NEW BANK, NEW MISSION: Finance ministers and delegates of 21 Asian countries including China sign the Memorandum of Understanding on Establishing the Asian Infrastructure Investment Bank in Beijing on October 24, 2014 (XINHUA)
A significant shift occurred when four major euro zone economies applied for founding membership of the China-proposed Asian Infrastructure Investment Bank (AIIB), dispelling concerns of some developed economies over the initiative's ability to successfully revolutionize infrastructure development in Asia.
Britain became the first big Western economy to apply on March 12, with France, Germany and Italy submitting their applications five days later. On March 20, Switzerland and Luxemburg announced their intention to join the Asian bank. More countries have followed suit ahead of the March 31 deadline.
After publicly voicing initial concerns over the bank's commitment to international standards on governance, the United States shifted its tone by expressing willingness to cooperate with the AIIB under the framework of other international financial institutions. Meanwhile, Japan has been closely watching the bank's progress since it was announced in Beijing last October with the participation of 21 Asian countries, fearing the new Asian bank would diminish the influence of the Japan-dominated Asian Development Bank (ADB).
A wise decision
Europe's decision to join the bank did not come as a surprise to most analysts.
Zhang Yuewen, a research fellow at the Institute of Finance and Banking under the Chinese Academy of Social Sciences (CASS), said that the four major European economies' decision to join the AIIB despite strong U.S. opposition was in accordance with their national interests.
China envisions huge opportunities for Asia's future development, which it aims to tap into by proposing a series of initiatives to boost connectivity and infrastructure construction, such as the Silk Road Economic Belt and the 21st-Century Maritime Silk Road initiatives and the AIIB. European countries will find worthwhile investment opportunities as those initiatives are put into practice, Zhang said.
It has been widely recognized that Asia will soon be home to the world's fastest growing markets. There is no reason for European companies to ignore this golden opportunity, Zhang said. UK Chancellor George Osborne said in a statement that joining the AIIB at the founding stage would create "an unrivalled opportunity for the UK and Asia to invest and grow together."
The EU is now facing multiple challenges, including a debt crisis, sluggish growth and pressures from reforming its fiscal, tax and social welfare systems. Joining the new Asian bank and getting in on the ground floor of Asian development is a smart move for any far-sighted investor, said Pang Zhongying, professor of international relations at Renmin University of China.
The China-proposed bank will help advance reform of current global financial institutions, said Pang.
The EU prefers a multilateral style of global financial governance. Although a plan was reached as early as in 2010 on reforming the International Monetary Fund (IMF) and World Bank, the United States has stubbornly blocked the implementation of the plan, causing discontent from both Europe and emerging countries. These conflicting national interests have put a wedge between the EU and the United States, Pang said.
As the dominant power in global institutions, the United States shows mixed reactions to the rise of emerging economies. On one hand, it wants emerging countries to contribute more to global governance. But on the other hand, it fears that its control of global institutions will be weakened by China and other emerging players. As a result, due to U.S. opposition, the reform plan of increasing shares of emerging economies in the IMF and World Bank has been delayed, said Wang Yong, a professor of international relations at Peking University. Wang said the United States takes the same attitude toward the AIIB.