AIIB Will Perfect the Existing International Financial System
The "basic law" for Asian Infrastructure Investment Bank (AIIB)—the AIIB agreement—was signed in Beijing on June 29, with financial ministers and authorized representatives from 57 founding member states attending the signing ceremony, marking a significant progress toward the bank's formal launch and operation.
Reviewing the content of the agreement, people can easily find that the AIIB will improve rather than subvert the current international financial system, which is in compliance with the purpose of China, the initiator of the multilateral bank.
The key reason for China to propose the launch of the AIIB is because the existing financial system fails to fully reflect the actual pattern and development trend of international economic and financial strength, and to meet the reasonable demand of China and other emerging nations for rights based on their actual status. This viewpoint is widely shared by prominent American figures in political and business circles such as Ben Bernanke, former Chairman of the U.S. Federal Reserve, as well as major Western media like the Financial Times. Bernanke said that Beijing was pushed into launching the AIIB by U.S. lawmakers' refusal to give China greater clout in existing multilateral institutions.
Now, even some old European developed countries such as Britain, Germany and France are interested in joining the ranks of the AIIB founding member states regardless of the obstruction from the United States, indicating the international community's high expectations on China.
After several decades of leapfrog growth, China has become the world's second largest economy and largest industrial and trading nation. China Development Bank has grown into a frontrunner and heavyweight among global development-oriented financial institutions. Therefore, it comes as no surprise that American politicians worry the rise of AIIB may challenge the position of international financial institutions that they dominate.
However, China has no intention to confront the United States or subvert the current international economic and political system. For one thing, the inequality and inefficiency of the existing system have been repeatedly denounced and criticized; for another, the bank meets the demand for international governance and conforms to objective economic laws. It's not until entering the system as an equal member that China set out with its growth miracle.
As a vibrant emerging nation, China's complaints about the current international economic and political system mostly revolve around its efficiency problems. We are confident that our participation in international governance will greatly improve the efficiency of the international economic system and make more people benefit from global growth.
Hence, it's not proper to call the Belt and Road Initiative a new Marshall Plan. (The Belt and Road Initiative refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road proposed by China in 2013 for improved cooperation with countries in Asia, Europe and Africa.) While the Marshall Plan mainly involved financial aid, the Belt and Road Initiative is a set of development plans focusing on development projects, particularly commercial projects.
China is quite aware of the fact that only a global multilateral trading system can meet its demand for the external market. For this reason, China reiterates the importance of a multilateral trading system and the compatibility and complementarity between the regional economic integration and the multilateral trading system it has initiated. Presently, the countries and regions covered by the Belt and Road Initiative have gone beyond the Free Trade Area of the Asia-Pacific.
Given that, the new-born AIIB is not a challenger to the current international financial system, but an active participant and reformer.
The agreement, on one hand, endows China with one-vote veto power over major issues and designates Beijing as the location of the AIIB headquarters; on the other hand, it stipulates that the U.S. dollar will be used in capital stock valuation and taken as subscription currency. That's to say, the AIIB will follow existing international financial rules within the present international economic system.
Moreover, the agreement denies preferential treatment to certain nations in terms of procurement, allows financing activities in the international financial market; and ensures that every member state has representatives in the board of governors and the board of directors is authorized by the board of governors. All these reflect China and other founding members' willingness to pursue efficiency and equality in the AIIB's internal governance.
The author is an op-ed contributor to Beijing Review and a researcher with the Chinese Academy of International Trade and Economic Cooperation
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