AIIB: Not a US Loss, Not a Chinese Win

The China-led AIIB does not necessarily challenge U.S. financial hegemony; it could be a golden opportunity for cooperation.

AIIB: Not a US Loss, Not a Chinese Win
Credit: Wikimedia Commons

Too much ink has been spilled over China’s seeming success in wooing away the United States’ traditional allies to the China-led Asian Infrastructure Investment Bank (AIIB). Many analysts (here, here, and here) see it as a ‘China winning, U.S. losing’ story, thereby implicitly highlighting the confrontational nature of Sino-U.S. relations. Such a view is not only too simplistic, but also dangerous for moving Sino-U.S. relations forward. While to some degree it is true that China has scored a political victory by successfully attracting some of America’s traditional allies to the AIIB, there are three things we need to consider before we bandwagon with the cliché that China is rising while the U.S. is declining.

The first thing to bear in mind is that the AIIB is an economic institution that may or may not carry strategic implications. While many might be tempted to view China’s AIIB move as a direct threat to the U.S.-led global financial order, in reality the AIIB’s goals are much more limited. It is very important for the U.S. not to view the AIIB as a new signal of strategic rivalry between China and the U.S.; such a distorted view would assign unnecessary strategic significance to the AIIB which is in reality is first and foremost about development. It is about funding more roads, railroads, airports, and pipelines for many developing countries in Asia. If the U.S. becomes hypersensitive to China’s every effort in global governance, then it is possible that the U.S. might reach the wrong conclusion that China indeed is trying to overthrow U.S. hegemony and start taking countermeasures to curb China’s rising influence. That would be a tragedy. In actuality, China cannot and will not challenge U.S. hegemony.

Another thing that is worth remembering, as many have already pointed out, is that the AIIB’s future is still uncertain. For one thing, it is the first time that Beijing has tried running a multilateral economic institution. Some internal challenges will not be fixed easily, and some external challenges are even harder to overcome. It is not clear how democratic and transparent the decision-making structure will be within the AIIB, especially now that many major economies like Germany and the U.K. have decided to join the bank. What is more likely is that Beijing’s preferences will be constrained by such major players, which is not necessarily a bad thing. The reason is that these more experienced players can help Beijing make better decisions when allocating funds and thus ultimately improve the quality and reputation of the AIIB in the future.

More importantly, a more democratic structure in the AIIB will reduce the suspicions and worries of smaller Asian countries that are already wary of China’s future intentions. By delegating more power to other players, Beijing can send a strong and reassuring signal to countries like Vietnam and the Philippines thereby moderating tensions between these countries, stemming from maritime territorial disputes. Beijing must make a serious effort to show that the AIIB is not just another weapon to help China dominate Southeast Asia. Failing to do so would jeopardize not only the AIIB’s goals but also China’s project of a peaceful rise.

Finally, it is misleading to claim that the U.S. is a loser in the AIIB project. While it was unwise for the U.S. to prevent its allies from joining the AIIB earlier, it would be equally unwise to underestimate the potential influence of the U.S. on the AIIB and development in Asia in general. Whether or not the U.S. eventually joins the AIIB remains to be seen. If the U.S. does join the AIIB, then we could very well see a different structure for the bank. Even if the U.S. chooses to stay outside of the AIIB in the future, competition between AIIB and the U.S.-led world bank and International Monetary Fund (IMF) will ensure that American standards and will continue to dominate the global financial order in the foreseeable future.

Needless to say, the China-led AIIB poses some challenges to U.S. influence in Asia. It is imperative for leaders from both China and the United States to avoid falling into a confrontational trap. Healthy competition between different global financial institutions is good for Asia and the world as a whole. To that end, analysts should stop the “China vs. the U.S.” hype and pay more attention to how the quality of the AIIB as an institution can be improved.