The global financial architecture is subject to experience
a sea change in the aftermath of the decision of major Western powers to join
the Asian Infrastructure Investment Bank (AIIB), being floated under Chinese initiative.
The twin major economic powers viz. the Japan and the United States have
already got isolated and their apprehensive displeasure too may come true after
this new realignment of the global economic diplomacy wherein this present century
may turn into a Chinese Century. The Chinese initiated twin development banks,
viz. the BRICS bank and the AIIB may bring a major shift in the global power-balance
by paving way for gradual replacement of the 'Washington Consensus' by a
'Beijing Consensus' as a pre-requisite in global economic affairs. India has
though, agreed to be among the founder members of both the China-proposed
ventures, but China would enjoy a relatively more affirmative influence in both
the ventures by virtue of her greater capital contribution and GDP. So, it is
quite imperative that the AIIB with 57 or more participating countries and
dominated by China, can enable it (China) to have greater influence, to wean many
countries away from India, if it would have greater influence over the Board
for Approval of Infrastructure Loans. Though, India would have one of the vice
Presidents in the governing Board of the AIIB, yet India and other major powers
should ensure that the board of the AIIB for loan approvals does not come under
more affirmative Chinese influence in loan sanctions. India should now even
think to endeavor enhancing greater economic integration of South Asia at least
to retain the traditional proximity of the countries of South Asia and Indian
Ocean region with it. The Asian Development Bank founded in 1966
with the participation of 31 countries and regions from Asia, North America and
Europe is headed by Japanese president alone wherein, Japan accounted for 15.67
percent, of its capital followed by the U.S. 15.56 percent, China 6.47 percent,
India 6.35 percent, Australia 5.8 percent, Canada 5.25 percent, Indonesia 5.17
percent and South Korea 5.05 percent. Though it headquartered in Manila. Though
the ADB is believed to maintain fairness and impartiality as applications being
made to it for loans are screened by a Board of Governors, made up of
representatives from all member nations wherein no single country exerts undue
influence. But, with respect to the AIIB, the US and Japan apprehend that, it would
be under strong Chinese influence and may not have such an impartial board for
screening loan applications. Moreover, once the AIIB would start its
operations, No country would then be able to stop Beijing from making unilateral
decisions. So, its Articles of Association need to be cautiously balanced for
neutrality. Any presumption of making the AIIB as an impartial international
financial institution through inside efforts after joining it may sound genuine
and feasible now, but would any member country endeavor to clash head-on with
China, once the details are worked out.
Especially when, China is believed to have proposed
this new infrastructure bank with the intent to compete with and overtake
Euro-American controlled funding agencies, and securing decisive benefits for
Chinese infrastructure developers. Moreover when, inspite of the U.S. opposition,
57 nations have already declared their intent to join it, including 14 members
of the G-20. Shall any other country would have any superior influence than the
US? It was inspite of U.S. objections, the U.K. Chancellor of the Exchequer,
George Osborne, announced to join the AIIB, and the Germany,
France and Italy immediately announced to join it.
Israel’s decision to join the bank was all the more astonishing. Even Taiwan too
tried to become a charter member, but China rejected her application, because
the mainland considers Taiwan as a province of China. Indeed UK is believed to
be having the ambition that London can evolve as
a major clearing market for the Chinese yuan (CNY) if that currency ever becomes
freely convertible, along with an apprehension as well that, if it stayed out
of the AIIB then, other financial centers might overtake London in this regard.
Now, when
the American economy has already gone down from occupying half the share of the
world economy 70 years ago to occupying less than a fifth of it today. The
writing on the wall is clear that the trend of decline would continue. Notably,
the aggregate economic activity of the BRICS countries alone now equals that of
the United States, and the Chinese GDP alone is more than 60 percent of the US in
general terms and more than 120 percent of US manufacturing. China tops the
world in global foreign exchange reserves too. So, with the growing influence
of the "Beijing consensus" in global affairs, out of its growing
economic clout, China would now expand its role in shaping the global financial
architecture. Although China's actions won't immediately overturn the existing
international economic and financial order, but, they are creating a grumpy imbalance
among the major economic powers.
The 69th
anniversary year of creation of Bretton Woods Institutes (IMF and World Bank)
after the, cessation of Second World War 70 years ago. The two new rival banks
viz BRICS Bank and AIIB would redefine governance of the world economy as well
as the global financial architecture, have a different ideological pretext. The
fundamental ideals of the Bretton Woods system have been a free market economy
and democracy. In contrast, the AIIB is being floated by an authoritarian market
economy of China that does not permit democracy political opposition, freedom
of expression and open space which ultimately might establish the hegemony of Peiking
consensus. Besides, this new infrastructure bank of China may also help
it to redeem its ambition for a globalized renminbi currency, most likely to
upend the 70-year-old global economic order pivoted around Euro-American economies
and currencies. So, India should be vigilant to ensure parity with Chinese
might at all decision making for of the AIIB.
