Finally United Kingdom has decided to join Asian Infrastructure Investment Bank (AIIB) whereas the US is not ”happy” with the move of the UK to join AIIB. It’s a new international financial institution (IFI) lead by China and viewed as a rival to the World Bank. Due to size of population, increasing per capita consumption and their hard work Chinese economy is growing to be the largest in the world. Now China has backed the Asian Infrastructure Investment Bank (AIIB) and seeking large number of membership. The 21 founding member countries of the AIIB agree the basic parameter determining the capital structure of the new bank. Asian region requires $8 trillion to be invested from 2010 to 2020 in infrastructure for the region to continue economic development. The AIIB could allow Chinese capital to finance these projects and allow it a greater role to play in the economic development.
“It’s not normal for the United States.” The United States is wary about a trend toward constant accommodation of China, a rising power” – Pippa Malmgren, a former economic advisor to US President George W Bush
Another World is Possible:
The UK is the first Western country to submit application to be a founding member of the AIIB. Pippa Malmgren, a former economic advisor to US President George W Bush, told the BBC that- “It’s not normal for the United States.” The United States is wary about a trend toward constant accommodation of China, a rising power. [**]
The reaction of the White House was “This is the UK’s sovereign decision. We hope and expect that the UK will use its voice to push for adoption of high standards.” [**] It seems that the US is still hoping the UK’s membership of the AIIB would be a ‘manipulator’ in favour of its benefits. Future game of the AIIB has just started.
The bank has about $50bn capital of which China will have share about 67 percentages. David Kuo, economist of AIIB, said ‘‘there were plenty of infrastructure projects in Asia that needed funding’’. It is clear that China is a much more powerful and the largest economy wants to lead its own international financial services.
“This is the UK’s sovereign decision. We hope and expect that the UK will use its voice to push for adoption of high standards.” – the White House
Due to changing global economic contexts it is right time for every nation to overview their national economic interest for the sake of future. By considering the facts France, Germany and Italy on Tuesday, 17th of March 2015, have also joined the UK in signing onto the Chinese-led AIIB, leaving the U.S. on the side-lines
Similarly, On 15 July 2014, the BRICS group (Brazil, Russia, India, China and South Africa) signed to create a New Development Bank worth of $100 billion and a reserve currency pool worth over another $100 billion. Both will counter the influence of Western-based lending institutions and the dollar.
Reality: Influence of Chinese Economy
Let’s have a close look on how China overcame the obstacle. Professor Stiglitz disclosed an example in his book Globalization and its Discontents– ‘‘In April 1999 Chinese president Zhu Rongji visited to USA to negotiate to join the WTO. It was essentials for the world trade and market reform in China itself as well. But China was ‘quite rightly worried’ about a condition- ‘faster liberalization of Chinese financial markets’ put forward by the USA to join the WTO. It was ‘narrow interests of the financial community… West was seeking to weaken China. Finally, ‘Zhu Rongji was forced to return china without a signed agreement’’ (P64).
But now time has been changed. According to the data revealed by International Monetary Fund (IMF) in 2014, China just overtook the US as he World’s largest economy. The size of the Chines economy is larger than any countries of the G7. ”Figures show that Chinese economy is worth $17.6 trillion, compared to America’s $17.4 trillion. The IMF estimates China’s economy will be worth a whopping $27 trillion in 2019.” Definitely China took benefit from the globalization without damaging its own economy.
‘‘In April 1999 Chinese president Zhu Rongji visited to USA to negotiate to join the WTO. It was essentials for the world trade and market reform in China itself as well. But China was ‘quite rightly worried’ about a condition- ‘faster liberalization of Chinese financial markets’ put forward by the USA to join the WTO. It was ‘narrow interests of the financial community… West was seeking to weaken China. Finally, ‘Zhu Rongji was forced to return china without a signed agreement’’
Regarding the future of the World economy Jim O’Neil mentioned in his famous book The Growth Map: ”China will have the largest economy in the world, the USA second and India will be third by 2035. The group of BRICS will be economically most powerful nations by 2050.” Jim first coined the term BRIC (Brazil, Russia, India and China) in 2002 and later in 2010 South Africa was included. These countries encompass over 25% of the world’s land coverage and 40% of the world’s population and hold a combined GDP of $20 trillion
After collapsing the Russian Federation there was almost a monopoly of Washington Consensus (WC) in the World economy. But now the US sees the Chinese effort as a ploy to dilute US control even in the banking system as well. The unavoidable fact is given the size of the U.S. debt – $17.6 trillion as of June 30, 2014 – China owned an estimated $1.268 trillion, is the number-one foreign investor.
According to recent information China has become the world’s third largest arms exporter after the US and Russia, according to a new report. China overtook Germany, France and the UK in exporting weapons. China’s arms exports rose 143% between 2009-14
Investment in infrastructure and public sector: Chinese approach
Chinese firms have invested substantial amount in developing economies, such as Africa, Asia and Latin America. China has lent $110 billion to developing countries in past two years – more than the World Bank. Chinese approach of investment in ‘infrastructure and public sector that really lead for socio-economic development and growth rather than politically motivation’ is characterised as ‘‘the end of the ‘Washington consensus’’.
‘‘There were plenty of infrastructure projects in Asia that needed funding’’. It is clear that China is a much more powerful and the largest economy wants to lead its own international financial services.- David Kuo, economist of AIIB
Privatisation has the capacity to increase efficiency and improve the quality of the product / service. However, for key public sector industries, privatisation may mean companies ignore wider social objectives. For example, in the 1990s, under World Bank pressure, Bolivia privatised its water industry. But, this led to water supplies being cut off from the poorest members of society. (politics of water in Bolivia at the Nation) But ‘now China offers a new model of development.
China now has successfully proved its growth model against the hidden interest of Washington Consensus. Now China is in central attraction but founder of the Washington Consensus are on the verge of losing their grip of ‘‘land of opportunities and global policies’’. The academies who are looking an alternate to reduce intolerable inequality and poverty are also hopeful with the Chinese approach of ‘investment in infrastructure and public sector’. Obliviously China raises its attraction to the developing and low income nations whose lips were sealed during the era of globalization. The World needs REAL DEVELOPMENT and GROWTH for ALL. Can China prove its international role to fulfil the basic need of 3.5 billion poorest in the world by allowing them to join the main stream of economy?