Is China A Game Changer？

The Logic Behind the Ambivalence towards the AIIB

Xiance Wang

MS in Global Studies and International Relations candidate, July, 2015

Northeastern University College of Professional Studies

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Foreign Affairs recently generated a debate asking a broad pool of experts to air their

opinions on the building of the Asian Infrastructure Investment Bank (AIIB) and its potential

influence on the current global multilateral order. Although more than half of the opinions

believe that the transformative effect of this China-led multilateral financial institution is

limited, there are still strong voices on the opposite side. If we concentrate our focus on the

principle subject of this situation, it’s not hard to find that the logical cause of this

ambivalence towards the AIIB actually shares the same logic with the world’s ambivalence

towards the rapid expansion of China.

The building of the AIIB is the first time for China to build and take a real lead in a

multilateral institution, which has high possibility of creating “a new geopolitical reality”.

Comparing with the U.S’s “talking much but does little” model, China’s “money supported

friendship” on the contrary shows greater attractiveness in involving international partners.

The U.S’s failure in dissuading allies embracing the AIIB seems supporting it. Especially for

the facts that China is mobilizing entire national capacity both domestically and

internationally to support its Eurasian strategy, the current condition of the game then has

been commented as “amid U.S. paralysis, China cashing in”. By this token, it seems that

China is building a new regional order in Asia with itself in central and further it will replace

the remaining U.S-led Bretton Woods system thoroughly with its own. Accompanying with

China’s state level strategy “One Belt, One Road”, it’s reasonable for the current game

controllers to worry about the potential erosion of their International living spaces, especially

in the context that China has been suspected as a “waking lion” with fuzzy intentions for a

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long time. However, if we comprehend the realities that China really faces, then this “lion”

seems more outwardly strong but inwardly weak.

The AIIB is limited, so is China.

The first factor limits the influence of the AIIB is its scale and scope. Its 100 billion

USD register capital seems large. However, Japan immediately topped it by providing a

counteroffer of $110 billion for the Asian development project through both its state affiliated

agencies and Japan-led Asian Development Bank. Compare AIIB’s size with the IMF and the

World Bank Group, which is the current body of the world multilateral financial system, it’s

not hard to find that the real tasks that the AIIB can tackle on the ground are still limited. Not

to mention the great gap the AIIB has in soft power and achievable resources that traditional

international financial institutions have accumulated in the past decades. On the other hand,

for the reason that what China expects to successfully build is still an international institution,

so it won’t be a case that China could cash in this bank alone with its huge currency reserves

and keep its multilateral characters at the same time, even if China wishes. It means that the

down-to-earth influence of the AIIB is not only determined by China but also depends on the

actual financial capability that other cooperate members could provide. In addition, the AIIB

is designed and can only have limited capabilities in providing development-oriented

financial support to Asian specifically. It also focuses on the field of long lasting, high risk

but low return infrastructure constructions, which also have unpredictable geopolitical

externalities in Asia’s specific context. Consequently, this financial arrangement in practical

functions, as China claims, actually could only come for the purpose of supplementing the

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vacancy of other International Development Banks in this area. Therefore, AIIB’s real

influence is limited in both scope and scale.

Secondly, AIIB is being created in the background of the failure of the current IMF

reforms. So China needs to practice multilateralism in this international institution to keep its

peddling promise. Within this scope, China could only keep or even raise the operational

standard and follow the universal rules and norms to maintain the reputation of this newborn

bank. It represents the success of China’s multilateral practice and determines its future

appeal in other international programs. In addition, the more efficient and well-functioning

AIIB is, the more relevant benefits China would gain as the leading power of this multilateral

institution. Meanwhile, almost all of the universal rules and norms China would like to accept

and utilize in AIIB come from the current word system, so that China essentially is incapable

to overturn them and just do whatever it wants. In this sense, it’s irrational for China to mass

up the current universal rules and norms, which is functioning the world system that China

also still relies on. This limits China’s possibility of changing the world order in norms and

rules.

