By David Bosco
Today’s New York Times describes the remarkable appeal of Beijing’s most recent multilateral creation–the Asian Infrastructure Investment Bank (AIIB):
That the United States’ allies in Europe and Asia flouted Washington’s appeals not to join the bank has brought a sense of triumph to Chinese officials and scholars who say that China has now demonstrated it can construct a broad-based institution without the United States in the lead.
“This has shown China that you don’t always have to work your way with the United States, that you can work your way with the region and many others outside the region,” said Wu Xinbo, the director of the American Studies Center at Fudan University in Shanghai. “As long as people think what you are doing is beneficial and that you are providing for the public good, you don’t need U.S. approval.”
Washington basically undermined itself by failing to allow a bigger voice for China in the World Bank and the International Monetary Fund, said David Daokui Li, a former adviser to the People’s Bank of China who has a Ph.D. in economics from Harvard.
As U.S. allies around the world–including, recently, Israel–sign up for the AIIB, the consensus is hardening that its rise is not only an achievement for Beijing but an embarrassing defeat for Washington. Forbes contributor Jean-Pierre Lehmann puts it this way:
Washington’s colossal imbecility in opposing the bank has resulted in a colossal loss of face. It is, as suggested above, a spectacular own goal. It has eroded not only the US’ hard (financial) power, but also its soft power, leadership and prestige.
Amidst the chorus of criticism, however, it’s important to parse out what the key U.S. missteps were. The accounts above cite two quite distinct errors. First, there was an alleged failure to recognize Beijing’s growing influence adequately at the World Bank and International Monetary Fund. Then there is the argument the the United States erred by publicly expressing skepticism about the AIIB and set itself up for diplomatic embarrassment.
To my mind, the latter charge is far better supported than the former. It’s beyond dispute that Washington miscalculated badly by discouraging key allies from joining the AIIB. Either the administration never should have made that push or it should have coordinated much more closely with allies and provided enough muscle to give its anti-AIIB campaign a chance of success.
What of the argument that the United States might have headed off the AIIB’s rise by accommodating China’s rise at the Bank and the IMF? Those making this argument generally point fingers not at the administration but at Congress. Here‘s Vox‘s Matthew Yglesias making the case:
The Obama administration more or less foresaw this problem years ago. That’s why back in 2010 it negotiated a deal to increase China’s role in the IMF and World Bank. This plan, if approved, would lift China from number six to number three at the IMF while also enhancing the positions of India and Brazil and giving the IMF more overall resources. The proposal has secured the support of most of the IMF’s 188 members, including all the major powers.
There are a couple problems with this diagnosis. First, it relies heavily on the idea that a modest increase in China’s IMF voting share would have altered its plan regarding the AIIB. Most IMF decisions are taken by consensus, and it’s unlikely that China’s new voting share wouldn’t have significantly altered its influence. Whether under the old system or the new system, China is not close to crossing the 15 percent threshold that gives Washington its effective veto over certain types of IMF decisions.
Even more problematic for this line of argument, the Congressional blockage to a greater Chinese voting share has been all about the IMF, while the AIIB is quite clearly a potential competitor to the World Bank.
Is it fair to say that Washington has been holding back Chinese influence at the Bank in the same way? Not really. In 2010, in fact, the Bank’s membership adopted a voting reform that gave China the third-largest voting share, behind only the United States and Japan. Rather than attempting to block reform, Congress acquiesced. Indeed, it quietly approved a big capital increase for the Bank in 2012. And there are other important ways that China’s rise has been recognized at the Bank. From 2008 to 2012, a Chinese national, Justin Lin, served as the Bank’s chief economist, a position previously occupied by such luminaries as Lawrence Summers, Joseph Stiglitz, Stanley Fischer, and Anne Krueger. Lin’s appointment was trumpeted as a recognition of China’s new influence. If the United States had wanted to scupper that appointment, it almost certainly could have.
Washington certainly has made mistakes regarding the AIIB’s emergence, but it’s hard to argue that stiffing Beijing at the World Bank was one of them.