China-led AIIB as a Gradual Modification of Asian Financial Order

Abstract

Since China declared its plan to create the Asian Infrastructure Investment Bank (AIIB) in 2013, the bank has become the core issue of the heated debate over whether a rising China is challenging or supporting the current U.S.-led international order. Given the importance of the AIIB in the existing economic order and Sino-American relationship both at present times and in the future, this research aims to investigate Chinese intentions and strategies behind the establishment of the AIIB. Particularly, this research asks questions regarding what a rising China wants with the AIIB, what kinds of strategies China has adopted in order to successfully launch the bank, and how the China-led AIIB has influenced the Asian regional financial order. In order to answer these questions, this research first examines the overall context behind the setup of the bank, encompassing motivations and processes. In addition, this paper compares the scale, functions, and institutional design of the AIIB with those of the World Bank and Asian Development Bank, addressing questions with regard to the degree of Chinese influence and role within the AIIB and the depth of the AIIBs commitments to the norms, rules, and principles encapsulated within the international system.

This paper mainly argues that the China-led AIIB can be viewed as a gradual modification of Asian financial order, not wholly status quo nor wholly revisionism. By launching the AIIB in a gradual and careful manner within the established system rather than directly challenging to US primacy, China has increased its influence, weaken U.S. hegemony and take on a leadership role in the Asian financial arena. Chinas strategic approaches to the establishment of the AIIB can be summarized by the following four practices: (1) delegitimizing U.S. primacy by criticizing U.S.-led current global financial governance and calling for democratization of the international economic order, (2) projecting its image as a responsible power with an emphasis on its altruistic motivation and devotion to contribute to Asias growth, (3) revising the core architecture of the AIIB in response to overwhelming concerns and controversies, and (4) making the institutional design of the AIIB similar to and compatible with that of the existing institutions. Adopting the listed practices rather than directly challenging the U.S. hegemonic position and rejecting the deep principle of liberal order, China has tried to carefully modify the Asian financial order within the established system, shifting from US-centered toward a more of China-centered.