China’s new development bank, which was announced just five months ago, is becoming a massive headache for the US. Try as it might, the US government can’t persuade its allies to stop joining the Asian Infrastructure Investment Bank (AIIB).
The bank will be a bit like the World Bank, providing loans to developing countries in Asia for infrastructure projects.
Unlike the World Bank, China will hold the reins of the AIIB. The US administration is publicly worried that the institution will not meet high governance standards, but it really seems opposed to the move because it signals a growing Chinese influence in the region and in global politics.
The US has already endured a series of embarrassments over the bank. It might have been expected that some European countries with a cooler relationship with the US would join, which they did. India and Singapore, however, were quick to sign up despite having decent relationships with the US. And several other countries have started joining, leaving the US almost completely isolated in its position.
Britain is one of the US’ closest allies, but the government has been pursuing an unashamedly warmer relationship with China for several years and was one of the first countries to say it wanted a role in the AIIB.
The front page of the Financial Times the next day, in which anonymous White House sources attacked the British government for “constant accommodation” of China, might have been intended as a warning to others, but it doesn’t seem to have worked.
South Korea has applied, and America’s other major allies in the region, Japan and Australia, have been warming to the idea of joining.
Tuesday, however, brought the most embarrassing event of all. Taiwan, which has no formal relationship with mainland China, is a former enemy of China, and basically survived the 20th century with its independence only through assistance from the United States, applied to join the AIIB.
The infrastructure bank isn’t going to be a massive boom for the UK economy, or even for nearer nations like Japan, and the US will not retaliate. The point is that the UK is willing to take a very modest improvement in economic and political ties with China in exchange for a small deterioration in ties with the US. Pretty much every country has decided that this is the right move.
The AIIB is a part of the wider “new Silk Road” initiative by China to deepen trade and investment both in the rest of Asia and the wider world. According to Barclays, it could actually be a positive thing for the region’s stability:
We believe through the building of interdependent relationships based on shared economic interests, this New Silk Road plan should deepen political linkages, improve mutual understanding and foster long-term stability in the region. The agreement to set up the AIIB by countries that have territorial disputes with China suggests potentially lower geopolitical risks and lower probability for military conflicts, in our view.
But the move goes beyond that — it’s a major PR push for China, which the American administration has positioned itself opposite from. So far, that strategy is failing spectacularly for the US.