Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                

(The Political Economy of East Asia) Ming Wan (auth.) - The Asian Infrastructure Investment Bank_ The Construction of Power and the Struggle for the East Asian International Order-Palgrave Macmillan U

Download as pdf or txt
Download as pdf or txt
You are on page 1of 149

The Asian Infrastructure Investment Bank

DOI: 10.1057/9781137593870.0001
The Political Economy of East Asia

Series Editors:
Ming Wan, George Mason University
Natasha Hamilton-Hart, the University of Auckland
Published by Palgrave Macmillan
CHINA ON THE GROUND IN LATIN AMERICA: Challenges for the Chinese and Impacts on
the Region
R. Evan Ellis
THE ASIAN INFRASTRUCTURE INVESTMENT BANK: The Construction of Power and the
Struggle for the East Asian International Order
Ming Wan

DOI: 10.1057/9781137593870.0001
The Asian
Infrastructure
Investment Bank:
The Construction of
Power and the Struggle
for the East Asian
International Order
Ming Wan
Professor, George Mason University, USA

DOI: 10.1057/9781137593870.0001
THE ASIAN INFRASTRUCTURE INVESTMENT BANK
Copyright © Ming Wang, 2016
Softcover reprint of the hardcover 1st edition 2016 978-1-137-59386-3

All rights reserved.


First published in 2016 by
PALGRAVE MACMILLAN®
in the United States—a division of St. Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Where this book is distributed in the UK, Europe and the rest of the world,
this is by Palgrave Macmillan, a division of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills, Basingstoke,
Hampshire RG21 6XS.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.

ISBN: 978-1-137-59387-0 PDF


ISBN: 978-1-349-88791-0

Library of Congress Cataloging-in-Publication Data is available from


the Library of Congress.
A catalogue record of the book is available from the British Library.
First edition: 2016
www.palgrave.com/pivot
doi: 10.1057/9781137593870
To my beloved daughter Annaliese

DOI: 10.1057/9781137593870.0001
Contents
List of Illustrations vii
Preface viii
List of Abbreviations xv

1 Power, Order and Biogeography 1


2 The East Asian International Orders 21
3 The AIIB Tied in a Belt 43
4 The AIIB versus the World Bank and the ADB 58
5 A New Hegemonic Order in Asia? 92

Appendix 106
Select Bibliography 120
Index 129

vi DOI: 10.1057/9781137593870.0001
List of Illustrations
Figures

1.1 Convergent versus divergent historical trajectories 16


2.1 Achievement gaps in the world 23
2.2 Evolving political institutions 26
2.3 Democratic expansion, 1809–2012 34
5.1 Power distribution among the Big Five,
1960–2014 100
5.2 Power distribution among the Big Five,
1980–2014 100
5.3 Big Five military expenditure, 1988–2014 101

Maps

2.1 Distribution of freedom in the world 35


2.2 Freedom versus economic development in
the world 37
4.1 ADB membership in 1966 versus AIIB
membership in 2015 77
4.2 ADB membership versus AIIB membership
in 2015 78

Tables

2.1 Systematics of political regimes 29


3.1 The ADB membership versus the AIIB
membership 45
4.1 The AIIB versus the IBRD and the ADB 81

DOI: 10.1057/9781137593870.0002 vii


Preface
The Chinese government’s sudden proposal for establish-
ing the Asian Infrastructure Investment Bank (AIIB) has
garnered worldwide attention from the media. There have
been many dramatic news stories in the past two years.
These include the Islamic State advance in the Middle East
and beyond, Russia’s annexation of Crimea and continuous
conflict in eastern Ukraine, the United States-led compre-
hensive agreement on the Iranian nuclear program, the
Ebola outbreak in West Africa and the electoral victory of
a left-wing party Syriza in Greece that has posed a major
challenge for the European Union. When viewed in this
context, a $50–100 billion proposal for a development
bank does not appear to be that significant.
One of the primary reasons the AIIB has attracted so
much attention is that officials and commentators view it
as a sign that China, as a rising power, is making signifi-
cant progress in establishing a new hegemonic order in
East Asia. They perceive that Beijing-led multilateral insti-
tutions such as the AIIB are mechanisms for the creation
and entrenchment of this order. The United States – the
reigning world leader – has declined or made major policy
blunders that will further facilitate this trend. The validity
of these notions is very difficult to ascertain. The basic
facts about the AIIB itself are not complicated. Yet we see
many diverse interpretations.
I wanted to write this book because it gives me an oppor-
tunity to reexamine our very conceptual basis for foreign
policy analysis. As an international relations scholar who
has researched, taught and talked about international

