The AIIB Debacle: What Washington Should Do Now

[AbidM]

21st century is the Chinese century it seems. US has to be the shortest an Empire has lasted in world history.

You should know by economists the 21st century has been dubbed the 'Asian Century' before that I believe it was America century (20st Century) and even before that European century (19th)

Go go Asia

 

[YoucanYouup]

You should know by economists the 21st century has been dubbed the 'Asian Century' before that I believe it was America century (20st Century) and even before that European century (19th)

Go go Asia

American century began in 1991 as Soviet falled

 

[ravi kiran]

21st century is the Chinese century it seems. US has to be the shortest an Empire has lasted in world history.

i would say 21st century is the Asian century.

 

[TejasMk3]

I read it as "All India Bakchod debacle: what Washington should do now"

Anyway, there was a nice article on this on LiveMint:

A Bretton Woods moment in Asia - Livemint

China is experiencing its Bretton Woods moment. Flush with a huge pile of cash, Beijing is on a bank-creation spree. Last year it took the lead in forming the Brics (Brazil, Russia, India, China and South Africa) Bank. In 2013, it announced plans to create the Asian Infrastructure Investment Bank (AIIB). It has tied up close to $110 billion in both projects. On Thursday, Britain signalled its intent to become a founding member of AIIB. This is another signal of the global financial and political realignments that are underway. As expected, the reaction from the US has been cold.

Officially, AIIB is expected to meet the infrastructure investment needs of the Asian region. Last year, China doubled its contribution to the bank from the original $50 billion to $100 billion. This amount dwarfs its share in the Brics Bank which stands at $10 billion.

While the Brics Bank is limited to five countries, AIIB will have a wider membership. So far, 22 countries, including India, have joined the bank. Most of the bank’s members are concentrated in Asia, Central Asia and the Middle East. AIIB is open to all countries, but three key nations in the Asia-Pacific have not signed up: Japan, South Korea and Australia. This is a story in itself.

The proposed banks are China’s answer to the International Monetary Fund (IMF) and the World Bank. China’s claims should be taken with a pinch of salt as unlike IMF and the World Bank, Beijing’s geopolitical goals are too enmeshed with the economic aims of these banks. Unlike the Brics Bank—where each country has one vote each and the share capital of a country cannot be increased without unanimous approval of all members—AIIB is a different creature. Negotiations on its operating rules are yet to be finalized and it is not clear if it will adhere to the one member, one vote rule as in the case of the Brics Bank. If it does have an equal vote pattern, it will constrict China’s goals.

Three issues merit attention: the size and structure of these banks, their lending priorities and territorial reach. Far from being alternatives to IMF and the World Bank, these institutions have different goals.

First, consider the magnitude involved. In AIIB, China is the dominant partner. It began with a promise of $50 billion as its share. Last year it promised to double it to $100 billion. While this will be quite smaller than that of the $165 billion Asian Development Bank (ADB), let alone IMF and the World Bank, this does give very considerable heft to China in lending across countries and political influence.

The latter point is key to the exercise. Unlike the Bretton-Woods institutions, that service all countries with development problems and the management of temporary balance of payments problems, the goals of the China-led banks are much more limited. These are straightforward lending banks and specifically infrastructure lending institutions. This is a much more specialized task as compared to managing global financial frictions and development. Any institution with these goals requires much greater membership and acceptability—which IMF and the World Bank have. The corollary is clear: with greater scope of lending by China comes much greater political leverage. This is reinforced by the membership structure of these banks: IMF and World Bank have 188 members; AIIB has just 22.

Finally, these banks have the potential to shift the world’s political and economic centre of gravity away from the West to China. This point lies in the future but the seeds are being sown now. Britain’s eagerness to join AIIB is an indicator of things to come. The great failure of these western institutions lies in their unchanging nature. It is a travesty that countries such as Italy should have greater voting rights than India; France more than China. It is this inability to change with the time in tune with economic realities that is letting China have its way. The losers will be western countries and the wider world.

The world’s poor countries need infrastructure and that requires money. The West does not have enough of it to lend, China does. But along with that opportunity to benefit come many strings. IMF may be infamous for insisting on “reform conditionalities” but these have stood the test of time. When China lends, an army of Chinese workers, companies and political nudging come with the package. Countries such as India should be aware of that.

 

[East or West India Best]

You should know by economists the 21st century has been dubbed the 'Asian Century' before that I believe it was America century (20st Century) and even before that European century (19th)

Go go Asia

By Asian century they mean East Asia, and perhaps maybe (doubtfully) India. bangla desh has nothing to do with the Asian century.

 

[ravi kiran]

By Asian century they mean East Asia, and perhaps maybe (doubtfully) India. bangla desh has nothing to do with the Asian century.

dont say this.
BD is also developing like other nations in south Asia.
In my opinion soon they will be bigger economy than Pakistan.
They do have vast natural resources and very big work force.
BD will be definitely important economy in south Asia.
and BD will definitely contribute in making 21st century as Asian century.

 

[East or West India Best]

dont say this.
BD is also developing like other nations in south Asia.
In my opinion soon they will be bigger economy than Pakistan.
They do have vast natural resources and very big work force.
BD will be definitely important economy in south Asia.
and BD will definitely contribute in making 21st century as Asian century.

You're giving it wayyy to much value. Their HDI is undeveloped, their per capita income is ~$900, they produce nothing, no military strength or cultural or economic.

 

[deckingraj]

well next step would be another globally traded currency apart from dollars....Europe was an attempt however failed...anybody in China listening

 

[Yizhi]

1) Continue to press its allies not to join the AIIB until governance procedures for the bank are assured;

2) Join the AIIB itself; or

3) Drop the issue.

apparently US is doing 1&3 now. don't know if they have the courage to eventually join AIIB, that would be a huge slap to the face...