|US seeks to strangle Xi Jinping's baby in its cradle.|
Or so it would. One of the interesting things happening behind the scenes right now is the United States pulling out all the stops to ensure that the AIIB is stillborn. From the New York Times:
[I]n quiet conversations with China's potential partners, American officials have lobbied against the development bank with unexpected determination and engaged in a vigorous campaign to persuade important allies to shun the project, according to senior United States officials and representatives of other governments involved. Call it the "League of Nations" strategy: strip it of legitimacy by not having participation from respected members of the international community and it will die off soon:What the US is attempting to do is strong-arm erstwhile allies into not contributing capital to AIIB. Note that among those not solicited are arch-American toady Japan as well as India which it has something of a regional rivalry with:
The dispute, the latest manifestation of Chinese-American competition in Asia, could escalate in coming weeks, as Beijing pushes to confirm South Korea and Australia as founding partners of the bank in time for Mr. Xi to formally announce it at a summit meeting of Asian leaders in November [APEC 2014 in Beijing]. President Obama is scheduled to attend the meeting, and Washington is pressing the two countries to reject the Chinese plan.
Beijing has asked dozens of nations to contribute funds to the bank, which it calls the Asian Infrastructure Investment Bank, and hopes it will become a global institution that rivals the World Bank. To give it broader scope, the Chinese have invited and won the support of some wealthy Middle East nations, including Qatar and Saudi Arabia. But if Washington persuades South Korea and Australia to abstain, it would all but ensure membership in the bank would be limited to smaller countries, depriving it of the prestige and respectability the Chinese seek.The truth of the matter is simpler: despite the doubt and fearmongering Washington wishes to propagate, there are massive infrastructure requirements in the region going forward that will hardly be met by the World Bank and ADB:
The United States Treasury Department has criticized the bank as a deliberate effort to undercut the World Bank and the Asian Development Bank, international financial institutions established after World War II that are dominated by the United States and Japan, senior South Korean and Australian officials said. Washington also sees the bank as a political tool for China to pull countries in Southeast Asia closer to its orbit, a soft-power play that promises economic benefits while polishing its image among neighbors anxious about its territorial claims.
But Washington's arguments run up against undisputed needs on the ground in Asia — needs that existing institutions have been unable to meet, some development experts said. The Asian Development Bank estimated in 2009 that the region would need as much as $8 trillion in investments in physical infrastructure by 2020 — an amount that exceeds what it or the World Bank can muster, experts at the two banks said.Personally, my objections to this American meddling is simpler. Neoliberal policy dialogue spouted by the World Bank and ADB champions the beneficial effects of competition in raising the quality of product or service offerings as well as forestalling monopoly. OK, fine. If this principle holds in development, I do not see why it should not apply to development lending:
A literature review shows that competition policy reforms allow markets to work more efficiently for the benefit of consumers and drive sustainable economic growth. Three main insights emerge: Greater market competition matters for achieving greater innovation, productivity, and economic growth. Policies that help open markets and remove anticompetitive regulations can promote competition, resulting in lower prices and better deals for consumers and firms. And effective enforcement of competition rules across sectors—rather than the pure existence of competition laws—makes a difference in the impact of competition policies.Bottom line: the US is using anti-competitive practices like strong-arming would-be AIIB contributors [1, 2] to the detriment of alternate sources of much-needed infrastructure funding in our region. As objectionable as the Chinese can be, it is up for would-be borrowers to decide for themselves whether they want to borrow from them instead of the United States.
America, can't you for once mind your own business and allow the "competition" you champion to flourish? Let the best development lender win.