viii DOI: 10.1057/9781137593870.0003


Preface ix

political economy issues, particularly when they are relevant to East


Asia, I have already felt that a new framework is needed. I am also inter-
ested in the AIIB because this topic provides important empirical clues
to the emerging struggle for the East Asian international order, an area
of expertise and interest for me.
The AIIB debate goes to the heart of international relations, namely the
very nature of political power, international rules and the relationship
between global finance and sovereign states. Power is a notoriously diffi-
cult concept. It is easy to observe and understand but difficult to meas-
ure and predict. It is also fascinating to observe ourselves as observers of
international politics. We are often surprised by new developments but
are quick to resign to the new power realities.
The AIIB issue is intimately linked to most other events happening
in the world. Take the Washington Post’s one-day coverage on 10 May
2015, for example: the paper had a two-page plus headline story on how
the US government has been struggling to counter the sophisticated
social media propaganda from the Islamic State of Iraq and the Levant
(ISIL).1 With all its military, financial and technological power, the
United States has yet to win war on terror. This raises a fundamental
question about power (how powerful is the United States?) and power
calculations (why would anyone challenge a country with preponderant
power?). It also explains partly China’s strategic success in recent years:
the United States is preoccupied in the Middle East despite its effort to
rebalance to the Asia-Pacific. The next prominent story was about the
general election in the United Kingdom three days earlier, which gave
the ruling conservative party a surprising victory. The story analyzed
the possibility of the United Kingdom becoming ‘Little England’ after
losing Scotland and leaving the European Union. This would weaken its
role as a crucial strategic ally for the United States.2 The United Kingdom
had already done some ‘damage’ to the United States when it became the
first Group of Seven (G-7) country to join the AIIB despite US oppos-
ition. The paper carried a story on page A6 about the massive military
parade staged by Russian President Putin to mark the 70th anniversary
of victory over Nazi Germany. Unlike the previous two occasions, the
United States and its Western allies chose not to attend the ceremony
because of Russian annexation of Crimea. Chinese President Xi Jinping
was the main guest of honor.3 The tensions with the West have moved
Russia closer to China. Russia is a founding member of the AIIB and
has expressed support for Xi’s vision of the ‘New Silk Road’. In a smaller

DOI: 10.1057/9781137593870.0003
x Preface

news story in the Politics and the Nation section, President Obama
called Sen. Elizabeth Warren was ‘absolutely wrong’ about the Trans-
Pacific Partnership (TPP) Agreement under negotiation. Warren was
opposed to the TPP and viewed it as ‘an overlooked threat to the safety
of our financial markets’.4 The US government has framed the TPP as all
about making sure the United States rather than China write rules for
Asia. The TPP that excludes China was a reason for Beijing to create its
own institutions such as the AIIB, which in turn puts pressure on the US
government and the Japanese government to conclude the TPP.
I have summarized only a few stories relevant to the AIIB in a single
major newspaper’s one-day coverage. How should we handle the massive
information we are bombarded with every second then? One solution is
to utilize the computing power we now possess. In fact, there was a long
story in the same edition of the Washington Post about the big data we
now have about consumer lifestyles thanks to the proliferation of wear-
able devices.5 We political scientists are not in that stage yet. Even more
important, we need to tell computers the algorithms to make calcula-
tions unless we utilize artificial intelligence. Knowing is not the same as
problem solving, as recognized by the lead character cited in the news
story.
We may also rely on our own brains and experiences to process infor-
mation and reach conclusions. We are hardwired to see patterns, but are
influenced by implicit or explicit theories about the world we observe.
Are these theories useful or accurate? As a reminder of the limitation
of political science theory, the Washington Post noted that opinion polls
before the British election had all predicted a different outcome for the
British election, revealing that the preelection assumptions had been
wrong.6 Studies of electoral politics in the United States and other
advanced democracies are arguably the most sophisticated political
science research in the discipline.
I have adopted an evolutionary approach in this book in order to
analyze the development around the AIIB. Power should be understood
as a duality on at least two dimensions. First, power should be understood
as both the ends and the means. How much one wants power and how
one uses power is observable. However, the variation in choices relates
to the inherent competitive nature of the environment one is in. And
one’s own behavior contributes to how competitive that environment
becomes. Second, power practiced and power observed can be different.
Put together, one needs to be comfortable with the notion that an actor

