Sweden is the latest European country to apply for membership of the new China-led development bank.
”Power,” Chairman Mao said, ”comes out of the barrel of a gun.” It can of course be expressed less explicitly, which is why the new China-led development bank, called the Asian Infrastructure Investment Bank (AIIB), has received the attention of leaders from around the world.
For most of the time since the Chinese government announced in the fall of 2013 that it was going to set up a new venue for funding infrastructure projects in the region with the AIIB, despite the fact that everyone was invited to join, its membership seemed to be determined by geography. Twenty one other countries signed up to be founding members last October, but none from outside Asia.
As the name suggests, its raison d’être is beefing up the region’s so far inadequate supply of investments in building roads, bridges and other unglamorous but necessary goods. It has been noted by the bank’s sceptics that there are already organizations that are doing just that, including the World Bank, IMF and the Asian Development Bank (ADB). Adding a few bucks to their budgets, some say, would fill the same purpose.
But then again, there are reasons for China to not do that. The World Bank is viewed as dominated by the US, and reform efforts of the IMF have been stifled by the US congress. The ADB is in practice though not formally led by Japan, and considering the less than lukewarm relations of late, funding their pet project is a political no-go for the Chinese leaders.
Going your own way has its own perks too. In a changing world were the global governance institutions are based on the power structures of the immediate post-war world, for China to build their own institutions will in addition to its explicit function also be a prestige boost for Beijing. Not everyone is enthusiastic about that. For the ”rise of China” – whatever that means today or will mean in the years to come – to become this tangible has made some worried. Because after all, the institutions of global finance do shape distributional outcomes, which gives political leverage, and is thus part of the nitty-gritty of international relations.
Much to the dislike of the US, which has expressed concerns over the AIIB’s governance standards and social safeguards, many of its best of friends – including the UK, Germany, France, Italy, and lately South Korea and Australia, among others – have lined up one after another to join the new bank. The Obama administration has denied lobbying others against what now seems like jumping the bandwagon, but few believe that to be true. And, apparantly, it has been of little use. For once, his domestic opponents’ critique that the President is ”leading from behind” has caught on internationally as the failed lobbying efforts have been unaccompanied by any proactive measures such as adding funds to the already existing banks. Instead, pivoting to Asia has been a European endevour lately.
One of the latest to apply is Sweden. Although Prime Minister Stefan Löfven didn’t make any mention of such prospects before or during his visit to Beijing last weekend, and our media outlets did not show any interest in the matter, Finance Minister Magdalena Andersson revealed on Monday (30/3) that they too want to join the ranks. What exactly they are getting themselves – or rather, us – into is however not clear. The bank, which is not yet up and running, still has crucial features to be molded. Will China have a veto? The Wall Street Journal reports that it will not, a claim that has been denied by Chinese officials. Beijing has said it will not strong-arm counterparts, but forgoing the veto-power would make that case more believable.
If Mr Löfven has been reassured behind closed doors is something we cannot know, but regardlessly it remains the case that being a founding member comes with having a say about the rules of the game. Late-comers will have to settle with what the others have already agreed upon. In that sense, power comes not just from the barrel of a gun or the bang of the buck, but also from a seat at the table at the Asia’s new development bank.