One of the Financial Times’ more endearing traits over the past decade has been to play up any indication that China is taking any action that contravenes or undercuts the status quo in the global political economy.  As someone who has argued that China has been acting like a responsible stakeholder on the global economy since 2008, I do pay attention to these articles — because it’s always possible that I’m wrong.

Sure enough, the FT’s Jamil Anderlini has a story out on a new Chinese initiative that ostensibly threatens the World Bank and Asian Development Bank:

China is expanding plans to establish a global financial institution to rival the World Bank and the Asian Development Bank, which Beijing fears are too influenced by the US and its allies.
In meetings with other countries, Beijing has proposed doubling the size of registered capital for the proposed bank to $100bn, according to two people familiar with the matter.
So far, 22 countries across the region, including several wealthy states in the Middle East, which China refers to as “West Asia,” have shown interest in the multilateral lender, which would be known as the Asian Infrastructure Investment Bank. It would initially focus on building a new version of the “silk road,” the ancient trade route that once connected Europe to China.
Most of the funding for the lender would come from China and be spent on infrastructure projects across the region, including a direct rail link from Beijing to Baghdad….
The AIIB would provide a direct challenge to the Manila-based ADB, which China feels is too influenced by its rival Japan. If it was established with $100bn, as proposed by Beijing, the AIIB would already be about two-thirds the size of the $165bn ADB.

Since Chinese President Xi Jinping first proposed the AIIB in October, China has continued its diplomatic push, even arranging a meeting on the margins of the actual ADB meeting last month, cutting rivals Japan and India out in the process.  Anderlini’s report reinforces the impression that China is mounting a direct challenge to preexisting multilateral institutions, particularly as they shift away from the infrastructure project loans that get China all hot and bothered.


That said, there’s another possibility to consider: that China is starting to play a game that the established great powers perfected a while back called “forum-shopping.”  As I argued in another book — and I’m not the only one to make this argument — the United States and European Union learned long ago that if institutional sclerosis stymied their efforts at, say, the IMF or WTO, they would respond by setting up new structures, like the Financial Stability Board or smaller preferential trade agreements.  The idea here is two-fold:  first, create an institution with a more receptive membership to the great power’s set of policy preferences; and second, put some competitive pressure on the preexisting institution by loudly hinting that there’s a viable exit option in place.

Sure enough, buried in Anderlini’s story is a pretty loud signal that this is, in part, what the Chinese are thinking:

China’s push for a regional institution that it would control reflects Beijing’s frustration at western dominance of the multilateral bodies. Chinese leaders have demanded a greater say in institutions such as the World Bank, International Monetary Fund and Asian Development Bank for years but changes to reflect China’s increasing economic importance and power have been painfully slow.
“China feels it can’t get anything done in the World Bank or the IMF so it wants to set up its own World Bank that it can control itself,” said one person directly involved in discussions to establish the AIIB. “There is a lot of interest from across Asia but China is going to go ahead with this even if nobody else joins it.”

Bear this in mind when we see initiatives like IMF quota reform dying a slow death in the U.S. Congress.


It’s also interesting that China seems to be placing more diplomatic capital behind this initiative, than, say, the BRICS Development Bank, where Beijing has had to make some serious compromises with the other members.  One wonders whether those compromises have encouraged Beijing to emphasize the AIIB as a more concrete alternative where they will have more influence.

Fifteen years ago, the standard argument in international relations was that the Pacific Rim was “under-institutionalized” compared to, say, Europe or North America.  That has clearly changed, and China is now starting to recognize the benefits that come with putting pressure on existing multilateral arrangements. Going forward, it will be very interesting to see if these nascent structures actually take off, and how the United States responds.