DOI: 10.1057/9781137593870.0003
Preface xi

may be powerful and not powerful simultaneously. An actor is powerful


when it seeks to expand its power or when it has power to implement
its policy. It is not powerful when it is passive, when its goal to expand
power does little to affect the environment or when it has limited power
to implement its policy goals.
Viewing power as ecological in nature, I define power also as the
impact on the environment and other actors. An actor is powerful if it
has an ecological fitness, or the range of activities, between its capacity
and its environment. Thus, when measuring power, besides the usual
methods of counting power assets or gauging influence by one actor over
another, we should also measure ecological fitness to reveal the competi-
tiveness of the environment and where a particular action fits. I will also
measure how natural one’s power is judging from its past behavior.
Power is socially constructed. And different from nature, much of
what has happened in the human world and increasingly natural world
has resulted from artificial selection. We can study empirically how
power is tried or not tried and how actors can establish power or fail to
establish power.
To apply my theoretical approach to the AIIB case, the Chinese govern-
ment has made a major power move and has realized its initial goal of
founding a China-led international organization. China’s power is thus
reflected in its ability to marshal resources for its confidently declared
objectives. China’s move was stronger than before but in a more competi-
tive environment. China’s AIIB project is a good fit for the global financial
system. It has historically been the case that a hegemon builds institutions
after establishing overall dominance rather than the other way around.
And China’s construction of the AIIB is not yet a radical departure from
the existing international order. The AIIB has generated so much curi-
osity mainly because it appears to show that the United States no longer
commands the respect of friends or fear of foes. Moreover, one may view
the AIIB as an integral part of a larger Chinese strategy. These perceptions
matter at this sensitive historical moment when balance of power seems
to be shifting away from the status quo hegemon.
What surprised me while writing this book is that I started by dismiss-
ing the alarming comments on the AIIB as hyperbole but came to view
the AIIB as indeed historically significant. However, I did so for reasons
different from those advanced by most analysts and commentators. The
AIIB is likely to be successful and compatible with the international
norms. Yet it does partially draw from a different institutional lineage/

DOI: 10.1057/9781137593870.0003
xii Preface

historical root/national system of political economy. China’s greater


success will constitute a partial change of the existing international order
whatever the Chinese intentions. It is also conceivable that the grafting
of Western-originated institutions into the Chinese tree may change
China as well. If there is a concerted effort by the West to stifle the AIIB
(which is fortunately not the case yet), the result could be Chinese insti-
tutional initiatives less influenced and less connected with the Western
ones, which would be damaging for both.
The Chinese government is constructing its power, which reveals a
process of social reality construction. While one might have been taken
back by the boldness of the Chinese initiative initially, it is striking
how quickly the international community came to accept the fact that
the Chinese government would get the bank and differ only over the
significance of this development. The social fact that China is entitled
to have a development bank under its dominance is being established.
What appeared to be a novel idea stopped being so quickly. The
Chinese determination and speed in pursuing its goals has contributed
to their success. It is equally important that the Chinese initiative has
resulted from its past foreign policy actions and interactions with the
international community. After all, they have established themselves
as cost-effective infrastructure constructors. They also have cash and a
ready workforce to meet the demands of the developing world not fully
met by the existing development institutions. The AIIB already contains
familiar features to the West and developing nations. It should be more
so with more member states operating in it.
More broadly, while it is difficult to predict what China will do at a
particular point in the future, how it has conducted itself is largely
consistent with its institutional trajectory in recent decades. Put simply,
China is doing what comes naturally to it. It is largely viewed as such by
others whether they like what the Chinese are doing or not.
This book makes a particular contribution to the literature of East
Asian international studies by explaining how the Chinese government
goes about building an international institution at a critical historical
juncture despite negative United States reaction. International order
does not spring into existence automatically. Rather, political players
build them using material and ideational resources at their disposal,
often ignorant of potential consequences. Moreover, the AIIB drama
reflects the fundamental characteristics of the competing major national
systems in the world.

DOI: 10.1057/9781137593870.0003
Preface xiii

I have written, taught or talked about the issues relevant for under-
standing the AIIB phenomenon. These issues include international
relations theory on power and order, the history of East Asian inter-
national orders, the American hegemony and postwar global economic
institutions, the Asian Development Bank (ADB) and Japan’s use of its
rising economic and financial power, China’s development model that
has gone global and Chinese president Xi Jinping’s ambitious policy
agenda. The AIIB is a fascinating case for research. Thus, a detailed study
should provide a necessary corrective to our conventional understand-
ing of international order, East Asian international relations and Chinese
foreign policy.
The book has five chapters. The first chapter examines the theor-
ies of power and international order. The next chapter illustrates what
seems common and peculiar about the East Asian international orders.
Chapter 3 studies how the Chinese have been constructing the AIIB and
sets the AIIB in the Chinese domestic context. Chapter 4 compares the
AIIB with the World Bank and the ADB. The last chapter analyzes the
AIIB factor in the struggle for hegemony in East Asia.
I want to thank Sara Doskow, Natasha Hamilton-Hart and an
anonymous reviewer for their support and useful comments on the
proposal. Jihye Lim provided able assistance for research that went into
the sections on ‘the branching of the political institutions in the world’
and ‘halting expansion of democracy’ in Chapter 2. She brilliantly made
the four maps used in the book. I also want to thank Erica Seng-White
for her excellent editorial assistance.
Figure 2.1 came from my previous publication: Wan, M. (2013) ‘Back
to Nature: An Achievement-Based Structural Assessment of the Modern
International System’, The Chinese Journal of International Politics, 6 (4),
401–428.
I spent the summer of 2015 working on the book manuscript, which
took me away from some family activities. My family’s support continues
to be central to my research and academic career.

