The U.S. dominates the World Bank, Europe has the International Monetary Fund, while Japan steers the Asian Development Bank. China? Well, its stewardship of global bodies has been confined to the International Network for Bamboo and Rattan. Until now.
Officials from around the world will gather in Beijing on Monday for a signing ceremony on the articles of agreement for the $100-billion Asian Infrastructure Investment Bank.
The 56 nations that have put money on the table to join the China-backed bank are betting they can influence its direction from the inside and win business in the process. On the outside: Japan and the U.S. have held back over worries China won’t follow best practice and will lend to projects that harm the environment or reward crony politics.
“There’s a lot at stake for China to make this bank a success,” said Jin Canrong, deputy dean of the School of International Studies at Renmin University in Beijing. “It would set precedence for China leading a multinational organization, and China can further its strategic influence throughout the region and beyond.”
China is pushing for a bigger economic and political role, shedding the hide-and-bide stance adopted since Deng Xiaoping began opening the economy in the late 1970s. Current President Xi Jinping is starting a fund to invest in projects along the historic Silk Road trading route and is pushing for greater influence in the region, even when it risks inflaming tensions.
The Beijing-based AIIB will offer an alternative to bodies like the World Bank, IMF and the ADB. In some cases, the institutions may join up to fund the building of bridges or dams; in others they may compete against each other.
China’s frustration that it doesn’t have a bigger voice at bodies including the IMF is among reasons it established the bank. Another motivation: China wants its currency globalized.
“China will push for using the yuan as the settlement currency, which is a main point why Beijing initiated the bank in the first place,” said Hong Hao, chief China strategist at Bocom International Holdings Co. in Hong Kong. “The whole thing would lose its point if the AIIB is still stuck with using U.S. dollars and the greenback’s dominance is left unchallenged.”
In the late 1960s, China’s international isolation was near complete as the communist country was wrenched by the cultural revolution. Participation in global bodies increased since its membership in the United Nations in 1971. It joined the World Health Organization in 1972, the International Olympic Committee in 1979, the IMF and the World Bank in 1980, the International Atomic Energy Agency in 1984, Asia-Pacific Economic Cooperation in 1991 and the World Trade Organization in 2001.
As for leading and founding multilateral institutions, there’s the International Network for Bamboo and Rattan, whose mission is to improve the well-being of producers and users of the materials. It was established at the Great Hall of People in Beijing in November 1997, with nine founding members and six observers and now has an office building in the Chaoyang District.
China initiated the Shanghai Cooperation Organization in 2001, a security organization with six founding members including Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan and five observers including India, and 3 dialog partners including Turkey. Its secretariat is based in Beijing.
But for the most part, China is a member, not leader, of global bodies. It has joined more than 100 international intergovernmental institutions, according to the official Xinhua News Agency.
“The lack of experience will certainly cause problems,” said Ji Zhiye, president of China Institutes of Contemporary International Relations, a national think tank in Beijing. “But it’s also positive as China could easily think out of the box and avoid mistakes that other financial organizations used to make.”