Why the US Is Trying to Squash China's New Development Bank

By Zachary Keck

October 10, 2014

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The U.S. has been lobbying Asian nations to persuade them to reject China’s Asian Infrastructure Investment Bank. 

The U.S. has been working behind the scenes to kill a Chinese proposal for a regional infrastructure bank in Asia, according to the New York Times.

As The Diplomat has reported in the past, Beijing is quietly lobbying Asian nations to sign onto its proposed new regional development bank, the Asian Infrastructure Investment Bank (AIIB). China views the AIIB as a way to diminish the regional influence of the World Bank and Asian Development Bank (ADB), where countries like the United States and Japan hold substantial sway. By offering to provide most of the $50 billion in start-up funding, Beijing is hoping to get smaller and medium-sized nations in Asia to sign onto a bank where it will call the shots.

The New York Times reports, however, that the U.S. has also been lobbying the same Asian nations in an effort to persuade them not to sign onto the Chinese proposal. Citing senior U.S. officials and other representatives from Asian governments, the report says, “In quiet conversations with China’s potential partners, American officials have lobbied against the development bank with unexpected determination and engaged in a vigorous campaign to persuade important allies to shun the project.”

The report goes on to name South Korea and Australia as the two most important nations America and China are trying to woo. Beijing is hoping to get Canberra and Seoul to sign on as founding members of the AIIB in time for Xi Jinping to announce it at the APEC summit in Beijing next month. U.S. officials are lobbying South Korea and Australia to ensure that doesn’t happen.

“If Washington persuades South Korea and Australia to abstain,” the report notes, “it would all but ensure membership in the bank would be limited to smaller countries, depriving it of the prestige and respectability the Chinese seek.”

The New York Times finds it ironic that America is trying to squash the Chinese bank. As the report notes, the U.S. has long been one of the loudest voices in calling on China to take on a greater role in global affairs. But now that China is starting to act the part of a great power with initiatives like the AIIB, the U.S. is trying to undercut its efforts.

This view, while not completely without merit, misses some of the nuance of the U.S. position. It is certainly true that, throughout most of the post-Cold War era, there has been a widespread, bipartisan consensus in Washington that China’s rise is a good thing for the U.S. because it would allow Beijing to relieve the U.S. of some of the burden of upholding the global order. It is also true that as China continued to rise, the U.S. grew increasingly vocal in calling on Beijing to do just that.

All of this was premised, however, on the belief that China would use its power to reinforce the existing global order, and not seek to create its own order. Indeed, Western analysts who dissented from the general consensus did so on the grounds that China, like rising powers before it, would use its newfound power to reshape the global order — not to reinforce the existing one. The pro-China camp in Washington responded to these criticisms by contending that China would not challenge the existing order because it had served Beijing so well during its rise. Neither side, however, disputed that China attempting to reshape the global order would be a bad thing for the U.S. The only disagreement was over whether China would use its power to support the existing system, as most in in the U.S. foreign policy community argued, or to overturn the existing order, as critics of the conventional wisdom maintained.

In recent years, of course, the optimism in Washington over China’s rise has rapidly diminished. The reason for this is because China’s actions — particularly in the South and East China Sea, but also through initiatives like the AIIB — have made it increasingly difficult to argue that China will continue to support the existing order even as its power grows. After all, if China is already challenging the U.S.-led order in Asia, then why would China begin supporting the status quo as it becomes even more powerful? Thus, seemingly overnight, the conventional wisdom in Washington changed from viewing China’s rise as a boon to the U.S. to viewing it as a major threat to America and the existing order. However, the key point is that the U.S. foreign policy community was always opposed to China or any other nation trying to upend the regional order in Asia, and there was never any reason to think the U.S. wouldn’t be opposed to initiatives that do just that, such as the AIIB.

It’s worth noting that none of this seems to have been lost on China. Indeed, despite frequent U.S. reassurances, China has been unwavering in its belief that the U.S. is seeking to contain it. All signs suggest that this view isn’t limited to some faceless “hardliners” in the PLA, but rather is a deeply held belief among the broader foreign policy community, and quite likely the society writ large. The reason why Beijing has always been certain the U.S. wanted to contain it was because it viewed the U.S.-led regional order in Asia as unnatural, and (as it probably felt should be obvious to everyone), something that it would seek to change if it became powerful enough to do. From watching the debate over its rise unfold in Washington, it was quite clear to Chinese leaders that the U.S. would try to prevent China from achieving its objectives. In this sense, Beijing was and is correct in saying that the U.S. wants to contain it.