By Brett Daniel Shehadey
Special Correspondent for In Homeland Security
While all eyes are on the Islamic State, Iran, Russia or Ukraine, some 5,000 miles to the east, China is subtly learning the power of the purse. Beijing is leading the charge in forming a regional development bank of its own that rivals the American-Japanese-led Asian Development Bank (ADB).
Every ADB President has been Japanese; the U.S. and Japan hold the largest shares. The International Monetary Fund (IMF) and the World Bank are also seen by China as a Western operation that runs contrary to its interests.
Theoretically, leading a large development bank gives a state tremendous power, as it influences which states receive loans and what criteria is needed to obtain them. Most importantly, it would be able to withhold loans or broker deals behind the scenes based on financial influence and controls—with threats of punishment or reward—though not on the same level as bilateral financial soft power.
The concern from Tokyo and Washington is the lowering of standards, lack of transparency and an extension of Chinese foreign policy. If successful, this could give Beijing a massive advantage in financial soft power beyond their traditional and national Export-Import Bank.
The deal is not even done and states are signing up. US regional assistant secretary of state Daniel Russel cautioned that the articles of agreement for the new bank have not been made clear: “Every government can make its own decision about whether the way to achieve that goal is by joining before the articles of agreement are clarified or by waiting to see what the evidence looks like as the bank starts to operate.”
The Asian Infrastructure Investment Bank (AIIB) was recently founded with Chinese leadership. During a summit held in Beijing, 20 additional states signed the charter: India, Thailand, Malaysia, Singapore, the Philippines, Pakistan, Bangladesh, Brunei, Cambodia, Kazakhstan, Kuwait, Laos, Myanmar, Mongolia, Nepal, Oman, Qatar, Sri Lanka, Uzbekistan and Vietnam.
In spite of all of Washington’s strong efforts to curb participation in China’s AIIB, it has already grown far beyond the region and expectations. There are another 15 members that have joined, seriously considered joining or agreed to join in 2015. Australia is just re-evaluating its position on the AIIB and potentially will contribute $$3 billion. The others are: the UK, France, Germany, Italy, Luxemburg, South Korea, New Zealand, Saudi Arabia, Tajikistan, Jordan, Malaysia, Maldives, Pakistan, Philippines and Singapore. Thirty-two are already in with more expected, according to the Washington Times.
The project looks like a big success; and right at the same time the U.S. House just passed legislation to increase war fund spending by $38 billion and the White House seeks authorization to use military force against ISIL. The American focus is again on waging wars through military means without political ends. China is learning how it can win wars through non-military means and through the use of political ends.
China, Russia and other ambitious states are taking every advantage they can in order to gain a greater power-share of their respective regional spheres of influence. China has, in the AIIB, created a wedge between the U.S. and its allies (South Korea, Australia, Indonesia and others) that have expressed interest and a desire to join but were initially strongly discouraged. Now the American diplomatic and financial influence is under attack. The AIIB is just one of the latest in highly skillful political strategies engineered by Beijing. Also, the AIIB will only start out as a third of the ADB (under $150 billion) and once the articles of agreement are decided by the members and early infrastructure lending operations commence, the particulars will be observed and scrutinized.
Bottom-line: As the U.S. continues to operate on old rules and struggles to play the part of a declining hegemon, powerful players like China are creating new rules where they can and avoiding the battles they are sure to lose. They will find other means to win political battles that the U.S. is not in a position to win.
If Washington continues to ignore the needed strategic and financial commitments of modern statecraft and instead plays perpetual war games, it will fail to attract and lead any revolution in foreign affairs and other leaders will take states away from the American sphere of influence. What is needed are more strategic diplomacy games, more innovative intelligence, financial, economic, cyber and informational operations on the scale and commitment of theater military operations. These should be liberating, intending to promote reform and cooperation and based on principles of classical liberalism rather than democracy.
Note: China still welcomes the U.S. and Japan to join the AIIB as founding members. Offer expires March 31, 2015.
The opinions and comments stated in the preceding article, and views expressed by any contributor to In Homeland Security, do not represent the views of American Military University, American Public University System, its management or employees.
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