Ask someone on the street about international news and they will most likely tell you about the plethora of conflicts in the Middle East (like those in the Yemen, Iran, Iraq, and Syria) or the crash of the run up to the U.S. 2016 presidential election. However, while the world has been focused on the news in the U.S. and the Middle East a major event has been unfolding in Asia. The world is witnessing the creation of a new global financial institution, based out of China, the likes of which has not been seem since the creation of the International Monetary Fund or the World Bank. This Chinese led institution is called the Asian Infrastructure Investment Bank (AIIB, for short).
The bank was founded in late 2014 with the expressed goal of providing funding to infrastructure projects in Asia. Considering the tremendous growth of Asian economies in the coming decade many of them will need additional capital to fund infrastructure projects to support that economic growth. China is not the only country that feels this way. Many major Asian and European countries like India, South Korea, Germany, and the United Kingdom, are joining the ranks of the AIIB. However, why is China creating a new bank to fund infrastructure projects? Global financial institutions already exist that can meet the challenge to provide the sizable capital that Asian countries will need. The Chinese state that they are simply helping to fill a funding gap and look forward to working in collaboration with the other global financial institutions on funding Asian infrastructure projects. However, there are some who question if this is the only motive for China to support the creation of the AIIB. The AIIB funding of projects has the potential of significantly increasing Chinese influence in Asia. Increased Chinese influence in Asia is not necessarily something to be troubled about. The questions is how China will use that influence.
The United States is one of the countries that is concerned about Chinese governance of the AIIB. Many U.S. allies have been urged not to become members of the AIIB because of this concern. Thus far, the U.S. has been unsuccessful at convincing even its closest allies, like the U.K. to refrain from becoming members of the AIIB. The concerns raised by the United States are not without merit. As early as 2014 China was embroiled in commodity lending fraud. Furthermore, China has also been criticized by some for its use of resource backed funding in Africa.
Despite these issues that China has had in the past the U.S. should consider becoming a member of the AIIB. Due to the multilateral nature of the institution and the significant amount of public scrutiny its actions will receive the AIIB will most likely follow international lending best practices. A great example of this is the fact that recently the AIIB rejected North Korea's bid to join the bank. North Korea is part of China's sphere of influence and for China to reject them demonstrates the potential of the AIIB to become a responsible global financial institution. Furthermore, as a member of the AIIB the U.S. can help play a role, along side the Chinese, to guide the institution to continue being a responsible investor.
China has become a significant economic and political power. Therefore, it is no surprise that they are spearheading the creation of an Asia based investment bank. The issue here is not one of dominance. The Chinese are a major power in Asia. The creation of this bank may seem like a front to expand Chinese influence, however, considering the influence that all of the other members of the bank will have this may not happen as easily as some have insinuated. If anything the creation of this bank may bring more of China's investments into the light and provide more transparency. It is hard to predict what the future may hold but as China continues to grow stronger the U.S. should aid in it's efforts to be a responsible global leader.
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