China’s AIIB: The Final Tally
Interesting facts about the members of China’s AIIB — with even more interesting implications.
The deadline for prospective founding members to submit their applications to China’s new Asian Infrastructure Investment Bank (AIIB) came on March 31, leading a flurry of final applications from countries all over the world. When the dust settled, China moved on to selecting who would actually made the cut. Yesterday, the AIIB released its final, approved list of founding members (excluding Taiwan). With 57 countries signed up, the AIIB includes well over a quarter of the world’s nations. Even more interestingly, 16 of the world’s 20 largest economies are on board (with the U.S., Japan, Mexico, and Canada as the holdouts).
So which countries will be joining the AIIB? Here’s a map based on the list of prospective founding members found on AIIB’s official website:
A few key points stand out here.
For one thing, Japan is nearly alone in Asia in not joining the AIIB. It’s the only major economy in all of Asia not to seek membership (Taiwan, as noted above, applied and was turned down, but will still seek to join later as an ordinary member). Looking at the other non-AIIB members in Asia – three are currently dealing with major uprisings (Iraq, Syria, and Yemen), one (Afghanistan) is undergoing its own fragile rebuilding process, one (Turkmenistan) avoids multilateral entanglements on principle, and one (North Korea) is extremely isolated internationally. Three of the other Asian non-applicants rank 116th (Papua New Guinea), 168th (Bhutan), and 174th (Timor-Leste) in terms of GDP, according to the World Bank. That’s not exactly great company for Japan. Even North Korea reportedly sought membership but was told it would need far more economic transparency to join.
The AIIB also has great representation in Europe. Nearly all of Western Europe (save Belgium and Ireland) officially signed up for the new bank. It’s a different story in Eastern Europe, where countries generally don’t have the excess capital to invest in an extra-regional bank (and thus Eastern European countries are not involved with the Asian Development Bank either). Meanwhile, the interest in AIIB from Western Europe marks a stark contrast between that region and North America. The U.S., Canada, and Mexico all declined to sign on, with Washington being particularly critical of the new project (including pressuring its friends and allies not to join).
However, the glut of Western European countries involved in AIIB doesn’t mean Europe will be able to play a major role in the bank’s governance. The AIIB’s chief, Jin Liqun, previously said that non-Asian countries will be limited to holding a total of 25 percent of AIIB shares. That means China can claim all of the prestige of having Western Europe join its new pet project without actually have to share control.
It also means that Asian countries with governance concerns (including Australia and South Korea) will have to be more vocal about these issues to ensure AIIB actually lives up to international standards. China has announced that negotiations over the AIIB charter will take place in April and May, with the signing of the charter scheduled for the end of June.
One other intriguing point: All of the BRICS nations – Brazil, Russia, India, China, and South Africa – are on board. That means double duty for these countries, as they are also in the midst of getting the new BRICS Development Bank (formally launched last July) up and running. The Diplomat
China’s AIIB and the US Reputation Risk
ReplyDeleteWhat are the implications of the Asian Infrastructure Investment Bank for the next U.S. president?
India, Iran and Israel joined. Europe’s leading economies – France, Germany, Italy, Switzerland, and United Kingdom – are approved members. Russia is in. Saudi Arabia and the United Arab Emirates are on board. Australia and South Korea are confirmed. Japan has allocated $1.5 billion for AIIB membership, though Tokyo is assessing AIIB’s governance framework and will decide in June. Canada is considering. North Korea’s application was rejected. Currently, 57 countries are confirmed founding members. The United States stands alone.
Critics of the U.S. decision not to join see Washington sidelined as allies jump on the AIIB bandwagon. Proponents of Washington’s position, mainly Obama administration officials, decry the absence of transparent governance standards and competition with the World Bank and Asian Development Bank, even though both banks have endorsed the AIIB. The White House’s concerns over AIIB’s environmental and social responsibility framework, though valid, miss the bigger picture. What is the strategic significance of the AIIB for the next US president and US rebalance to Asia?
Geopolitics. A U.S. president with a clear vision of U.S. leadership in Asia would see the geopolitical context of the AIIB. In tandem with the New Silk Road, Maritime Silk Road, and Air Defense Identification Zone, the AIIB reflects the symbiosis of Chinese soft power prowess and hard power calculations. Both serve to fortify China’s growing stature and leverage in recasting the region’s strategic landscape with China at the epicenter. The decision of 57 countries to join the AIIB suggests that a tectonic shift toward a new world economic order is underway. China has surpassed the United States as the world’s largest economy in purchasing-power parity terms and will eventually bridge the GDP gap with the U.S., according to U.S. Department of Agriculture data. It is, therefore, increasingly incumbent on Washington and the next administration to ascertain how the United States will shape this emerging Asia-centric global economic system. To this end, moving the Trans-Pacific Partnership (TPP) – the crux of the U.S. rebalance to Asia – forward requires the White House and Congress to prevent local politics from trumping national economic interests, and constraining long-term geopolitical leverage in the region.
ReplyDeleteGovernance. The next U.S. administration would see that the rebalance could be advanced if AIIB fosters a culture of transparent governance and social responsibility throughout Asia. The real proof of AIIB’s efficacy is for China to ensure that the level of AIIB governance standards is commensurate with those of the World Bank, International Monetary Fund and Asian Development Bank. Whether it is forging the Pakistan-China economic corridor to connect gas and oil pipelines to Middle East, building agriculture, telecommunications and transportation infrastructure in Africa or constructing ports in the Indian Ocean, funding and implementation oversight of China’s investments in global megaprojects have and will continue to warrant investor, stakeholder and policy scrutiny. Perceptions of corruption continue to taint China’s international image despite President Xi Jinping’s ongoing anti-corruption campaign. China ranked 100th among 175 countries in Transparency International’s 2014 Corruption Perceptions Index – a significant drop from its 80th in the 2013 index. With the establishment of the AIIB, China will need to demonstrate credible accountability in upholding international rules and norms.
ReplyDeleteCurrency. One main function of the AIIB will be to facilitate the internationalization of China’s currency – renminbi (RMB). While the next White House may understand the impact of RMB internationalization on global capital markets, it will face the challenge of managing the domestic politics of Chinese currency with Congress and constituents. Congressional review over current TPP legislation, which includes an amendment against Chinese currency manipulation, is just as much a political contest as it is a “greenback vs redback” currency debate. By joining AIIB, Singapore and London – both global financial leaders – will strengthen their market positions as centers for RMB-denominated offshore transactions. London intends to be the first RMB clearing house outside Asia, according to the U.K. Chancellor of the Exchequer George Osborne. The AIIB founding and RMB internationalization are interlinked vectors driving economic integration between Asia and the rest of the world. US allies are capitalizing on this trend. U.S. presidential candidates would benefit from grasping its long-term impact on the U.S. rebalance to Asia. By Mercy A. Kuo and Angelica O. Tang
ReplyDelete