AFP: China scored a diplomatic coup by enticing almost 50 countries including key US allies to join its new development bank.
But analysts say authoritarian Beijing now faces a daunting task managing a multilateral institution for the first time, with members ranging from the Netherlands to Nepal.
By Tuesday’s deadline to seek founding membership of the $50 billion Asian Infrastructure Investment Bank (AIIB) a total of 49 countries and Taiwan had applied, the finance ministry and governments said.
They include four of the five permanent members of the United Nations Security Council, 18 out of 34 members of the Organisation for Economic Co-operation and Development (OECD) and all 10 members of the Association of Southeast Asian Nations (ASEAN).
Conspicuous by their absence are the United States and Japan.
China already has leading roles in the Shanghai Cooperation Organisation that links it with Russia and Central Asian countries, and the BRICS group of emerging economies which also comprises Brazil, Russia, India and South Africa.
But the AIIB “is on a whole different level”, said Christopher Balding, of Peking University’s HSBC Business School.
“This is a lot more money, this is countries that have a lot more influence and expect to be taken a lot more seriously.”
The signatories include countries closely tied to China such as Kazakhstan and Myanmar, but also some of Washington’s biggest allies - Germany, Britain, France, Italy and Australia.
With democratic and market systems they will have strong views on issues such as the environment, human rights, corruption and efficient lending.
China has basked in the enthusiastic acceptances of its invitations despite US opposition, but the victory could end up a case of “be careful of what you wish for”, Balding added.
“The more countries like this that you bring on board, the tougher it’s going to be for you to control and the more input those people are very reasonably going to expect to have,” he told AFP.
‘Talk softer and carry a large purse’
The Global Times newspaper, affiliated with the ruling Communist Party mouthpiece People’s Daily, acknowledged as much on Wednesday, saying in an editorial: “The more countries and regions join, the harder it will be for us to achieve a consensus in the future.”
Reports said a key part of Beijing’s appeal was a willingness to give up veto power over the bank’s decisions which it said it was not seeking.
ANZ economists said the AIIB could offer “a new approach for Asia’s infrastructure financing”, with “more transparent and well-developed practice and policies from advanced economies”.
But there are enduring concerns over the openness of a bank helmed by China which is led by an authoritarian Communist Party embroiled in endemic corruption and whether Beijing will want to use it to push its own geopolitical and economic interests as a rising great power.
Asia will need vast transport, power and telecommunications networks in coming decades, costing far more than existing multilateral lenders such as the US-led World Bank and the Japan-led Asian Development Bank (ADB) are considered able to deliver.
An ADB study once estimated infrastructure spending demand at $8 trillion between 2010 and 2020.
Under President Xi Jinping China, the world’s second-largest economy, is pushing to build on the ancient Silk Road trade routes on land and sea, a “One Belt, One Road” initiative expected to be part-funded by the AIIB.
“Beijing is clearly pursuing economic statecraft in a big way, centering its foreign policy on the strategy of what I’ve called ‘Talk softer and carry a large purse’,” said Damien Ma, an expert at The Paulson Institute in Washington.
The approach is built around a “grandiose vision of recreating the old Silk Road trading routes to further integrate Eurasia economically”, he said in an email.
“All the newly formed entities, AIIB, Silk Road Fund, BRICS Bank etc, should be viewed as vehicles that will support this ambitious endeavour in one form or another.”
China insists it has no ulterior or selfish motives.
“The AIIB is a mutually beneficial initiative and is a beneficial complement to the existing international economic order,” vice finance minister Shi Yaobin said in a statement, promising it will be built “in an open, transparent and highly-efficient manner.”
The AIIB could erode the role of the World Bank and the ADB. The US and Japan have so far refused to apply, with Tokyo’s Chief Cabinet Secretary Yoshihide Suga saying it remains “dubious” about governance.
US Treasury Secretary Jacob Lew said in Beijing that Washington was still concerned over standards, adding: “The initial decisions of what kinds of projects are invested in will obviously be a very important signal as to how it will proceed.”
Given China’s experience so far, such caution may be warranted.
“The record of Chinese lending to places like Africa and Latin America, let’s just say is chequered at best, whether investing in projects that have either essentially defaulted or are very tenuous,” said Balding, citing a multi-billion-dollar deal for Venezuelan oil in particular.
Ultimately, some say that Beijing recognises the need for a strong Western contribution.
Rajiv Biswas, Asia-Pacific chief economist at IHS, told AFP: “China would be happy to see this input, because they really want the AIIB to be successful.”