China Is Simply Doing What Others Have Done for Decades

Despite support from major U.S. allies amid U.S. opposition, the China-led Asian Infrastructure Investment Bank does not pose the fundamental challenge to the existing global economic institutional order that some ascribe to it.

Development lending is a policy area where economic influence easily translates into political influence. If you have money you can find countries to lend it to. Western governments have long used bilateral aid and World Bank lending to gain favors in the international arena and to influence the domestic politics of poorer countries. Japan has similarly applied its preponderant influence in the Asian Development Bank.

China uses bilateral foreign aid to advance its political interests but its relatively modest voting shares in the Asian Development Bank and World Bank preclude the multilateral route. This changes with the decision to devote about $50 billion that could have gone to bilateral aid to create a multilateral bank. We don’t really know why — perhaps China has discovered, like the U.S. and Japan, that there are political downsides to lending directly to poorer nations. The Asian Infrastructure Investment Bank may well turn out different from most of the two dozen multilateral development banks in that it poses few governance and environmental standards in its lending (neither did the World Bank until relatively recently). But China is essentially doing what other powers have done for decades.

Opportunities to create alternatives to global institutions are sparser in other policy areas where the benefits of global solutions are more apparent. Asian regional alternatives have failed to challenge the International Monetary Fund's role as the primary institution to maintain financial stability. The patchwork of bilateral and regional trade agreements does not substitute for the global market access that the World Trade Organization provides. Nor does China have incentives to undermine the United Nations Security Council. There remain strong interdependencies that keep Chinese interests entangled with the world’s economic and political institutions. China will surely translate its economic might into political influence but in the medium term it is most likely to do so most of the time within rather than outside the existing global institutional architecture.

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