Power VisionChinese President Xi Jinping’s vision of achieving the same great-power status enjoyed by the U.S. received a major boost this month when the U.K., Germany, France and Italy signed on to the Asian Infrastructure Investment Bank. The AIIB will have authorized capital of $100 billion and starting funds of about $50 billion.
Canada is considering joining, which would leave the U.S. and Japan as the only Group of Seven holdouts as they question the institution’s governance and environmental standards. Australian Prime Minister Tony Abbott’s cabinet approved negotiations to join too, according to a government official who asked not to be identified as the decision hasn’t been made public.
“China’s economic rise is acting as a huge pull factor forcing the existing architecture to adapt,” said James Laurenceson, deputy director of the Australia-China Relations Institute in Sydney. “The AIIB has shown the U.S. that a majority in international community support China’s aspirations for taking on greater leadership and responsibility, at least on economic initiatives.”
The new China-backed institutions — the infrastructure bank, a $50 billion development bank in conjunction with fellow BRICS nations and a $40 billion fund to revive the ancient Silk Road trade route — are being set up after years of frustrated attempts by China and other emerging nations to revamp the existing international financial institutions to better reflect the shape of the global economy.
“The real tragedy is, compared to the billions we spend on defense to support U.S. global leadership, Congress undermined it by refusing to provide the chump change needed to reform the IMF,” said David Loevinger, former U.S. Treasury Department senior coordinator for China affairs and now an analyst at TCW Group Inc. in Los Angeles. “Congress can abdicate its international responsibilities. What it can’t do is stop China from playing a bigger role in managing the global economy.”
Some analysts have likened the plan to the postwar effort to help Europe that helped establish the U.S. as a regional economic power. A detailed plan may be unveiled at China’s Boao Forum conference starting Thursday, where Xi is scheduled to speak, according to Australia & New Zealand Banking Group Ltd.
Full article: China’s Influence Set to Climb as U.S. Thwarted on New Bank (BloombergBusiness)