Washington must address changing balance of power in Asia

The changing balance of power in Asia has been dramatically highlighted in recent weeks by jostling between the United States and its allies on whether to become founding members of the new Asian Infrastructure Investment Bank (AIIB) proposed by China and to be headquartered in Beijing.

The bank is to have 35 founding members. Britain, Germany and France have decided to join, despite US opposition. So have Australia, Singapore and South Korea, which Washington similarly pressured.

Japan is unlikely to do so, partly because it dominates shareholding in the Asia Development Bank set up in 1966, and faces an acute dilemma as the US’s closest ally in the region.

The new bank will have an initial capital of $50 billion, which can be increased. Washington complains that its governance rules are murky and ambiguous and will be laid down by Beijing. Its spokesman said the UK is constantly accommodating China. But the surge of Asian and European states seeking membership signals that the US has failed to prevent the new bank emerging.

The AIIB will address the need for investment in Asian transport, energy and telecommunications. Its brief also extends to air pollution, water contamination and scarcity, and to land degraded by development. These objectives are widely acknowledged as necessary throughout the region.

They should be put alongside another Chinese initiative, the “New Silk Road”, intended to fund transport infrastructure across the Indian Ocean, Eurasia and the South China Sea. Critics say the $40 billion fund involved will mainly facilitate China exporting its surplus capacity from state-owned cement, steel, shipping and engineering plants and that its authorities are setting more ruthless terms for control and repayments in many states there and throughout the world.

When put together with the repeated refusal of the US Congress to agree on a new voting rights and quotas in the very western-dominated International Monetary Fund, as agreed five years ago by the Group of 20 leading economic countries, this failure to stop allies joining AIIB is a substantial political setback for Washington.

‘Containing China’

Its expressed policy effectively counterposes the options of “accommodating” or “containing” China, leaving little room for “engaging” with its emerging regional and global power. That makes little sense for the Chinese without institutional change. At the World Bank, another of the western-dominated institutions set up after the second World War, China has a mere 3.8 per cent share of voting rights compared to its 16 per cent share of global output.

Should China be treated like an emerging revisionist power, bent on war like Nazi Germany and therefore “contained” or confronted militarily? Or should it be “accommodated” along the lines of this banking politics and diplomacy?

Stark alternatives

These stark alternatives drawn largely from European history are arguably quite inappropriate for contemporary Asia. Its states have to live with China. They are willing to engage with it, not necessarily in a tributary manner but multilaterally – and they want to preserve their relations with the US as well to ensure they can do so.

In these circumstances perhaps the errant partners are not disobedient US allies but a Washington unwilling or incapable of changing the rules to allow China join the existing world order on more equal terms than those laid down in 1945. As an Australian expert on China, Hugh White puts it: “If we treat China like Nazi Germany, then we will indeed end up going to war with it.”

China obviously welcomes support from European states as it negotiates this major transition. Their support and willingness to join the AIIB so as to help shape its rules helps offset US opposition. It will strengthen the Europe-Asia side of the powerful strategic and economic triangle linking Asia, the US and Europe which still dominates much of the world’s economy and politics. This is so notwithstanding China’s intensifying engagements with Asia, Latin America, Africa and Russia to escape being so constrained by its western interlocutors.

Another source of inspiration for the Chinese approach comes from Singapore. The death of Lee Kuan Yew this week removes a significant interpreter of Chinese engagement with the rest of Asia. His authoritarian capitalism influenced Deng Xiaoping’s opening up of China in the 1980s and he was a persistent advocate of Asian engagement with it despite remaining so close to the US as well.

As another influential Singaporean, Kishore Mahbubani writes, China’s extraordinary ability in the geopolitical sphere saw it deciding to share its prosperity with its Asian neighbours. They are not willing to sacrifice that to satisfy Washington’s pride. pegillespie@gmail.com