bank (AIIB), America seems to be confirming China’s darkest fears: it has adopted a policy of containment that is wrong in principle and has failed in practice.
Flush with the world’s largest foreign-exchange reserves, China plans a new bank to help match Asia’s vast savings with its even vaster need for new bridges, roads and other necessities of development. America dislikes the idea because it thinks the bank will not abide by high standards of creditworthiness and transparency; it also fears the institution will be a vehicle for Chinese influence.
Though the Americans say they have not lobbied against the bank, they have put pressure on allies not to join it. When Britain became the first country outside Asia to apply for membership, an American official harrumphed about its trend towards “constant accommodation” of China.
That admonition did not stop Germany, France and Italy declaring this week that they too wanted to be founding members. Others may follow.
America is not wrong to be suspicious of China’s motives. The AIIB is designed to project Chinese power in the region.
Institutions already exist to match capital with projects, most obviously the Asian Development Bank (ADB). Rather than setting up a new lender, China could have put more money into an old one.
Nor is America wrong to warn against a supine approach to China: Britain’s limp response to the protests that rocked Hong Kong last year did it no credit.
America’s doubts over the bank’s lending policies cannot just be wished away, either. As Sri Lanka’s largest infrastructure project shows, Chinese-financed development plans can be opaque, careless of environmental concerns and shot through with dodgy political dealings.
A missed opportunity
But there are three reasons why America should be more receptive toward the AIIB and its allies’ potential membership.
The first is that Asia’s need for infrastructure is vast and pressing.
The continent’s relentless urbanisation requires at least $US8 trillion of infrastructure spending in this decade, according to the ADB. The AIIB will not finance this splurge on its own: it looks likely to end up with a capital base of between $US50 billion and $US100 billion. But it will help.
Second, the best way to deal with concerns about Chinese lending standards is to join the bank and improve it from inside, not to throw brickbats from outside.
Chinese leaders know perfectly well that the new institution will come under a lot of scrutiny. They have an incentive to be open and transparent, at least at first. Having more nations outside its orbit on board should help keep things more honest.
Third, although it might have been better to expand and reform existing institutions (the ADB, World Bank and so on), America itself has made that impossible.
Even a modest proposal to increase the resources of the IMF (giving slightly more votes to China and other big emerging markets) has been stymied for years in Congress. America has frustrated efforts to boost China’s clout in the World Bank. Nor is China included in its planned Trans-Pacific Partnership free-trade deal.
Rather than try to thwart the AIIB, America ought to embrace it. China should invite it to join, and America should accept. That would be the best way to accommodate Asia’s massive infrastructure plans–to say nothing of a rising China.
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