During the last one decade, the world was anxiously and eagerly waiting for a serious Chinese engagement in the world affairs.
The civilization giant of the East, who was ‘sleeping’ beyond the Great Wall, is waking up as Napoleon has warned the Europe once.
Rising economy, quickly modernizing military and strengthening political clout – China has all prospects for being a rival to the West.
Pundits were thinking, writing and speaking that the post cold war era inertia will be broken once China enters the global arena seriously. They made predictions that we can see fascinating rivalry between the post world arrangement like the Bretton Woods System (or BWS, represented by IMF and World Bank) and the ambitious rising powers of East like China and India.
Nearly seventy years back, the IMF and WB were formed with the US and Europe ruling the two institutions.
The Bretton Woods Institutions represented power domain of the post war world. But at the same time, the existing powers in the BWS institutions are not ready to see the change occurring in the world economy. They have to give more roles to the emerging world in the management of the world economy.
But the aborted fourteenth quota reform of the IMF, torpedoed by the US Congress has led the EMEs to lost faith in the governance reform of the IMF. After the unfulfilled quota reform, the emerging world is seeing the BWS as outdated and like a product continuing in the market after its expiry date.
Seven decades after the establishment of the IMF, many countries in the emerging world have developed serious attrition with it.
Time has changed certainly. Western economies have lost their sheen; rather they have to settle their own economic problems. The last global financial crisis has revealed that the western policy makers are prayers and not practitioners in crisis management. Crisis has seriously eroded their credibility and the world was looking for alternative views.
Formation of AIIB
When the disheartened EMEs were looking for alternatives to the BWS institutions, China has suggested the formation of Asian Infrastructure and Investment Bank (AIIB).
Surprising even the Chinese visionaries, many fans of the BWS have joined as founder members of the AIIB. The US has warned the world about Chinese efforts and compelled countries not to join the Chinese alliance.
When US were opposing the AIIB, its close ally and Asian power, Japan has abstained from participation.
Surprising was the joining of Australia and UK in the AIIB. It was evident that China’s rich prospects and foreign exchange reserves were dividing the West.
The articles of the agreement of the AIIB are a curious case. All throughout, China was accusing lack of governance reforms in the IMF as the US holding nearly 16% share.
But in the AIIB, China has nearly 26% voting share. Now, the rest of the world should note this as Beijing was agitating against skewed vote share in the Fund.
India is in the remote second position with nearly 7.5% of the voting power.
With Japan not joining and Beijing denying the expansion of AIIB, it is certain that the AIIB will continue in the hands of the ‘Hans’.
Politically, the AIIB will give a fine stage for China to implement its economic engagements. The Road and Belt policy will get maximum attentions once the AIIB becomes functional. Beijing has revealed that (Boao Summit) the AIIB can help Asia to meet its infrastructure deficit.
Through AIIB, Beijing can win new political friends and can entertain the nonbelievers of BWS.
The AIIB is the first international institution to be established in China (New Development Bank created by the BRICS will also start functioning soon). Inarguably, the bank is a starting point for a big rivalry between China and the shrinking West.