Into the Asian Century: China, Australia and the Asian Infrastructure Investment Bank

Australian politicians and diplomats have been talking about this being the Asian Century. American politicians and diplomats have been referring to a diplomatic pivot to Asia. Chinese politicians and diplomats have been talking about the country’s path to peaceful development and rise to political power. The Asian Infrastructure Investment Bank (AIIB) will be an interesting way to test the credibility of these slogans. So what is the AIIB? What might it mean to Australia and the world? And what will it strive to do?

To put it simply, the AIIB will be an institution through which the development of Asia’s infrastructure will be financed. The aim of the bank will be to ensure that such financing will be done in a multilateral way, in Beijing. This is an important idea to consider for it will involve China wielding its political power to influence Asia’s economy and the world’s economy in turn. The bank’s symbolism should not be dismissed for the world will not have seen a China so cosmopolitan and so able to influence international economics since the early Ming dynasty (1368–1644CE). Whether or not the bank succeeds in confirming China’s status as a cosmopolitan power will be a matter for history to decide.

The prospects of the AIIB are best understood in terms of the supposed issues it seeks to address. Many economies in Asia have been strengthening recently and are forecast to continue strengthening. For example, Asia’s Gross Domestic Product (GDP) is expected to grow at a rate of 5.5% this year which is slightly higher than last year. However Asia is a diverse economic region: Japan’s GDP per capita is US$38,634 while Nepal’s is US$694. There are countries with a lot of financial capital, like China, and countries without much financial capital, like Bangladesh. There are countries with great infrastructure, like the Republic of Korea, and countries with poor infrastructure, like Laos. The AIIB’s most basic and important aim is to resolve the region’s mismatch of financial capital and infrastructural development. This task is an important one for Asia because its success will make for a region more prosperous than it is now.

Success in this task will have to involve efficient multilateral diplomacy and, if one thing’s clear, multilateralism is often inefficient. This is one reason why the AIIB strove to be an institution with only few members initially. However in the last weeks of March the founding membership of the bank bloated to 57 countries from an array of cultural and linguistic backgrounds. So large is the bank’s founding membership that there has been talk of there being ten Vice-Presidents of the bank. Some commentators have asked, quite rightly, what language will the bank use. These questions might make for some bureaucratic issues in the AIIB.

China, however, is one country which can handle a large bureaucracy and all the issues associated with it. One must not forget that, between 221BCE and 1911CE, China was governed by a series of dynasties, starting from the Qin and finishing with the Qing. These dynasties were distinguished by their large, efficient bureaucracies. The civil servants had to pass a fiercely transparent and meritocratic examination which was there to test their suitability for work in the administration of government. After knowing this history, there could be little wonder as to why the AIIB has already pledged that its employees will be selected according to such principles.

In saying this, there is one more hurdle over which the AIIB will need to jump in order to meet its aims. The AIIB will have to be better and more efficient than the Asian Development Bank (ADB): a Multilateral Development Bank whose largest stakeholders are Japan and the United States. The ADB’s aim is similar to that of the AIIB’s although its focus is wider. Whereas the AIIB will only fund infrastructure, the ADB funds public and financial administration, healthcare policy and climate-change policy as well. The ADB has also responded to the institution of the AIIB with great ferocity for it has pledged to fund, along with the Japanese government, $US 110 billion worth of infrastructure in Asia over the next five or so years. Whether or not the AIIB proves to be better and more efficient than the ADB will be another matter for history to decide. However it certainly will challenge Asia’s current economic order which has the ADB at the top.

What does all this mean for Australia? After all, Australia is a country in the Asia-Pacific with historical ties to Great Britain, Europe and America, amongst others. However Australia is also a country committed to being an active member of the Asian community in the coming century. The AIIB offers Australia an opportunity to familiarise itself with the political culture of a region in which it lives, yet is still foreign. Australia has grasped this opportunity firmly and it has done so in spite of its allies — namely United States, Japan and Canada — not joining the bank. Although not a founding-member of the AIIB, Australia is the sixth largest stakeholder in it which will present the country with the opportunity to influence the international economic order of the Asia-Pacific. Australia is also a member of the ADB so being a part of two Multilateral Development Banks will give it more influence than being a part of one. For these reasons, the AIIB has already helped Australia mature diplomatically and will likely help the country mature furthermore. In light of this, Australia’s future in the Asian Century is set to be an interesting one.