Notes
1 G. Miller and S. Higham (2015) ‘US Struggles to Degrade Terrorists via
Twitter’, The Washington Post, 10 May, A1.

DOI: 10.1057/9781137593870.0003
xiv Preface

2 G. Witte and D. Balz (2015) ‘Britain Faces Crucial Choices’, The Washington
Post, 10 May, A1.
3 M. Birnbaum (2015) ‘Putin Mixes Pomp with Politics in Victory Parade
Snubbed by West’, The Washington Post, 10 May, A6.
4 Cited in G. Jaffe (2015) ‘Warren Is “Absolutely Wrong” on Trade Deal, Obama
Says’, The Washington Post, 10 May, A3.
5 A.E. Cha (2015) ‘The Human Upgrade: The Revolution Will Be Digitized’, The
Washington Post, 10 May, A1.
6 D. Balz (2015) ‘British Voters Shattered Pre-Election Assumptions’, The
Washington Post, 10 May, A2.

DOI: 10.1057/9781137593870.0003
List of Abbreviations
ADB Asian Development Bank
AfDB African Development Bank
AIIB Asian Infrastructure Investment Bank
CCIEE China Center for International Economic
Exchanges
CPEC China-Pakistan Economic Corridor
ECAFE Economic Commission for Asia and the Far
East of the United Nations
FTAAP Free Trade Area of Asia Pacific
G-7 Group of Seven
IBRD International Bank for Reconstruction and
Development
IDA International Development Association
IDB Inter-American Development Bank
IMF International Monetary Fund
ISIL Islamic State of Iraq and the Levant
ODA official development assistance
OPEC Organization of Petroleum Exporting Countries
PPP purchasing power parity
RTAA Reciprocal Trade Agreements Act
TPP Trans-Pacific Partnership Agreement

DOI: 10.1057/9781137593870.0004 xv
1
Power, Order and Biogeography
Abstract: Wan examines the theories of power and
international order, the relationship between global
finance and sovereign states and a broader scientific field
of biogeography. The AIIB is a power move by a rising
great power vis-à-vis the status quo superpower. Wan
provides an alternative but unified framework to analyze
power. Logically and empirically, power can be both goal
and means. He follows a biogeographical approach that
emphasizes evolving processes rather than simply action
and reaction in a mechanical fashion. Evolution exerts
pressure on the content and intensity of power. He also
argues that power is both intrinsic and observer-relative.
Power is partially a social construction. We should
focus on what seems to come ‘natural’ for the players in
international relations.

Keywords: AIIB; biogeography; global finance; order;


power; social construction

Wan, Ming. The Asian Infrastructure Investment Bank:


The Construction of Power and the Struggle for the
East Asian International Order. New York: Palgrave
Macmillan, 2016. doi: 10.1057/9781137593870.0005.

DOI: 10.1057/9781137593870.0005 1
2 The Asian Infrastructure Investment Bank

Why should anyone care whether China or any country wants to take
a leading role in helping other countries construct highways, ports or
power plants? Before I answer that question, I simply want to point out
that people do care, which is why I am writing this book. Whether they
should, we know that political actors care about power and influence
associated with development finance. Thus, we need to understand the
concept of power and preferred international order based on both power
and larger purposes.
This chapter provides what I think is an appropriate analytical frame-
work for the AIIB. The AIIB is necessarily unique but we need to under-
stand what the underlying forces driving it are, which should also be
applicable for looking at other international relations issues. I have writ-
ten this book because I want to make a larger point based on my critique
of the prevailing approaches to international relations. But because this
is a fast book, I will not engage in theoretical discussion in great detail.
Rather, I will adopt a need-based approach.
The chapter examines the concept of power, the theory of international
order, the relationship between the global financial market and the
sovereign state, and briefly a broader scientific field of biogeography. The
US-China rivalry is fundamentally about the rules of the game for Asia.
The theory of international order thus provides an appropriate analytical
framework.

The dual nature of political power


The AIIB has garnered so much attention because it is viewed as a power
move by a rising great power vis-à-vis the status quo superpower. Is there
a real power dynamic involved here? To answer this question, we need to
understand better what power really is.
Power is arguably the foundational concept of Political Science (PS)
and International Relations (IR). But as Philippe Schmitter has rightly
pointed out, much of current research in International Political Economy
(IPE) focuses on voluntary exchange of information, aggregation of indi-
vidual preferences and rational design of institutions, neglecting power
as the micro-foundation that differentiates PS from other disciplines.1
IPE scholars have neglected power partly because it is notoriously
difficult to define and measure, unlike market transactions. Mainstream
IR scholars have gone through three stages of conceptualizing power.

