Banking on infrastructure of the future

That 57 countries will be founding members of the Asian Infrastructure Investment Bank shows how decisively the global financial map is being redrawn by the economic rise of China, which leads the banking initiative. Indeed, 20 of those members are from outside the region, a statistic held up by Beijing that attests to the stake which countries far and near have in the success of this new, and possibly historic, international venture.

The AIIB's ambit covers nations that are diverse both geographically and economically. Its footprint ranges from Asia and Australasia to West Asia, Europe, Africa and Latin America. From Australia to Austria, from Brunei to Brazil, from India to Iran, and from Singapore to Saudi Arabia, countries have signed up for the founder-members' privilege of setting the bank's rules. This status comes at the price of initially paying up to a fifth of its US$50 billion (S$67.3 billion) authorised capital, which will be raised eventually to US$100 billion. The advantage is to be a part of an enterprise that would benefit from the returns of helping to finance Asia's gigantic infrastructure needs.

In a fit of pique, unfortunately, the United States has distanced itself from the Chinese initiative.

American critics of the AIIB worry about the absence in it of transparent governance standards, and environmental and social safeguards. However, American objections stem also from the new bank's potential to rival the established lenders, the World Bank and the Asian Development Bank, which are dominated by the US and Japan.

Resistance to the AIIB for these reasons is short-sighted, not least because Beijing has declared that it will not wield veto power in the new entity, unlike the World Bank, where the US enjoys a limited veto.

It is notable that China would benefit more if it focused purely on its assertive bilateral economic relations, which protect its national interests. Yet, Beijing has proceeded with its initiative as it is seeking global legitimacy through a bank that seeks to reconcile diverse international interests.

In this context, Washington should not view the AIIB as a threat to an America-centric global financial status quo. Instead, the US and its partners should use the new financial platform to nudge China into playing a more responsible role on the global stage. America's presence in the AIIB would help counterbalance any Chinese attempt to remake the bank in its own image.

The World Bank and the International Monetary Fund are unlikely to fade away with the arrival of the AIIB. What will occur more probably is that the international economic infrastructure will have an added leg to stand on.