Wu Zhenglong: Why Did America Suddenly Welcome AIIB?

Last October, 12 Asian countries, the founding members of the Asian Infrastructure Investment Bank, signed the AIIB memorandum, and the bank was formally established. It is undeniable that the founding of the AIIB ended the American domination in the international finance arena. America has tried ceaselessly to defeat this effort. In fact, South Korea and Australia were not able to the join AIIB, even though they were very interested, because of pressure from the U.S.

However, Wendy R. Sherman, the under-secretary for political affairs, recently expressed how a multilateral bank was instrumental in the growth of various Asian nations, and that America actually welcomed the establishment of AIIB as championed by China. Of course, there was a caveat: AIIB had to meet the needs of “high standards of other development institutions.” Why did America’s attitude change from the obstruction of a few months ago to today’s conditional support? What considerations are behind this policy change?

First, AIIB’s founding and warm reception made America face the facts. China’s advocacy for the AIIB reflected that the majority of Asian countries want to improve their weak infrastructure, connect with each other, and grow their economies. This is a winning endeavor for all partners. China’s initiative received a lot of support. All south and southeast Asian countries have joined, and important middle-Asia countries, like Kazakhstan and Uzbekistan, have also actively joined in the preparations. In addition, heads of the World Bank Group and the Asian Development Bank have also expressed their support for the AIIB. The number of countries who joined AIIB and their enthusiastic response showed the will of the people in Asia, and have made America realize that its flat objection may not meet America’s interests.

Second, changes in the ruling order of the global financial sphere cannot be stopped. After 70 years of post-world wars development and the rise of emerging economies, the power structure of the world has been fundamentally changed. Yet, the American-controlled World Bank and Asian Development Bank did not reflect this change; China and other emerging economies are still limited in the parallel powers of speech rights and voting rights. On the other hand, the World Bank and Asian Development Bank are primarily engaged in poverty relief, environmental protection, and gender equality matters, with very limited investment in infrastructure-building. China’s founding of its own agency, the AIIB, has filled this void. The AIIB and the BRICS Development Bank are the inevitable results of the deep changes in the world power structure. They indicate that the post-war Bretton Woods system is changing. America might want to stop these changes, but it cannot succeed.

Third, other than the military domain, America’s rebalancing of power in the Asia-Pacific region has reaped few rewards for the economy and other areas. The number one trading partner for almost all of America‘s Asia-Pacific friends and allies is China. Does America have the power to rebalance or change this? As an important strategy for rebalancing the Asia-Pacific power structure, the Trans-Pacific Partnership has seen a lot of back and forth, and a lot of fanfare, but no results. South Korea and Australia are against making economic problems political, and they are worried about losing economic partnerships in the region after being left out of the AIIB. America’s policy adjustment is, in a way, a resigned response to South Korea and Australia’s requests.

Finally, America’s demand that the AIIB needs to meet “high standards of other development institutions” is a way to save face for its policy change. In fact, China has clearly stated in the initiative for the AIIB that the bank will fully respect and reference the related standards and good practices of current multilateral banks, and establish strict and practical safeguard clauses with high standards. At the same time, some overly trivial, impractical and irrelevant practices would be improved. The AIIB would prevent a repetition of these problems, so as to lower costs and raise operating efficiency. It’s not hard to tell that the so-called standards America speaks of are a pseudo-proposition and nonexistent.

It can be estimated that as America’s “ban” on the AIIB is removed, South Korea and Australia’s joining of the bank is just a matter of time.

America’s attitude change toward the AIIB illustrates that its arbitrary, anti-China stance is not a good idea; it’s better to have more communication, understanding, cooperation and partnership between the two countries. It would not only be beneficial to the two countries, but also beneficial to the development of world peace.

The author is a former Chinese ambassador and currently a senior analyst at the China Foundation for International Studies, and special contributor at Huanqiu.