DOI: 10.1057/9781137593870.0005
Power, Order and Biogeography 3

In what some scholars call the prescience stage, power was understood
intuitively as it had been since before history. In the second stage, coin-
ciding with the behavioral revolution in Political Science some scholars
began to emphasize a precise definition and measure of power as an
analytical concept starting around 1950. A backlash emerged later due to
an assessment of limited progress made. Some would point out that we
should not treat power as atomistic.2 What is a valid indicator of power
in one period time may not be so in other periods. In the third stage,
rational choice has gained increasing influence in the discipline but
power is less emphasized in that framework.
Scholars have come to understand various aspects of power. We know,
for example, that power has different dimensions. Power assets may not
translate into actual influence. What is power in one area may not be
fungible in another. And we need to understand intention as well as
capacity.3 Fully aware of all these conceptual and measurement chal-
lenges, most IR scholars now adopt a pragmatic approach to power.4
In the following paragraphs, I will seek to provide an alternative but
unified framework to analyze power. To do so, I will go back to the early
studies of power when IR was emerging as a discipline in the United
States. Students who have studied IR theory should know the apparent
logical deficiency in Hans Morgenthau’s conceptualization of power.
Morgenthau, who aimed at making IR a scientific field, defined national
interest in terms of power.5 Power is a relationship or more precisely
‘man’s control over the minds and actions of other men’.6 I learned early
on in graduate school that Morgenthau had supposedly erred by confus-
ing power as end with power as means. Put simply, power cannot be
both goal and instrument.
Yet my research and observation for the past two decades has led me
to the conclusion that Morgenthau’s duality is intuitively more useful
than the later conceptualizations of power. Logically and empirically,
power can be both goal and means. Since power is highly desirable and
necessary, it makes sense that countries would want power. An analogy
is people pursuing wealth that can be used for achieving other objectives.
I am not concerned about the supposedly tautological problem. Power
pursued and power exercised are often not the same and they occur
at different points in time. More importantly, I follow an evolutionary
approach, which means that I use constitutive causality rather than linear
causality. Linear causality matches variation in the independent variable
and the dependent variable. However, from a biological perspective,

DOI: 10.1057/9781137593870.0005
4 The Asian Infrastructure Investment Bank

international relations are a ‘living thing’ and our attention should be


paid to evolving processes as well as internal changes rather than simply
action and reaction in a mechanical fashion.7 Empirically, we know that
countries pursue power as national goal, which has certainly been the
case in Northeast Asia.
Scholars who emphasize power typically follow the realist approach.
Realists have recognized the balance of power as a principal mechan-
ism in international relations. There are also other mechanisms such
as balance of threat and bandwagoning. Yet an evolutionary approach
offers a wide variety of types of relationships. Scientists have identified
the following cooperative or competitive interactions between popula-
tions within an ecosystem: protocooperation, mutualism, commensal-
ism, competition, amensalism and predation. Protocooperation refers
to nonobligatory mutual gains between two populations. Mutualism
is obligatory mutual gains. Commensalism means that one population
gains while the other population is unaffected. Competition refers
to an interaction that impedes one another. Amensalism means one
population is impeded and the other not. Predation happens when one
population kills and eats the other. To minimize competition, popula-
tions may diversify or partition energy requirements and evolve to avoid
direct competition. Spatial competition also allows good-dispersers-but
bad competitors to coexist with bad-dispersers-but good competitors by
spreading first into unoccupied territories.8
There should be more types of interaction in the human world.
However, we should then immediately see a potential problem of exces-
sive complexity. Indeed, Michael Mann maintains that ‘Human beings
are restless, purposive, and rational, striving to increase their enjoy-
ment of the good things of life and capable of choosing and pursuing
appropriate means for doing so. These human characteristics . . . are the
original source of power’.9 The more I think about international relations
the more I agree with Mann’s assertion. However, I differ from Mann
in whether a general theory may be achieved. Mann reasons that ‘goal-
oriented people form a multiplicity of social relationships too complex
for any general theory’.10 Rational choice scholars certainly would argue
that they have a scientific theory based on the very fact that humans
are goal-oriented. I adopt an evolutionary approach, which is a proven
scientific way of thinking about the living world.
Mann himself rejects evolution as an appropriate approach to studying
societies. His objection comes mainly from the conviction that societies

