The United States was opposed to the China-led Asian Infrastructure Investment Bank ostensibly out of concern that it would adopt poor governance standards.
But Washington’s real fear was that China was out to undermine and ultimately replace the US-dominated global financial architecture put in place at the end of World War II and usurp America’s place as the pre-eminent global leader.
China, of course, is well aware of such American apprehension and has set out to reassure the US that it has no such intentions.
In December, Vice-Premier Wang Yang, in a speech in Chicago, acknowledged that “the United States leads the world today” and said that China was willing to accept the US-led system and to “play a constructive role in the international economic system”.
This month, Foreign Minister Wang Yi said at a press conference on the sidelines of the annual session of the National People’s Congress, China’s parliament, that “China has always been a constructive force in building the international order”.
Speaking of the existing international system as a boat carrying all 190 countries in the world, he said: “We don’t want to upset that boat. Rather, we want to work with the other passengers to ensure that this boat will sail forward steadily and in the right direction.”
The message is clear: China is not out to destroy the existing system but to reform it.
And, as everyone knows, reform is needed in many areas, including in the world’s financial institutions, which have so far refused to accommodate new economic realities.
While US President Barack Obama’s administration agreed to increase the voting share of China and other emerging economies in the International Monetary Fund five years ago, a recalcitrant US Congress has refused to ratify that agreement.
These financial institutions have become like fiefdoms, with the World Bank always headed by an American, the International Monetary Fund by a European and the Asian Development Bank by a Japanese.
The fact that some of Washington’s closest friends and allies have asked to join the AIIB as founding members or are seriously weighing this option shows that, in their minds at least, the planned bank is not a threat to the existing order.
There is widespread recognition of Asia’s vast unmet infrastructural needs, which, at the same time, could provide a profit for lenders.
Christine Lagarde, managing director of the IMF, said in Beijing on Sunday that the fund will be happy to cooperate with the AIIB, echoing statements previously made by the World Bank and the ADB.
China has announced that the deadline for joining the AIIB as a founding member is March 31.
While 21 countries, including China, took place in the signing ceremony in Beijing in October, by now about 30 countries have shown strong interest in joining.
The number of founding members would thus be comparable to that of the ADB, which had 31 members when it was established in 1966 and which has now grown to 67 members.
One question China has not addressed is whether Taiwan will be allowed to join.
Taiwan – then known as the Republic of China – was a founding member of the ADB.
But then, after the People’s Republic of China became a member in 1986, it insisted on a name change for Taiwan, which since then has been referred to as Taipei, China, despite Taiwan’s vigorous opposition.
Taiwan has indicated interest in joining AIIB if invited.
If China were to invite Taiwan to join, it would help to ease concerns that politics would influence decision-making at the new bank.
As for the actual name to be used, Chinese Taipei – the name used by the World Trade Organization, the Asia Pacific Economic Cooperation forum and the International Olympic Committee – seems acceptable to most parties.
China has in the past injected politics into bankers’ decision-making processes.
Thus, in 2009, when India applied to the ADB for funds for a flood management project in Arunachal Pradesh state, China objected on the grounds that the entire state is Chinese sovereign territory and does not belong to India.
This forced the bank to withdraw its support for the project.
To ensure high-quality governance, as the US insists, the Americans should encourage more countries with high standards to join the bank rather than ostracize it.
It is fine for the US to be tough on China where warranted, but, in this case, China has articulated its intention to complement and work with existing institutions. It deserves the benefit of the doubt.
Allow the AIIB to stand or fall on its own merits.
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