Is the China-led Asian Infrastructure Investment Bank a threat to the U.S.-led global financial system, as Western policymakers and commentators have so vociferously been insisting? Under the contrary writes columnist Peter Achten of Switzerland’s News. In fact, Achten outines why the AIIB is not only complimentary to the World Back, Asia Development Bank and other Bretton Woods institutions, it is absolutely necessary if the region is to fund they type of infrustructure that everyone agrees is absolutely necessary for keeping the global economy humming over the coming decades.
For the News, Peter Achten reports from Beijing:
China is said to be striving for geopolitical as well as financial and economic dominance. Led by The Wall Street Journal, the mouthpiece of capital, and leading mainstream media in America and Europe, including Switzerland of course, judgment has been passed more or less in unison. It is a conclusion that came about as a result of poor reasoning and a skewed analysis of the facts. What has clearly changed, however, are global atmospheric conditions with respect to finance, economics and power politics.
For decades, the global center of gravity has been gradually shifting from the Atlantic to the Pacific. Yet Western commentators, economists, bankers, analysts and other assorted pundits who remain mired in Euro-centric thinking could not or would not comprehend that after 500 years of European and Western cultural supremacy, a new world is in the process of emerging – one no longer under U.S. hegemony, but multipolar instead. Asia has caught up rapidly in recent decades. First it was Japan, then the four tigers or dragon nations of South Korea, Taiwan, Hong Kong and Singapore, then Thailand and Malaysia and finally, heavyweights China, India and Indonesia.
Now that it is economically fortified, China has established the Asian Infrastructure Investment Bank or AIIB and is sending a clear financial and development policy signal that a new economic world order is emerging. This comes 70 years after the creation of the Bretton Woods institutions at the end of WWII – the International Monetary Fund (IMF), the World Bank (WB) and its offshoot, the Asian Development Bank (ADB).
Washington immediately responded with rejection. A spasmodic White House sought to prevent its closest European ally, Great Britain, from becoming a founding member of AIIB. In vain. Diplomatic pressure from America fizzled with other Western nations as well. New Zealand, Australia, South Korea, Brazil, India, Russia and South Africa, but also the U.S. allies Germany, France, Italy and yes, even Switzerland, Luxemburg and Austria – and 23 other countries – are now included as founding members.
By the target date of March 31, a total of 44 countries applied to be founding members. Among them is also – in Beijing’s view – the “renegade” province of Taiwan. China has responded to Taiwan’s application favorably. At the very last moment the Americans suddenly became more flexible, apparently influenced by the participation of its closest European allies. In talks held in Beijing on March 30th with Premier Li Keqiang, U.S. Treasury Secretary Jack Lew expressed cautious optimism. Lew stated diplomatically that the United States welcomes and supports proposals that promote an improved international financial structure. Washington was ready to talk.
As always when it comes to financial and economic issues, China proceeds with pragmatism and flexibility. The creation of the AIIB should be seen against the backdrop of a new Chinese Silk Road strategy. Shortly after taking office two and a half years ago, head of state and party leader Xi Jinping outlined his new view of things, not just for China, but for South Asia, Eurasia and Europe: The Silk Road must be reinvigorated on land and sea to benefit all people in Asia, Europe and beyond. The improvement and expansion of infrastructure is the first necessary step toward achieving that goal. That’s no surprise. This means the improvement and expansion of airports, container terminals, deep-water ports, telecommunications systems, energy and above all, the intercontinental Eurasian railway system. The investment required is enormous. Just one example: In Indonesia alone, the government estimates that a half a trillion dollars in investment is required to improve the ailing infrastructure. Or: According to estimates by the Asian Development Bank, where the largest shareholder is Japan, infrastructure requires an annual investment of $750 billion per year until 2020. This is beyond the capacity of the ADB, which in 2012 granted loans valued at only $7.5 billion.
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