DOI: 10.1057/9781137593870.0005
Power, Order and Biogeography 5

do not necessarily develop into a higher form.11 However, evolution is


not meant to be teleological, as Charles Darwin and others have made it
clear. As philosopher John Searle has pointed out, ‘one of Darwin’s great-
est achievement was to drive teleology out of the account of the origin of
species’.12 Indeed, evolution may lead to ‘lower forms’ that fit better in a
given ecosystem. Mann also observes that although we can apply evolu-
tion to the Neolithic Revolution, the theory has become irrelevant once
our ancestors could no longer evade from power the way prehistorical
hunters and gathers with loose social ties supposedly could.13 I maintain
that logically one can turn Mann’s argument on its head and suggest that
power accelerates evolution. Whether evolution still applies to our soci-
eties is also an empirical question.
Pure balance of power is rare. Other relationships are more prominent
through a longer historical lens. As a case in point, a most interesting
relationship is that of symbiosis between different players located in
different ecological niches. After an exhaustive study of early empires
throughout the world, Mann offered a general pattern: ‘[a] regionally
dominant, institution-building, developing power also upgrades the
power capacities of its neighbors, who learn its power techniques but
adapt them to their different social and geographical circumstances’.14
The nomadic empires needed successful pedantic empires to grow and
succeed because of their need for resource extraction.15 In modern times,
nations feed off hegemons to become successful, and rebellions are a
constant prominent feature in international relations.
Evolutionary notions such as competition and adaptation have already
been used to do the causal work for most mainstream IR theories.
Kenneth Waltz’s neorealism requires an evolutionary selective mechan-
ism, as pointed out by Robert Keohane.16 According to Waltz, structures
work their effects through socialization and competition by which ‘the
variety of behaviors and outcomes is reduced’. Waltz argues that ‘where
selection according to consequences rules, patterns emerge and endure’.17
Put simply, actors need to adapt for a structural imperative to be rele-
vant. And power evolves, particularly in terms of content and intensity,
due to systemic competition. I argue that we should make explicit the
underlying evolutionary logic.
Evolution exerts pressure on the content and intensity of power. Power
is always countered. Any reaction should be viewed as equivalent to the
action that triggers such reaction despite the apparent asymmetry of
material resources. The balance should be viewed broadly along several

DOI: 10.1057/9781137593870.0005
6 The Asian Infrastructure Investment Bank

dimensions such as time horizon and social dimensions. Countries


adopt adaptive response to power, not so much power balancing or
bandwagoning.
One of Darwin’s key contributions is natural selection. In the human
world, artificial selection is most often at work. That does not prevent an
evolutionary explanation. Darwin himself started his book On the Origin
of Species with discussion of artificial selection. As evolutionary scholar
Jerry Coyne maintains, the only difference between artificial and natural
selection is that ‘in artificial selection it is the breeder rather than nature
who sorts out which variants are “good” and “bad” ’.18 Artificial selection
may well accelerate evolutionary pressure. Artificial selection relates
directly to the fact that the world is what we make of it. Evolutionary
pressure determines how fast evolution takes place. A key feature of
international relations is the escalation of evolution over time.
Constructivism has become influential in the IR field in recent decades
because it makes sense.19 As will be discussed in the following pages,
constructivism relates to the English School of International Relations
that focus on international order. Moreover, as my discussion shows, I
do believe that the world is what we make of it. However, most construc-
tivists reject science as appropriate for studies of human society. That is
where I differ.
Artificial selection bears resemblance to social construction. John
Searle’s theory of construction of social reality is helpful for us to under-
stand how we build new institutional facts with both material and social
forces. Rather than engaging in a detailed abstract discussion of a phil-
osopher’s arguments in a fast book, I will introduce what I think is most
relevant from Searle’s insight framed around the AIIB phenomenon.
Searle’s central question is ‘how can there be an objective world of money,
property, marriage, governments . . . [or international organizations such
as the AIIB] in a world that consists entirely of physical particles in fields
of force, and in which some of these particles are organized into systems
that are conscious biological beasts, such as ourselves?’ Put simply, ‘how
do we construct an objective social reality?’.20 In order to explain how
this works, he first makes a ‘fundamental distinction . . . between those
features of the world that exist independently of us and those that are
dependent on us for their existence’ or between ‘intrinsic and observer-
related features’ of the world.21 The AIIB, once formed, should have some
intrinsic features such as the physical presence, size of authorized capital
and loans as well as observer-relative features such as being a policy

