China's latest power play comes at the expense of America

Everything you need to know, in three paragraphs

Chinese currency
(Image credit: (ChinaFotoPress/Getty Images))

"Historians may record March 2015 as the moment when China's checkbook diplomacy came of age," said Paul Taylor and William James at Reuters. Beijing has spent several years trying to persuade Western nations to join its Asian Infrastructure Investment Bank (AIIB), which will soon open its doors and begin handing out billions of dollars in development loans to fund roads, ports, water and sanitation systems, and telecom projects across Asia. The bank will also not so subtly expand China's influence "at the expense of the United States," which has dominated the international economic system since the end of World War II. The Obama administration has pressed allies in Europe and elsewhere to boycott the bank, arguing that it would have less scrupulous lending and environmental standards than rival U.S.-backed institutions like the World Bank and International Monetary Fund. But last week Washington lost the diplomatic "arm-wrestling match," said Gideon Rachman at the Financial Times. In quick succession, the U.K., France, Italy, and Germany all agreed to become founding shareholders of the AIIB, a sign that they are eager to cozy up to Beijing and its $4 trillion in foreign reserves. Once upon a time, "the world was said to bow down before the mighty dollar. These days, even many of America's closest allies have renminbi signs in their eyes."

This is an impressive "soft-power victory for China," said the editors at Bloomberg View, and "Washington largely has itself to blame." The U.S. has long called on China to take more of a role in international financial institutions, "without making room for it to do so." Congress has repeatedly "blocked efforts to dilute U.S. dominance of the World Bank" or give China more influence at the IMF, where Beijing's voting share is just 4 percent versus Washington's 17 percent. Republicans have also shot down President Obama's attempts to increase U.S. funding for the World Bank and IMF, said Charles Kenny at Bloomberg, leaving those institutions "undersize compared with the demands they face." But if the Obama administration can't persuade the GOP to put up the cash needed to underwrite development projects that will save lives and foster global growth, "it should at the very least get out of the way of other countries willing and able to lead."

The U.S. has emerged from this diplomatic debacle looking "churlish and ineffectual," said The Economist. But it "is not wrong to be suspicious of China's motives." The AIIB is designed expressly "to project Chinese power" throughout Asia, and China has a history of providing international loans that are "opaque, careless of environmental concerns, and shot through with dodgy political dealings." But the best way to address such concerns "is to join the bank and improve it from inside, not to throw brickbats from outside." The fact that so many European countries have now signed on also "makes it more likely" that the AIIB's lending standards will be aboveboard. The U.S. still has the opportunity to become one of the bank's founding members. "That would be the best way to accommodate Asia's massive infrastructure plans — to say nothing of a rising China."

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