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Asian Infrastructure Investment Bank (AIIB): A Threat to the US?

Asian Infrastructure Investment Bank
Photo Credit: Flickr

With the hope of filling the massive infrastructure funding gap in Asia, a gap that Asian Development Bank and World Bank fail to tackle, Asian Infrastructure Investment Bank (AIIB) has been initiated by Chnia. Whereas ADB and World Bank fund projects on everything from environmental protection to gender equality, the AIIB aims at improving primarily the infrastructures in China, Russia, Japan, South Korea, Thailand, Myanmar, India, Bangladesh, Pakistan, Indonesia, Malaysia, Vietnam and 43 other neighboring countries: the objective is to reconnect Asia and Europe via old trade routes. These modern-day Silk Roads will use highways, railroads, ports, bridges, and pipelines to reduce the travel time between the two continents. The efforts to reconnect Asia with Europe will be one of the biggest forces shaping the next 30 years, bringing new markets, people, and resources into the fabric of the global geopolitical landscape. If successful, it will revolutionize logistics and create trillions of dollars in economic value through increased trade and economic activity. The initiative was officially launched by Chinese President Xi Jinping on a state visit to Indonesia in October 2013 which was later joined by England, Germany, France, Italy, Australia, Hong Kong, and South Korea.

Why America is Against the AIIB?

Despite the Obama administration lobbied its allies not to join the Asian Infrastructure Investment Bank, as stated above, most of the developed countries have joined this multilateral development bank. The Obama administration saw the AIIB as a direct threat to the World Bank, IMF, and ADB of which the United States is either the largest or second-largest shareholder. The United States views China as a formidable economic power that would influence the political affairs in the Asian region through the economic policies and projects undertaken by the Asian Infrastructure Investment Bank. Washington officials suspect that China will use the bank to set the global economic agenda on its own terms. Referring to environmental protections, human rights, anticorruption measures and other governance standards that America often violates both in home and abroad, American officials tried to convince the allies that China would totally disregard these issues. But the Obama administration stomached an embarrassing diplomatic defeat when most of its closest allies signed up for the bank, including Britain, Germany, Australia and South Korea. Altogether 57 countries have joined Asian Infrastructure Investment Bank, leaving the United States and Japan on the outside.

Why most Countries joined the AIIB?

The decision by the major economic powers to join the Asian Infrastructure Investment Bank is easy to understand. China, with its vast wealth and resources, is now the strongest economic power in the world. Chinese currency now rivals the US dollar which is confirmed when the International Monetary Fund blessed the Chinese renminbi as one of the world’s elite currencies, alongside the dollar, euro, pound and yen. To maintain a stable economic growth through trade and investment, most countries deem it wise to operate in China’s orbit and to back the new bank for financial advantages. While many countries had similar doubts as the United States, they figured they could just shape the Asian Infrastructure Investment Bank from the inside.

Why is China so Interested in Establishing another World Bank?

China’s little influence in the Bretton Woods system established under the leadership of the United States and its cornered position in the ADB dominated by Japan instigated Beijing officials to have their own World Bank. Beijing officials say they want to take a faster approach than their counterparts at the World Bank, the International Monetary Fund and the Asian Development Bank. To China, the World Bank and the Asian Development Bank failed to deliver on big projects meant to transform backward parts of Asia, resulting in an estimated $8 trillion of needed investment in rails, ports and power plants. However, economic analysts argue that the China Development Bank and the Export-Import Bank of China have already financed big-ticket projects in Asia and Africa. By Chinese estimates, their combined overseas assets stood at $500 billion, more than the combined capital of the World Bank and the Asian Development Bank. So, does China plans to use the bank as a conduit to further its own ambitions? As Eswar Prasad, former head of the China division at the International Monetary Fund and a professor at Cornell University, states, Asian Infrastructure Investment Bank “is an instrument for China to lend legitimacy to its international forays and to extend its sphere of economic and political influence even while changing the rules of the game.”

Does China really plan to use AIIB in Controlling Asia?

The Obama administration and major shareholders of the World Bank and IMF initially viewed the Asian Infrastructure Investment Bank with remarkable suspicion. Chinese diplomats have successfully neutralized that suspicion through a number of policies related to the direction of the bank. Mr. Jin Liqun, the president of the Asian Infrastructure Investment Bank, declared that he wanted the bank to be part of an orchestra working with other development banks, not a solo player. Beijing officials unconditionally consented to forming a 12-member board for the bank and adopting an Australian idea that procurement should not be limited to member countries, a pledge that would distinguish the bank from the existing institutions. This means companies in the United States and Japan can compete for contracts. The bank also decided to hire staff members from nonparticipant countries. Two American veterans of the World Bank are working with the new bank: Stephen F. Lintner, a former senior adviser on quality assurance, and Natalie Lichtenstein, who recently retired as assistant general counsel.

Asia seriously lacks modern infrastructures, continental highways, or reliable railroads that could have boosted economic growth and consequent human development. China, being the most powerful economy of the region, foresees its future trade with the neighboring countries and detects the lack of infrastructures as a major obstacle. If connected with Europe via highways and railroads, the Euro-Asian region will certainly become the economic hub of the world with China at the help. Why would the United States allow this to happen? Well, it has already happened!


About the author


Business and technology have always been Sam's areas of interest, and he transformed that interest into a passion through his regular contributions on issues related to these. As an IT specialist Sam is well versed in the most up-to-date trends in the field of computer technology. He earned his Master's in Information Science from Penn State University. He writes on technology, science, business, nature, and contemporary issues.


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