OFF INTO THE WILD WET YONDER How does this...
Global news feeds this past week or so have been cluttered with stories about the new China-led Asian Infrastructure Investment Bank (AIIB). And in an even more recent turn of events, Western governments have begun falling over themselves to join as non-regional partners.
On March 17, the new infrastructure bank received applications from EU members France, Germany, and Italy. Just days later, Luxembourg, New Zealand, Switzerland, and the United Kingdom all chimed in with “Not without us!” and jumped on board.
The latter was surely a sting felt by the United States—the U.K.’s biggest ally—as it has portrayed itself to be just a little perturbed about the AIIB. The United Kingdom over the past decade or so has been in lockstep with the United States on almost everything. This is especially true with regard to who is friend and who is foe.
Seen as a rival to the U.S.-controlled International Monetary Fund (IMF), World Bank, and Asian Development Bank (ADB), it is no wonder that the United States would rhetorically attack and condemn such an institution. Governments, after all, hate competition.
China’s diplomatic clout has been rapidly growing over the years, especially in Southeast and Central Asia. This continues to cause considerable grief for the U.S. government. Why? Perhaps because China’s relationship with Russia is growing a little too cozy, or maybe the United States doesn’t want to contend with a growing superpower in Asia that it cannot easily control (read as: Japan).
In any event, the U.S.’ relationship with China grows more complex with each passing year, viewing the country as a possible/likely future threat, while at the same time an important economic and strategic partner to a vast majority of U.S. corporations. In addition, China is a huge purchaser of U.S. debt, holding upwards of 20% and making it the largest holder. Without China being one of the U.S.’ major creditors, the U.S. economy would certainly roll off a cliff—and more than likely take the world with it.
That said, China has scaled down its U.S. treasury purchases for a fifth consecutive month, signaling a change in the creditor’s investment model. The tiny island nation of Japan will soon overtake China to become the U.S.’ largest creditor, a significant event that U.S. authorities are no doubt concerned about.
Whether this has any impact on U.S.–China relations remains to be seen. As they say, politics makes for strange bedfellows. But even this is becoming almost too hard to swallow.
Nevertheless, just days after condemning EU powers and the United Kingdom for seeking to join the AIIB, it seems that the United States has blinked and changed course. Dramatically.
In a swift turn of events, the BBC is reporting that the IMF’s Christine Lagarde now believes that there is “massive” room for IMF cooperation with the AIIB on infrastructure financing.
And so this bizarre love triangle between the United States, China, and Russia continues. Where it ends up is a guess at best, but it’s no doubt shaping up to be the defining geopolitical affair of the 21st century.