One of the most amusing things about China’s Asian Infrastructure Investment Bank membership drive (which concluded at the end of March) was that it was so successful Beijing had to essentially apologize in order to ensure that all of the US allies that signed up stayed comfortable.
To recap, in early March Britain decided – much to Washington’s chagrin – to throw its support behind China’s effort to establish a new development bank. The venture, designed to help fill gaps left by The World Bank and the ADB, was viewed by the US as an attempt to challenge the supremacy of the multilateral institutions that have dominated the global economic order in the post-war world and also as an effort to create a powerful instrument of foreign policy that could be deployed on the way to establishing what amounts to a kind of Sino-Monroe Doctrine.
Of course the Obama administration couldn’t come out and say that, so the excuse for Washington’s largely behind-the-scenes effort to subvert the AIIB was that the new lender would have inadequate controls and flimsy underwriting standards. There was also some nonsense about a lack of regard for environmental concerns. As silly and transparent as that was, Washington’s allies were willing to buy it right up until Britain broke ranks and at that point, the floodgates opened as virtually everyone except the US and Japan jumped on board.
That was great for China, until talk of a new world order characterized by yuan hegemony started to make Beijing uncomfortable. As we put it earlier this month, “despite the Politburo’s best efforts to toe the line between acknowledging the bank’s early success and unnerving Western members who, although happy to participate, are still acutely aware that a dying hegemon is still a hegemon and therefore would prefer it if Beijing didn’t rub the whole thing in Washington’s face, it was abundantly clear to everyone involved that the AIIB represented no less than a changing of the guard and a revolution against the US-dominated multilateral institutions that many emerging countries believe have failed to respond to seismic shifts in the global economy.”
And so, China did its best to ensure everyone involved that it did not plan to use the bank as a foreign policy tool and had no plans to use the new lender as a kind of backdoor way to promote yuan hegemony. As we put it earlier this year, China simply couldn’t believe how successful the bank was before it was even launched.
Now, as the AIIB gets set to officially commence operations, Reuters is out with an interesting look back at the story behind the institution that’s set to bring about a dramatic change in how the world thinks about development lending. Here’s more: