Australia, UK, New Zealand… the list of countries from the US led western alliance joining the China sponsored AIIB is increasing. France, Germany and Italy have already expressed their willingness to join the Beijing based entity Decision of Britain to join the AIIB has alarmed the US and an open displeasure of Washington on the matter produced verbal retaliation from official Beijing media.
Asian Infrastructure and Investment Bank was formed in October 2014 by twenty one countries including India. The AIIB is widely perceived as an institution which is going to replace the Brettonwoods institutions – IMF and World Bank. Already, the Chinese led AIIB is making deep inroads into the international financial architecture.
What is more surprising about the AIIB is the speed the world is embracing the Chinese initiative despite the general trust deficit many countries have about Chinese approach.
Two factors have contributed to the quick turnaround about the developments. First, the world is disappointed with the global financial architecture including the working of the IMF. The Fund is lacking resources for potential future sovereign bailouts. Additionally, it gives only disproportionally small recognition to the rising Chinese power under the existing quota arrangement. The world now is ready to recognize the Chinese money but the IMF doesn’t.
Secondly, the world is fascinated by the nearly $4 trillion foreign exchange reserves with Beijing. This money can definitely finance economic activities- development and crisis bailouts. Here, a shift away from the crisis ridden and recession hit West supported IMF to the new wealthy China sponsored AIIB is understandable. But the game has just started and the world will see more strategic moves.