China’s World Bank rival, the Asian Infrastructure Investment Bank, a $50 billion dollar fund dedicated to infrastructure development, is picking up steam. Last week, China scored a major coup by getting the UK to announce it will be joining—against the loud protestations of the White House, which accused London of “constantly accomodating” China. Now, other major European powers (and U.S. allies) are signing on as well.Reuters reports:
Germany, France and Italy said on Tuesday they had agreed to join a new China-led Asian investment bank after close ally Britain defied U.S. pressure to become a founder member of a venture seen in Washington as a rival to the World Bank.The concerted move to participate in Beijing’s flagship economic outreach project was a diplomatic blow for the United States, reflecting European eagerness to partner with China’s fast-growing economy, the second largest in the world.It comes amid prickly trade negotiations between Brussels and Washington, and at a time when EU and Asian governments are frustrated that the U.S. Congress has held up a reform of voting rights in the International Monetary Fund due to give China and other emerging economies more say in global economic governance.
Australia is also just now getting in on the project, and Japan, India and New Zealand have already signed up.America’s understandable objection to the joiners is based on the concern that China will have greater leeway to act outside of the American-led global system of finance and trade if it leads parallel institutions to the ones based in Washington. But the motivations of those who want to participate in China’s project is understandable too. Being involved with infrastructure contracts in bull markets just seem like a good idea, and Western countries are desperate for anything that looks like it will provide for more growth. As huge swathes of ‘the third world’ turn into ‘the developing world’ in more than name only, the incentives to be a part of that rise become huge.It’s not the most brilliant American policy to turn this into a diplomatic failure by protesting our allies’ decisions loudly and publicly. In fact, if anything, the way to make sure that China’s push for Beijing-based global institutions does not allow it to create a separate and parallel global system would have been to get in on the ground floor by joining the bank ourselves—not to mention, it might have made us some money.Why exclude ourselves from a possible profit source? Why not be in the club, rather than loudly chastising our most important allies for looking out for their economic interests? American foreign policy is complicated enough without manufacturing crises that introduce further problems into it. And keep in mind that this is only a $50 billion project. It’s not going to be the factor that makes or breaks the future.