In addition, stretching out AIIB for China is more a passive strategic choice for survival

than an initiative selection for triumph. Domestically, China is experiencing great frictions in

its system-- “Rampant corruption, elite infighting, social and political unrest, environmental

degradation, and massive demographic challenges”. These all together make China’s current

system full of risks. Along with the lowest GDP growth in recent two decades, China’s

pressure of development from inside has achieved a certain point and urgently needs a sally

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port. In the situations that being pushed to the opposite side of ASEAN (Association of

Southeast Asian Nations) countries for the South China Sea disputes and the Trans-Pacific

Partnership (TPP) negotiating on the east but being excluded out, China’s depth space in the

Asia-Pacific is limited. The plan of turning to the west hinterland and financing it is still a

well thinking move, but it also means to face the lacking of economic foundations and

complicated geopolitical situation. This in fact reflects China’s incapacity in expanding

international space. On the other hand, within the background of the U.S’s pivoting back to

Asia and the accompanying South China Sea tensions, China’s ocean plan is facing realistic

flaws in its expected integration. Therefore, no matter the AIIB or the “One Belt, One Road”

initiative, they inessentially are the moves of breaking out of a plight but not crowing victory,

nor could even be a bold action proactively to change the current world order, which is

backed up by multiple dimensions of power balance between states. Even just within the

scope of Asia, the influence of the U.S may face some competition but still can’t be really

shaken or erased in the foreseeable future.

What’s the real impact on the game?

In fact, the core contradiction beneath the on going game options does not come from

considerations in technical levels, but lies in the deep strategic contradictions between

China’s current expansion in global context and the traditional U.S –led world order formed

since the end of WWII. But a practical question is: without the fundamental changes of world

balance in economic capacity (not scale), military strength and political acceptance, how

much of an impact would the expansion of China really have on the current world order?

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Meanwhile, being the biggest beneficiary among the world system participants for the past

three decades, how much willingness and capability would China have to entirely change the

current world system and the underlying rules?

Regardless, the building of AIIB is still telling a significant indication about the

potential trajectory of the game --China has started to take active and dexterous measures to

express its intentions to make its international standing fit the gradual variations in the

contrast of international power balance, and this isn’t the routine the elders in the game were

familiar with. Nevertheless, it’s not only a game between the defenders and challengers, but

also affected by the interactions with the highly related stakeholders. In this sense, it also

becomes more about how all participants in the current international system will reshape the

world order as a resultant force. But, it seems that this is a question that will always face

great game plights.

So, is China changing the rhythm of the game? From the ambivalence towards AIIB

and the hasty counter measures that China’s opponents have taken, it’s obvious that the

previous game emphasis has changed. But is China changing the fundamental rules of the

game? For current evidence, it’s still too early to make this judgment. Because after all, a

good punch at first can never ensure a firm standing in the end. However, the certain part is

that for the current scene of the game between states, the world at least still has high

possibility of obtaining a virtuous circle in integration, and China as a realistic gamer still has

sufficient chips to allure the world to get on board.

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Notes

Blanchard, Ben. "China Expresses Regret at U.S. Failure to Pass IMF Reforms." Reuters.

December 12, 2014. Accessed July 7, 2015. the failure of the current IMF reforms

Feigenbaum, Evan A. "The New Asian Order." Foreign Affairs. February 2, 2015. Accessed

June 26, 2015.

Fackler, Martin. "Japan, Sticking With U.S., Says It Won’t Join China-Led Bank." The New

York Times. March 31, 2015. Accessed July 7, 2015.

"Factsheet -- The IMF at a Glance." Factsheet -- The IMF at a Glance. March 27, 2015.

Accessed July 6, 2015. http://www.imf.org/external/np/exr/facts/glance.htm IMF

Kihara, Leika, and Linda Sieg. "Japan Unveils $110 Billion Plan to Fund Asia Infrastructure,

Eye on AIIB." Reuters. May 21, 2015. Accessed July 6, 2015. $110 billion

Lipscy, Phillip. "Who's Afraid of the AIIB." Foreign Affairs. May 7, 2015. Accessed June 26,

2015.

Renard, Thomas. "The Asian Infrastructure Investment Bank (AIIB): China’s new

multilateralism and the erosion of the West. Security Policy Brief No. 63, April

2015." (2015). a new geopolitical reality

"Should Washington Fear the AIIB?" Foreign Affairs. June 11, 2015. Accessed June 26,

2015. debate

Smith, Jeff. "Beware China's Grand Strategy." Foreign Affairs. May 20, 2015. Accessed June

26, 2015.  great frictions

Stokes, Jacob. "China's Road Rules." Foreign Affairs. April 19, 2015. Accessed June 26,

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2015. One Belt, One Road

Soergel, Andrew. "Amid U.S. Paralysis, China Cashing In." US News. June 10, 2015.

Accessed July 6, 2015. amid U.S. paralysis, China cashing in

"THE ASIAN INFRASTRUCTURE INVESTMENT BANK - AIIB." THE ASIAN

INFRASTRUCTURE INVESTMENT BANK - AIIB. Accessed July 6, 2015.  

claims