China’s development bank plans test rising power’s strategic shift

In an influential speech in 2005, then-US deputy secretary of state Robert Zoellick called on China to become a “responsible stakeholder” in the international community. To optimists, China’s recent efforts in creating high-profile international development banks shows that it is gradually embracing that role.

China signed an agreement in July with the four other BRICS countries – Brazil, Russia, India and South Africa – to create the New Development Bank (NDB) to provide loans and liquidity to member nations. Just three months later, Beijing pioneered the effort to create an Asian Infrastructure Investment Bank (AIIB) to finance development projects in the region. Twenty nations as diverse as Qatar, India, Singapore and Thailand signed on as founding members. China plans to provide the majority of the capital required to finance the new bank’s operations, with the headquarters located in Beijing.

The US and its allies view the China-backed AIIB with deep suspicion. It is an open secret that Washington has successfully pressured Australia and South Korea to refrain from joining the new development bank. What explains such hostility toward the Chinese effort to take a larger role in regional and global governance?

China’s economic statecraft

First, the AIIB can strengthen Beijing’s economic influence in Asia, which can then be leveraged to affect the foreign policies of nations in the region. Beijing has a long history of relying on its economic clout to further its international political objectives. In 2012, then-Chinese President Hu Jintao visited Cambodia’s Prime Minister Hun Sen and signed a series of bilateral trade and aid agreements right before the ASEAN summit that year. During the summit, the ASEAN nations failed to issue a common communique – which is unprecedented – due to Cambodia’s unwillingness to include any statement that might embarrass China. The list goes on.

Third, the creation of the AIIB places pressure on the Western powers and Japan to revamp the governance structures of the IMF, the World Bank and the ADB. Despite China’s growing economic clout, it is accorded little influence in these cornerstone international and regional financial institutions. China’s share of the vote in the IMF, for instance, is only one fourth of the US’s. Beijing’s backing of the AIIB sends a strong signal to the Western powers and Japan that China has outside options if existing multilateral arrangements do not evolve to reflect China’s rising economic and political influence.

Lastly, the creation of the AIIB provides an opportunity for Beijing to assess which nations in the region can be co-opted or pressured into supporting its foreign policy agenda (at least on the surface). A nation’s refusal to participate in the AIIB sends a strong signal to the Chinese leadership that: (1) it is a staunch US ally that requires more carrots and sticks to make it susceptible to Chinese influence; (2) it has doubts about China’s growing influence in the region. Of course, subscribing to the AIIB does not mean that a nation is an ally of China (for example, the Philippines and Vietnam), but it does signify at least superficial acceptance of Chinese leadership in Asia.

From biding time to great power diplomacy

Just ten years ago, it would be impossible to imagine that Beijing would take the lead in creating high-profile international institutions like the NDB and the AIIB. Under the slogan “conceal one’s strengths and bide one’s time” (taoguang yanghui), which succinctly summarizes Chinese grand strategy since Deng Xiaoping, Chinese diplomacy has been reactive and passive. This is no longer the case. The buzz word in the Chinese foreign policy circle these days is “great power diplomacy” (daguo waijiao), a term that highlights China’s growing confidence as the pre-eminent great power, second only to the US. The creation of the AIIB should be understood in the context of a paradigm shift in Chinese grand strategy.

Full article: China’s development bank plans test rising power’s strategic shift (The Conversation)

Comments are closed.