US obstructionism blocks much-needed finance reform

It seems that China has gained the upper hand in its competition with the US over the Asian Infrastructure Investment Bank (AIIB). Most G7 members, including the UK, have applied to join the AIIB as founding members. Since China proposed in 2013 to establish a multilateral development bank to boost infrastructure in the Asian region, Washington has been doing all it can to prevent its Asian and European allies from supporting Beijing, which has been an open secret. Now the US has to pay a substantial price in credibility. 

As Fred Bergsten, director emeritus and senior fellow at the Peterson Institute for International Economics, wrote in the Financial Times recently, "The US has correctly urged China to exercise leadership consistent with its expanding power, and to provide more resources to support development and other global goals. When the Chinese move in those directions, as they are doing with the AIIB, it is short-sighted and hypocritical for the US to seek to block them."

Meddling in the AIIB is not the only story that proves Washington's shortsightedness and hypocrisy. As early as 2010, the G20 made a decision to reform the IMF by increasing the quota share and voting power of developing countries in this international financial institution. However, five years later, the US Congress has still refused to approve the IMF reform package. IMF Managing Director Christine Lagarde has criticized the US on many occasions, saying that Washington is like an outsider and the IMF headquarters "may one day shift to Beijing from Washington."

Recently, the US' Western allies including the UK, France and Germany have decided to join the AIIB, offering another severe warning to Washington. Global governance reform is more needed at this critical moment than ever before, but the US has become a block instead of a facilitator. 

It appears at present that only the US has witnessed a steady and robust economic recovery. Europe and Japan are plagued by increasingly grim deflation while emerging economies like China are worried about further economic slowdown. Saudi Arabia is bogged down in a bitter oil price war with the US in a bid to maintain its market share. To many people's dismay, the US elite today are feeling complacent about Washington regaining its superiority, but play down their responsibility to propel global prosperity. Washington will fail to enjoy lasting prosperity if it merely relies on its own development and let the global system decay. 

In contrast, Beijing has been determined to link its destiny with the rest of the world. The Asian Development Bank (ADB) estimated in 2010 that Asia would need $8 trillion for infrastructure construction in the next decade. But the ADB and the World Bank can only provide an annual loan of $60 billion for infrastructure as they attach more importance to poverty alleviation. With a registered capital of $100 billion, the AIIB will effectively complement the ADB and the World Bank.

China is treated unfairly by the international financial mechanisms. Although the second largest economy in the world, China only has 3.81 percent of voting rights in the IMF while the US possesses the largest at 16.75 percent. And as the ADB is dominated by the US and Japan, the repeated requests of many countries including China to increase their stake in the ADB have all been declined. 

Chinese President Xi Jinping has reiterated that the launch of the AIIB means China will assume more international responsibility but will not seek to rewrite international norms. Taking the AIIB as a strategic measure through which Beijing can challenge the existing international financial mechanisms is either utterly groundless rhetoric or ideology-driven slander. 

The Chinese government has obligations to help its enterprises that have advantages in infrastructure to go global. Moreover, with the high criteria set by the AIIB, Chinese firms will explore better approaches in protecting the environment and safeguarding labor rights. 

The AIIB is scheduled to go into operation by the end of 2015. Washington will only bring itself more embarrassment if it continues to set obstacles.