Tag Archives: AIIB

AIIB I: Positive Impacts of AIIB

Apr 1st 2015

Thesis: AIIB will positively influence on the third world by supporting funds and technology and the world economy by becoming a rival of IMF and World Bank.

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(http://www.thefinancialexpress-bd.com/2015/03/26/86514)

The AIIB (Asian Infrastructure Investment Bank) expands its memberships from European countries to Asian countries despite the U.S. government’s strong objection. Last Tuesday was the deadline for signing up as founding members and numerous countries such as the United Kingdom, France, Germany, South Korea and Australia joined the AIIB. Robert Zoellick, former president of the World Bank, says that the establishment of AIIB means the failure of Obama administration both on policy and on execution (Wall Street Journal). First, the U.S. government concerned about Chinese ambition to remake the world’s multilateral landscape by reducing the impact of the World Bank and tried to convince allies not to join in. However, I agree with Zoellick’s idea that the U.S. should realize the existence of the AIIB and try to become a friend. “If I had been at the World Bank, I would have tried to embrace the AIIB as a partner (Zoellick).” Also, on execution, he pointed out that the administration only pressured its allies and partners, but didn’t provide an alternative. For example, for South Korea, the AIIB is really attractive because China, the founder of the AIIB, can support South Korea in some issues related to North Korea and expand the its influence to the world. Since the U.S. didn’t succeed in convincing the Korean government with specific alternatives, there was no choice for the Korean government and for other countries as well.

Personally, I support the establishment of AIIB because I think it will influence positively on the third world’s economy as well as on the world. More specifically, it is true that there are many developing countries in the Asia which need funds for building infrastructures. IMF (International Monetary Fund) and ADB (Asian Development Bank) were the only sources that those governments can borrow some funds; however, both institutions are led by Western countries which usually do not get though the economic growth and do not comprehend the Asian culture. I think AIIB led by China and other Asian countries will offer better options for developing countries since most members already got through the growth period. Also, it is possible that members in AIIB can provide technologies as well as their past experience and strategies.

Although the U.S. concerns about the transparency problem in AIIB, European countries like France, Germany and England and South Korea form the East Asia will control the structure. And I think the U.S. also can be another supervisor as Zoellick argues, “we should press the Chinese to perform to institute those institutions in ways that would be supportive of international economic growth.”

Finally, it is time to change the U.S. government’s recognition of AIIB. The institution is already organized successfully and many countries are positive to its impact. I think AIIB will boost the economy in Asia by providing funds with lower interest rate (I agree with the statement that AIIB lowers the interest rate of IMF, ADB and AIIB itself because of competition) and will balance the world financial market which was led by the U.S.

Revised Blog 4: America Should Join AIIB

“’China is playing the long game effectively,’ said Cornell University economist Eswar Prasad, a former senior China official at the IMF. ‘They are in absolutely no rush. They know other countries will come to them.’”

This long game’s name is called AIIB (Asian Infrastructure Investment Back), which was proposed by Beijing in 2013 initially. From the name, we can infer that this is an investing bank mainly for developing infrastructures in Asian countries. However, the members are not limited only for Asian countries, while British, Germany, France have announced to join in. Chinese government injected 49 percent of initial capital to the new bank. Till now, the collected funds have been almost prepared. “Meanwhile, the bank is on track to reach its target of $100 billion in registered capital, up from the $50 billion initially announced and that China is providing, according to Chinese and Western officials.” The start-up capital was only $10 billion of the World Bank, though we should consider about the time cost and inflation rate. But, without doubt, AIIB will definitely not only be an Asian but a worldly economic and financial center.

For such a big game, will America be a role paler? I think so whereas American government officials do not. Admittedly, at the first glance, we may consider that America should set tremendous barriers for China to form AIIB to firm its dominant status of the world’s economy. However, what is the really wise choice for America? Join in!

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America’s join will provide a positive influence to form a valid and qualified regulation within AIIB. “Over the past year, however, the U.S. has urged its allies not to sign up for the bank, saying it would be an instrument of Beijing’s foreign policy and that without proper governing rules it could contribute to debt and corruption in borrowing nations.” America expressed that they did not frown to form AIIB, but could not nod to China’s regulatory policies. They worry that China is not qualified to govern and lead such a huge organization successfully. They doubt China is not capable to provide rules and regulations scientifically and efficiently. If America join AIIB, they can bring many matured rules and regulations by their various former experiences from leading the World Bank and IMF. After all, global economic chaos will also present negative effects on America. As AIIB has such a magnificent scale, if this organization expose essential problems, it is hard to image America will not suffer any harm.

Joining in AIIB also help America lessen China’s dominant power. “Another pending issue is how to structure the board of directors at the new bank. In the World Bank and the IMF, countries are represented by resident directors who are actively involved in the institutions and vote on new projects, programs and policies. Those representatives act as a check on management. The U.S. has been pushing the Chinese to adopt the same structure, according to those involved in the discussions, but Beijing is resisting. Instead, it wants the bank’s management, which will likely mean Chinese officials, to have a more powerful position.” Without America’s joining, China will absolutely be the sole dominator of AIIB. Then, China will readily and legitimately introduce some foreign policies that benefit itself. That is definitely what America did not want to see. “Still, Mr. Jin, interim chief of the new bank, said over the weekend that more than 35 countries will join as the bank’s founding members by the end of this month. South Korea and Australia, key U.S. allies in the Asia-Pacific region, are also expected to come on board by then, according to Chinese officials involved in the effort.” Moreover, as some America’s allies joined AIIB for their own profits, America could draw them on the same side to against China and balance the authority in the AIIB.

Till now, 46 countries have applied to join in AIIB and this number will continue goes up seemingly. China successively introduced “One Belt and One Road” and AIIB, the goal is so clear—forming and consolidating the Eurasian Economic Community. After setting down the deep fraternity between African countries, China is ready to lobby Europe with its strong power. If America cannot propose some effective strategy back, the day of China’s dominance will come soon. Actually, Joining AIIB is an indispensable move for America.