DOI: 10.1057/9781137593870.0005
Power, Order and Biogeography 7

instrument of the Chinese government, which can be epistemically


objective.
Searle’s distinction between intrinsic and observer-relative properties
has also shaped the second duality of power emphasized in this book,
namely, that power is both intrinsic and observer-relative. Power has
to have intrinsic properties that are independent of what we think. For
example, US power includes nuclear weapons and air carriers that have
a physical presence. At the same time, American hegemony is a social
construction. My hypothesis is that power takes on more of an observer-
relative nature during a transition period when people rethink and
recalibrate.
More concretely, social reality is constructed with the assignment
of function, collective intentionality and constitutive rules. First, we
impose function on a naturally occurring or created object. The AIIB is
created to serve one or several functions that are always observer-rela-
tive. Collective intentionality does not have to be reduced to individual
intentionality. Social facts involve collective intentionality, and human
institutions are a subset of social facts. Constitutive rules do not just
regulate activities but create the possibility for activities, in the form of
‘X counts as Y’ or ‘X counts as Y in context C’.22 Searle’s explanation lies
mainly in the constitutive rules of human institutions even though the
human agents may be typically unconscious of the rules, emphasizing
what he calls ‘background’ nonintentional or preintentional capacities to
cope with a complex world.
I emphasize more than Searle the permeation of power in the three
elements to account for social reality: assignment of function, collective
intentionality and constitutive rules. I will examine the power element
in all these elements. As one should immediately see, the power element
has to vary in these three elements of social reality.
When it comes to studies of international organizations such as the
AIIB, liberal institutionalism is the approach that has committed most
energy to its research agenda. The AIIB is an international organization. I
endorse the basic arguments by liberal institutionalists that international
organizations facilitate international cooperation by providing informa-
tion, reducing transaction costs and allowing a longer-term perspec-
tive.23 I am intellectually more comfortable with the earliest studies on
international regimes.24 Later IPE work on international institutions is
heavily influenced by new institutionalism, which marginalizes power
in favor of market transaction analogy. To be exact, current IPE research

DOI: 10.1057/9781137593870.0005
8 The Asian Infrastructure Investment Bank

on international organizations falls into either ‘credible commitment’


or ‘rational design’.25 By contrast, I am interested in the power question
related to the AIIB in this book. In particular, I want to examine how
rising powers affect institutional landscapes, with a focus on East Asia.
It is also important to realize that cooperation is far more complex than
most IPE scholars have acknowledged in their work. For example, Mann
devoted a whole chapter of his books on sources of social power to ‘the
dialectics of compulsory cooperation’.26 Mann has specific meaning for
‘compulsory cooperation’, but if we just use that phrase as it sounds, we
can see its application in the contemporary world.27 European integra-
tion was the early intellectual inspiration for studies of international
cooperation. But the 13 July 2015 EU bailout deal with Greece was not a
shining example of cooperation. Greece was coerced into an agreement
not supported by its citizens. Thus, it is more important to understand
how cooperation factors in the larger political ecology than simply how
much occurs.
How do we calculate power? I do not believe that we should be
obsessed with finding a universal, all-time and all-purpose measure of
power. That is not logically possible given the twin-duality of power
discussed earlier. It is certainly not possible for this book. Rather, we
should seek a formula that is more appropriate for a particular time and
a particular location.
One way to do this is to simply have four imagined computer screens
in front of us, similar to the workstation of a broker. The screens include
power as goal, power as instrument, power as intrinsic and power as
observer-relative. There are surely relationships between them and one
may indeed come up with algorithms to create a unified model relying
on computer power. Yet one should keep in mind that any algorithm is
necessarily based on past patterns. Consistent with evolutionary under-
standing of prediction, what we hope for and may find are laws that can
be experimented with or tested with, but we cannot predict future evolu-
tion because of the presence of random factors.
Even without a supercomputer, humans have been able to make diffi-
cult decisions. That is because our brains are far more powerful than the
best available artificial intelligence algorithms. Brain activities involve
sophisticated and intelligent calculations that artificial intelligence
researchers have yet to emulate. What is simple for a computer is often
difficult for a human and what is simple for a human is often difficult for
a computer. I would not be surprised that the brain situates calculations

DOI: 10.1057/9781137593870.0005
Power, Order and Biogeography 9

like 1+1=2 in a multidimensioned context. Moreover, we are socially


wired to handle complex social reality. As Searle observes, ‘the complex
structure of social reality is . . . weightless and invisible’. Complex social
realty seems simple for us because ‘social reality is created by us for
our purposes and seems as readily intelligible to us as those purposes
themselves’.28
I suggest that we focus on what seems to come ‘natural’ for the play-
ers in international relations. Recognition of being natural results from
our observation of the past patterns. Things do not have to happen in a
particular way. Thus, much of the intellectual energy poured into elimin-
ating all possible alternatives to prove that only what actually happened
could have happened without any doubt is futile.

Power and international order

The AIIB has rightly been framed as about international order. Hedley
Bull’s conceptualization of international order has had a profound
influence on IR scholars. Bull defines international order as ‘a pattern
of activity that sustains the elementary of primary goals of the soci-
ety of states, or international society’.29 Bull is viewed as a founding
member of the so-called English School of International Relations.30 The
English School of International Relations has also developed its distinct
branch of International Political Economy compared to their American
counterpart.31
The English School or British School of IR/IPE typically adheres to
reductionist, interpretative and qualitative methods. This school of
thought pays particular attention to institutions and history. In contrast
to the American School, the English School values social contexts more
and scientific methods less.32 Similar to the English School, I will provide
a discussion of the East Asian international orders in the pages that
follow as the historical and social context of current East Asian inter-
national relations and the AIIB.
Power is important in English School scholarship. Bull discussed the
relationship between balance of power and international order. A particu-
larly influential English School IPE scholar Susan Strange highlighted the
connection between power and a reserve currency in her groundbreak-
ing book Sterling and British Policy.33 As will be discussed later, China’s
AIIB initiative is connected with its yuan internationalization agenda.

