First published: International Banker, 19/05/2015
Controversy has raged over a bank. The bank in question is the Asian Infrastructure Investment Bank (AIIB) in which China has strong financial and political interests. In March, the UK’s decision to become a founder member was made reportedly against the advice of the country’s foreign-policy establishment, and to China’s evident surprise and America’s chagrin. Countries that had previously stood shoulder to shoulder with the US and the UK, such as Australia, South Korea, Germany, France and Italy, followed the UK’s example. Japan may join later, leaving the US as the only major country not to be an actual or potential participant. The controversy over the AIIB is not a minor or esoteric matter.
The AIIB, which is a part of China’s new global financial diplomacy, is expected to be up and running by the end of the year, and promises to open up new business opportunities for banks and private providers of capital. Yet it is also a lightning rod for fundamental questions about the nature of the institutions and rules that will govern economic and political relations in the future, and in whose interests they will be framed. More broadly, it is a sort of weathervane from which we might learn if the world’s economic and financial system, fashioned by the US after 1945, can accommodate a rising China as well as other new regional powers, or whether it will succumb to fragmentation and nationalistic competition…. “more:”