Beijing should be careful what it wishes for in the AIIB
Players in international affairs can count on two things to be true. First, nothing is ever truly unthinkable given time. A decade ago, anyone who would have suggested the possibility of a rapid warming of ties between long-time foes such as Taiwan and mainland China or the U.S. and Cuba would have been considered wildly imaginative.
The initial success of the Asian Infrastructure Investment Bank is a surprise to many, not the least Beijing when it started to float the idea of establishing the international institution in 2013. Born out of the frustration felt by mainland China (and other emerging economies) at the failure of the World Bank and the International Monetary Fund (IMF) to reform to address their growing economic influence, the AIIB was considered more of a protest statement than a true rival to the World Bank and the IMF. The U.S. initially expressed its wariness on the founding of the AIIB, citing possible lack of clarity of the future institution’s governance. Washington (and probably even Beijing) expected its Western allies to stay away from the organization, rendering it a small club for China and other like-minded nations.
Instead, the UK surprised the world in early March by agreeing to join the AIIB as a founding member on the grounds that it can better ensure the bank’s transparency and robustness from the inside. Other Western nations — including Germany, France and Italy — soon followed the UK’s lead. In perhaps the biggest surprise of all, Taiwan applied for AIIB founding membership on March 31, the last day of application. In the end, the U.S. was able to only keep Japan from applying as a founding AIIB member. Washington made a late about-face and expressed willingness to work with the AIIB (via organizations such as the IMF and World Bank). Non-incumbent U.S. diplomats, however, were more honest in their assessment of the situation. Former Secretary of State Madeleine Albright said frankly that “I think maybe the bottom line is we screwed it up” when talking about Washington’s handling of the AIIB.
All of a sudden, the AIIB gained worldwide support and earned Beijing one of its biggest diplomatic victories, which brings us to the second truism: be careful what you wish for. For now Beijing seems to have gotten a seat at the grown-ups’ table, but with that seat come the challenges of being a big player. While the UK may have used its highminded “insider influence” rationale for joining the AIIB to cover for its other motive of hedging on the possible decline of the U.S. as the world’s sole superpower, developed nations would indeed be angling for influence and oversight in the AIIB. Instead of being the big guy in a small club and using it to do as it sees fit, China is now tasked with the hard work of handling a truly international institution, something it has yet to get acquainted with. It had made some initial good decisions to gain creditability, including rejecting North Korea’s application as a founding member due to its lack of financial transparency and hinting that it will give up veto power in the AIIB (The Wall Street Journal reported last month that Chinese negotiators persuaded key European countries to join the AIIB with a promise to do so, Beijing, however, denied such reports and said it is “premature” to discuss the matter).
Beijing, however, made a mistake yesterday by formally rejecting Taiwan’s application as a founding member. Having Taiwan as a founding AIIB member would help bring legitimacy to the institution as a non-political development bank and help show Beijing as being able to work professionally with an AIIB member it has a complicated relationship with. At the same time, increasing cooperation with Taipei gives Beijing an advantage in its tug-of-war with the U.S. in gaining influence in Taiwan. China should have recognized a possible ground for mutual concessions in the R.O.C. government’s agreement to join under the name Chinese Taipei (the name Taiwan uses in the international activities such as the Olympics, the FIFA World Cup and Miss Universe). Deciding to reject Taiwan’s founding membership due to cross-strait political issues — which is the only reason since Taiwan is well-qualified in terms of financial and economic transparency and capability — shows China’s lack of diplomatic imagination.
The true challenges for Beijing lie ahead. China is already facing strong diplomatic battles as prospective founding members are now engaging in negotiations in drafting the AIIB statutes. It has to prove itself a trustworthy and mature member of the international community or else the AIIB could serve as a window for the world to see China’s incompetence first-hand.