Opinion: U.S. Must Bank on Progress in the Asia-Pacific

Chinese Finance Minister Lou Jiwei (L) speaks during the signing ceremony of the Asian Infrastructure Investment Bank at the Great Hall of the People on October 24, 2014 in Beijing, China. (Takaki Yajima/Getty Images)

The views expressed here are those of the author and do not reflect the views of the Asia Society Policy Institute.

President Barack Obama left China last Wednesday with something of a mixed ledger. In one column, he won a series of pragmatic agreements on issues critical to both sides — high-tech investment, crisis prevention, visa policy, and climate change. In the other, he heard of a series of Chinese announcements that were widely seen as challenging U.S. global leadership.

With China’s rise, this unlikely balance may be the new normal. So what should American leaders do? Encouraging China’s responsible leadership has long been a stated U.S. goal, but so is maintaining America’s global influence. The key is to do just what the President did this week — lead the United States in its own race.

President Xi Jinping of China has been particularly ambitious of late in promoting regional cooperation. During the Asia-Pacific Economic Cooperation (APEC) 2014 summit meetings, China announced plans to advance a Free Trade Area of the Asia Pacific (FTAAP) — a trade agreement among Asian countries — and indicated its commitment to creating a “New Silk Road” with its neighbors by reaching various trade and infrastructure agreements. Meanwhile, talks over an Asian Infrastructure Investment Bank (AIIB) continue.

The United States will be hard pressed to oppose these proposals. The bank, proposed by China a year ago, will address Asia’s need for an estimated $8 trillion in infrastructure projects over the next 10 years. At the launch of the AIIB on October 24 in Beijing, 21 countries were in attendance, including India, Thailand, and Singapore. Some notable countries stayed home, however, including South Korea, Australia, and Indonesia.

Chinese experts have long criticized the Asian Development Bank (ADB) and World Bank, which they say are dominated by the United States and Japan and underrepresent China’s rightful role. Now, the AIIB seeks to give China a greater voice on development issues — and, by extension, on the global stage. With existing institutions lacking the capital to fund the necessary projects in Asia, China is stepping up, pledging to finance over half of the AIIB’s presumed authorized capital of $100 billion.

China is simultaneously promoting the creation of a New Silk Road, which would open trade routes through Central Asia and maritime routes around Southeast and South Asia, better connecting China to growing Asian economies and, through them, to the Middle East and Europe. The plan, still in its infancy, would cut the time needed to transport goods from Central and Western China into Europe from 60 days to around 10 days. China has pledged $40 billion to infrastructure projects to create the New Silk Road and speed the region’s industrial and financial cooperation.

Balancing the economic benefits of China’s investments with its own interest in maintaining leadership in global development efforts has put Washington in a difficult position. After China proposed the AIIB a year ago, U.S. diplomats cautioned that the bank needed to be adjusted, with State Department spokeswoman Jen Psaki saying, “Secretary Kerry has made clear directly to the Chinese… that we ‎welcome the idea of an infrastructure bank for Asia but we strongly urge that it meet international standards of governance and transparency.” Although free trade and deeper investments in Asia are critical, many in the U.S. fear that the AIIB, operating without attention to good governance and transparency, would undermine the progress made by the World Bank and ADB while expanding China’s soft power.

In response to these efforts, the United States is grappling with the implications of China’s rise. Development investments have long projected U.S. political, strategic, and economic influence around the world. With the formal establishment of the AIIB, China would work to promote its own economic and security interests.

On balance, there is little doubt that the new bank could have widespread benefits for Asia’s developing economies. In a statement on the day of the AIIB’s launch, Jim Kim, the President of the World Bank, spoke in support of the AIIB, saying he does not believe it could threaten the World Bank or U.S. interests abroad. Instead, the AIIB could create pressure for the World Bank and ADB to speed up the implementation of reforms and increase lending. By cooperating with and competing against existing institutions like the ADB and World Bank, the AIIB could lead to more efficient and productive lending across the board.

The U.S. has long asked China to take on a greater leadership role in global affairs, and last week China took steps that direction. The real question for the United States is not whether to support these Chinese actions. It is whether the United States and its allies will redouble their investments to help advance the prosperity and security that will strengthen the Asia-Pacific for the 21st century. Maintaining influence in the new Asian order is about what the United States does, not what it opposes. With Obama reaching new trade, environmental, and security agreements with President Xi this week, the United States has made important progress.

About the Author

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Sean O'Connor is an intern with the Asia Society Policy Institute based in Washington, D.C.