How can China emerge as a "responsible stakeholder?" One option would be for China to play a bigger role in the traditional Bretton Woods institutions, but such efforts have had limited success. China now is the world's second-largest economy, but its voting power in the IMF and World Bank is only around 4 percent, compared with 16 percent for the US, and more than 30 percent for Europe.
China's frustration on this front is credited in part with the decision to launch the new Asian Infrastructure Investment Bank (AIIB), to ensure it channels more of its expertise and economic might to nations in Asia starving for infrastructure investment funds.
Shouldn't the world applaud China's desire to shift from a purely bilateral investment framework to a multilateral approach?
The AIIB has just been launched with a capital target of $100 billion. 21 countries gathered in Beijing in late October, signing to become founding members of the bank. Notably absent were the US, Australia, Japan and South Korea.
It is abundantly evident that the current development agencies can address only a small fraction of Asia's infrastructure needs. For example, the Asian Development Bank (ADB) estimated that the Asian nations need $8 trillion in infrastructure investments between 2010 and 2020, amounting to an astounding $800 billion a year. The ADB lends on average less than 2 percent of this amount each year. So nations can only partially meet their needs with internal funds and borrowing.
The AIIB is destined to become a force to be reckoned with. If it is indeed capitalized at $100 billion, it is well on the road to surpass the ADB, which has around $50 billion in capital.
China has already been a force in global infrastructure development, and estimated to be building far more dams in the world than all the development banks combined. China's Finance Minister Lou Jiwei has pointed out that the domestic China Development Bank's commercial infrastructure loans now far exceed those of the World Bank and the ADB combined.
Why not welcome a multilateral institution that will ensure greater transparency and wider participation in those investments?
One of the reasons cited by some nations for not participating is concerns over governance and fears that best international practices in such areas as procurement, environment and social safeguards on lending arrangements will not be adopted.
However, we see China's third plenary session of the 18th Communist Party of China Central Committee outline a robust set of initiatives to strengthen China's own internal banking governance.
Why not then join in to ensure robust capacity building for all of Asia and that such standards are adopted early in the process by member nations?
It is impossible to predict if the AIIB will take its place among the pillars of global development and demonstrate a capacity for effectiveness and transparency. China would do well to bring on board advice from its burgeoning private sector champions, such as Alibaba, who have used technology to develop transparent standards and ways to ensure the most needy can be targeted for loans and support.
Organized properly, the AIIB could inject a healthy dose of competition into the global system and bring on board nations which had only participated in the sidelines.
In fact, President of the World Bank Jim Yong Kim has indicated he welcomes new institutions given that the unmet needs for infrastructure development are so vast. The president of the ADB has also indicated a willingness to collaborate with the AIIB.
The World Bank and IMF played key roles in sustaining and nurturing a global economy left in shambles by a global depression and two global wars. We are now in a new century. Viewed constructively, initiatives such as the AIIB can be great complements to, rather than detractors from, these established institutions.
The world has a strong incentive to cooperate with China on the AIIB. Global growth is lagging and the ability to meet any goals in reducing poverty and hunger requires massive infrastructure investments over the next decade in roads, railways, ports, dams, airports, sewage systems, schools, hospitals, housing and more.
Let's stop fighting and start building. After all, competition for financing infrastructure development that alleviates suffering and empowers communities should be most welcome.
The author is president and CEO of the Asia Society. opinion@globaltimes.com.cn