AIIB: A red herring for China's true ambitions on the global financial stage?

Some 30 years ago, when press baron Rupert Murdoch was at war with British printing unions, he declared his intention to open a new London evening paper and duly set up a printing plant in the East London borough of Wapping, ostensibly for the purpose of printing the paper there.

By then, he had added The Times of London to the jewels in his crown and a former colleague of mine on that paper even put forward my name as a potential business editor of the new publication - although I had limited interest in taking up any offer from that quarter.

Nevertheless, it came as a rude shock to learn that the new evening paper had been an elaborate ruse, so that The Times could be moved to union-free printing headquarters in Wapping, leaving the enraged union members high and dry in London's Grays Inn Road.

If you are wondering why I am recalling all this now, it is because I am wondering whether there might be some sort of parallel with the launch of the China-led Asian Infrastructure Investment Bank (AIIB). Sounds rather bizarre, I must admit, but let us examine the possible parallels.

When President Xi Jinping announced the launch of the AIIB in 2014, China was also involved in a "war", not with anything so mundane as print unions, but with the US Congress and multilateral entities that Beijing saw as denying the world's second largest economy its rightful place in global economic affairs.

Congress had blocked reforms at the International Monetary Fund (IMF) designed to give China and a few other leading emerging economies a significantly larger voice and vote in the institution; China's position in the World Bank and Asian Development Bank (ADB) was, meanwhile, rather lowly.

Out of the blue, then, came the announcement of the AIIB and of a US$40 billion (S$57 billion) Silk Road Fund to operate alongside the new bank. China was widely seen as thumbing its nose at the international financial community (and the US Congress) by saying, in effect: "If we can't join them, beat them."

Some doubted that the AIIB would ever see the light of day, but in the event, more than 50 countries entered a last-minute scramble to join the bank, for fear of being left out either of cheap loans from a reserve-rich country, or of losing lucrative contracts for AIIB projects.

Obama administration officials in Washington too had not taken seriously the prospect of the AIIB coming to birth (as authoritative US sources will confirm) but they had to change their minds once it saw others piling into the Beijing-based AIIB and as it began recruiting staff (as Mr Murdoch had done).

Things began to happen quite fast and furiously thereafter. The US Congress suddenly decided to drop its refusal to back the IMF reforms, allowing China to move up quite sharply in its ranks, and the IMF quickly accepted China's renminbi into the elite Special Drawing Rights (SDR) currency basket.

The family of World Bank-led multilateral development banks that had initially adopted a rather snooty "Don't deal with newcomers" attitude toward the AIIB began to openly welcome it into the family, while the ADB agreed to co-operate on projects with the new bank.

If we return for a moment to Mr Murdoch, we might ask: Was the AIIB intended (rather like the Wapping printing plant) as a cover for China's real ambition of securing greater influence in organisations (the IMF especially) that occupy the commanding heights of the world economy?

Perhaps not, but World Bank president Jim Yong Kim's announcement last week that he was appointing Shaolin Yang, one of the architects of the AIIB, to a newly created position of chief administrative officer and managing director at the Washington-based institution suggested that something could be afoot.

Is not the possibility of subterfuge on China's part in achieving its global aims not rather far-fetched, you may ask, especially as Beijing has already recruited foreign and well as Chinese financial specialists to staff the new bank?

A fair question but stranger things have happened. If China were to find its enthusiasm for a new infrastructure bank waning - now that it has secured larger ends - at least some staff could be sent back to Beijing's Ministry of Finance from where many of them have been drawn.

As for the international specialists who have been recruited to the AIIB, China could deploy their talents to good ends elsewhere in helping improve what is still in some ways an immature model of institutional development, as senior Chinese financial officials have hinted.

Of course, all this may prove to be idle speculation and the AIIB may well burst upon the regional and global stage following its launch over the weekend, with a show of bravura and bravado that makes it a star overnight.

But, given China's diminished financial fortunes, it could equally launch, not with a bang, but a whimper.

This article was first published on Jan 19, 2016.
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