AIIB: Guess Who’s Got Back in Business?

4353534534In the recent decades Beijing has made every effort to ensure that it has the resources, markets, and the strategic alliances with developing countries to ensure a stable growth of its economy. This policy driven by politically motivated loans has been labeled “checkbook politics” by Western experts. In particular, Beijing provided a number of Africa, Latin America and Asia countries with considerable loans.Among the states that received comparatively significant loans once can mention Venezuela, Argentina, Ecuador, Sri Lanka, Zimbabwe, and, of course, Ukraine. Reinforcing its claim of being the world’s largest provider of funds for developing countries, China allocates 3.8 trillion dollars to strengthen its relations with states that are allegedly pursuing anti-American policies.

However, Chinese client states have recently started facing an increasing number of political turmoils, that has been jeopardizing China’s friendly efforts big time. Some of of the former allies of China have even preferred to switch sides and obey the harsh rule of Washington, causing some serious damage to Beijing’s master plan. Among those countries one can definitely name Sri Lanka, that has started taking a U-turn from it former ally once Maithripala Sirisena won the presidential election last January. At the same time Sri Lanka has received billions of dollars in investments from China, but instead of showing gratitude it chose to make friends with Beijing’s biggest rival in the region – India. According to some Western experts, the total amount of the Chinese government and non-state loans to Latin American in 2005 amounted to 19 billion dollars, that later increased to the level of 22 billion dollars by 2014. As for the hefty Chinese loans to Africa, according to some estimates, between 2000 and 2011, Beijing allocated some 52.8 billion dollars for the developement of this region.

Under these conditions, Beijing decided a to create a new financial institutions and attract joint partners, it launched the creation of New Development Bank and the Asian Infrastructure Investment Bank (AIIB). This decision was long overdue, since starting with 2010 the emerging economies begun actively proposing a reform of all the major financial institutions – the IMF and the World Bank, which remain in full control of the White Hose.

The creation of these new banks was a step that China’s President Xi Jinping announced two years ago, it is believed that these banks will become a major competition for the leading financial institutions under the control of the West – the IMF, the World Bank, the Asian Development Bank. Despite the attempts to resist the inevitable that were made by the United States, this April has proven that there’s a long list of countries that are willing to become co-founders of AIIB, the list is already 50 countries long, while some applications are still in the process of approval. Among the founding members one can find Russia, Saudi Arabia, and the leading countries of Western Europe. Great Britain, Australia and South Korea also chose to join this Chinese venture despite the fact that they are perceived as the closest allies of the White House. The Obama administration has received a crippling blow once the defiance of its allies has become known. Yes, Washington’s influence has lost its charm.

It’s curious that out of a long list of faithful allies of the United States only Japan refused to join this new project, and thus suffered along with its masters in Washington, not simply economic losses but major reputational costs.

Ironically, the emergence of AIIB was provoked by the US and its diplomatic folly, along with its reluctance to support the emerging markets, that contribute even more value  to the world economy with each passing year. The creation of AIIB objectively meets new challenges and reflects the changes in the world economic order. Until the end of the year the structure of this bank must be fully determined, but it’s clear that AIIB headquarters will be located in Beijing. Soon China will start yet another alternative to US influence financial institution – New Development Bank, headquartered in Shanghai, founded by Russia, Brazil, India, China and South Africa. The initial capital of AIIB is 100 billion dollars, half of which will be provided by China. For comparison, the Asian Development Bank, can boast a 160 billion dollars capital, and the World Bank – about 500 billion dollars.

According to The Financial Times, AIIB has quickly become Washington’s worst nightmare and the utter diplomatic disaster. By initiating the fight with China for power and influence, and then losing it Washington has accentuateв the shifting vector in the 21st century. At the same time an increasing number of states realizes that in the struggle for influence in today’s world’s economy is the main asset, but not the military power. Those countries that were in the middle, face a dilemma. If we talk about the Asian region, the example of Japan, Australia, the Philippines, South Korea, all of which have a security pact with the US, but each of them at the same time has more trade going with China, but not the United States.

There was a time when they were saying that the world would be bowing to the almighty dollar. But the story of the AIIB says that even today many of America’s closest allies are dreaming about cashing yuans. As the fist fight around AIIB between Washington and Beijing gets more tense, the ultimate question is what will prevail: the brutal military force or growing economic power.

However, the future result of the battle seems to be evident even today. As the Portuguese journal Expresso underlined, the importance of the US as the world’s leading power is increasingly called into question because of the brilliant rise of China. Weak as it is now, Europe has not even been considered in the international arena as a possible rival of the United States, and therefore it became an obedient tool of Washington in its political, military and economic games, therefore the great shift is underway.

It seems that Horace was right after all: «Vis Consilii Expers Mole Ruit Sua» (lat.- strength, lacking judgment, collapses by its own weight).

Valery Kulikov, political analyst, exclusively for the online magazine “New Eastern Outlook”.

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