The China-led World Bank competitor, the Asian Infrastructure Investment Bank (AIIB), held it first meeting this weekend, an accomplishment which Beijing has been trumpeting all week. The WSJ:
“It’s been a triumph for them, so I think it’s all right for them to take a bit of a victory lap,” said David Dollar, a fellow at the Brookings Institution in Washington, a former U.S. Treasury official in Beijing and a nonpaid adviser to the new Chinese bank. “But what they’ve done so far is relatively easy compared with what comes next.”
The bank, known as the AIIB, is starting out with $100 billion in capital and was conceived as China’s answer to the World Bank and Asian Development Bank, institutions dominated by Washington and Japan, respectively. The AIIB has delivered China a propaganda coup by attracting 57 founding members, far more than expected, including such U.S. allies as Britain, Germany, France and Australia.
The AIIB has indeed been a success for China thus far. And as we’ve said, the U.S. should have gotten in on the ground floor rather than opposing the bank and thus losing an opportunity to have some leverage over what could be an influential institution. But at this point, the bank, which intends to finance development in emerging market economies, is a sideshow to the bigger story of China’s global collapse. However much the bank spends in the next few years, it won’t match the hundreds of billions of dollars Chinese investors (state-controlled and private) are pulling out of developing countries. Nor will it compensate for the even more consequential collapse in Chinese demand for global commodities. As we wrote last week, exports from Africa to China plummeted by 40 percent in 2015. They’re likely to only fall even more this year—as are those from countries across Asia and Latin America.
When Beijing has finished off the Veuve Clicquot, it will face a sobering reality: China’s global economic power is on the wane in 2016.