On Friday, representatives from 20 other Asian nations signed onto Xi's latest project, the Asian Infrastructure Investment Bank. Most were smaller countries: Japan, Indonesia, Australia and South Korea held aloof, the latter two reportedly after facing pressure from Washington. The US has expressed obvious concerns about the new bank's transparency and governance structure, not to mention the competition it might pose to existing lending institutions such as the World Bank and the Asian Development Bank (ADB).
This is a mistake. The US shouldn't just support China's $50-billion Asia bank, but seek to join it.
Why? First of all, to cite the cliche, it's best to keep your enemies close. Washington's fears aren't groundless. A bank dominated by China could indeed reduce the West's influence over emerging nations in Asia. Beijing will offer no-strings-attached largesse to governments, asking only loyalty in return instead of economic upgrades and open capital accounts. Others worry China, a bilateral bully in the best of times, will use its influence to dominate resource and food-supply chains.
But even if so, the best way to influence the bank's lending behaviour is from within the tent, not outside. If Obama's team worries this new bank will promote China's values over America's, then why not ask for a voting share - or at least an advisory role. In fact, to enhance its clout, the US should offer to match China's contributions to the enterprise, as best it can. Granted, given China's deep pockets and a hostile Republican opposition, this would be a tough sell for Obama. But the old Asian order, with the US at its centre, is over. Supporting emerging new institutions would enable the US to solidify its role in the region alongside China - not in opposition to it.
Second, this is only China's latest salvo in a long-term battle for supremacy in Asia. The US should reflect on why China is so eager to sideline existing international institutions. For one thing, the US and arch-rival Japan continue to dominate bodies like the International Monetary Fund (IMF) and the ADB. At the same time, despite all the happy talk about welcoming its rise, the US has sought to contain rather than make room for China. If the US wants Beijing to act like a global stakeholder and play a bigger role addressing everything from climate change to geopolitical stability to Ebola, Congress should pass reforms giving China a bigger say in existing institutions.
Finally, competition is good. Yes, risks abound. China could well use the new bank to support unsavoury regimes and to undermine environmental and labour protections. But at the same time, Asia needs about $8 trillion in infrastructure spending through 2020. The IMF, World Bank and ADB can't meet all that demand. And let's face it, China has developed considerable expertise at generating economic growth via infrastructure over the past couple decades.
Losing their monopoly over development projects in Asia should force those existing international institutions to become more nimble and less demanding of rigid, by-the-book reforms in nations that may be ill-equipped for shock therapy. As much as the new bank will complement existing institutions, it will also vie to build power grids in Mongolia, ports in Vietnam, dams in Myanmar and roads in Thailand. For the US, which preaches the gospel of free markets, to block competition that could ultimately benefit millions of Asians would be hypocritical.
Rather than fight China, the US should help ensure that the new bank adopts greater accountability and higher lending standards than China typically does when doling out money. Carping from afar, and strong-arming rivals to do the same, isn't the best way to accomplish that worthy goal.
The writer is a Bloomberg View columnist
wpesek@bloomberg.net