DOI: 10.1057/9781137593870.0005
10 The Asian Infrastructure Investment Bank

One can imagine a title like Yuan and Chinese Policy, following a similar
approach to great effect.
I differ from the English School mainly in believing that IR should
be a scientific discipline.34 After all, I follow an evolutionary approach. I
assume that international order and what is composed of it continues to
evolve, following scientific principles if not scientific laws.

Global finance and the sovereign state system

The AIIB is meant to be an intergovernmental financial institution.


Thus, to understand the AIIB, one needs to have some theoretical under-
standing of the interaction between global finance and sovereign states.
Financial markets emerged since before the modern sovereign states and
then have coevolved powerfully. Intergovernmental institutions have
largely been a phenomenon since the end of World War II. There is a
debate over the nature and extent of financial globalization,35 but there is
no question that the global financial market now has an overwhelming
presence, posing both challenges and opportunities for the sovereign
states. In a well-known dilemma called ‘the impossible trinity’, one can
only at most two of the three objectives. These include capital mobility,
monetary policy autonomy and exchange rate stability.36 For example, if
one wants to benefit from the global financial market, one will need to
liberalize capital control. This means that one would lose policy auton-
omy to some extent. If one wants to raise interest rate to fight inflation,
that hike would lead to inflow of capital, defeating the original purpose
of reducing the monetary supply.
Does that mean the state has diminished? Another way to ask about
this is whether state power still matters. As discussed earlier, Susan
Strange saw the importance of power in the British currency policy.
From the American school, Stephen Krasner studied the power under-
lying and within international economic institutions.37 More recently,
Lloyd Gruber has discussed how the West-led international institutions
have put pressure on other countries.38 All these discussions are relevant
for understanding the AIIB. I agree that the state has not diminished.
Rather, the successful ones have adapted to the new global financial real-
ities and continue to exert influence. The Chinese state has certainly not
diminished. Consistent with my theorization of power, the Chinese state
is both powerful and weak in the global financial market.

DOI: 10.1057/9781137593870.0005
Power, Order and Biogeography 11

Another question is whether the states in the world have converged


due to the financial market pressure. Robert Gilpin, a founding member
of the IPE field in America, spent considerable time discussing the
different national systems of political economy.39 Gilpin’s theorization
of the national systems of political economy has had a strong influence
on my research and teaching about East Asia and China. Gilpin actu-
ally explored the possibility of using an evolutionary approach to study
the national systems but concluded that evolution was not a satisfactory
approach for this topic.40 I differ in that regard.
Going beyond the national systems, Peter Katzenstein has argued that
regional orders remain at the center of world politics. To be exact, the
contemporary international system can be characterized as an American
imperium supported by key American allies in Europe and Asia, with
regional orders established consistent with the nature of domestic
institutions in the two regions, law in Europe and ethnic capitalism in
Asia.41 The immediate implication of Katzenstein’s arguments is that one
can see why the United States would be concerned about the AIIB: any
challenge to the East Asian regional order would potentially comprom-
ise its global imperium. At the same time, one can infer from a focus
on regional orders that serious turmoil in several regions simultaneously
would severely test American resources and potentially damage its world
leadership position.
Before I turn to an even more abstract discussion of biogeography in
the following section to provide a fundamental theoretical underpinning
of my analysis in the book, I want to highlight how my previous discus-
sion will help us understand the power stakes in the AIIB case, which I
raised early in the chapter. China’s AIIB initiative constitutes a challenge
to the status quo powers such as the United States and Japan. It should
be understood as a power move to increase its influence in Asia and the
world based on its growing financial power. China has been successful so
far also because most countries have seemingly accepted the new social
reality of China building its own financial development institution just
like the United States and Japan before it. China’s power is limited at the
same time, reflected both in its need to involve more member countries,
which will weaken its relative power in the bank, and in strong push-
back on some of China’s other initiatives such as the land reclamation
projects in the South China Sea. The AIIB itself does not represent a
major departure from the existing international financial order, but it
came from a nondemocratic country that has a state capitalist version of

DOI: 10.1057/9781137593870.0005
12 The Asian Infrastructure Investment Bank

political economy, different from the United States and Western Europe.
Thus, the way China is rather than the establishment of the AIIB itself
affects the international order. More broadly, China’s long traditions can
be expected to affect its goals and use of power. All these points will be
fleshed out empirically in the following chapters.

Biogeography

I agree with Katzenstein that geography or how international relations are


constituted in different regions is crucial for understanding international
relations. To better understand how evolution and geography have
impacted international relations, I turn to biogeography. Biogeography
is a recently recognized scientific discipline that studies the geograph-
ical distributions and patterns of diversity of living things.42 Physical
scientists ask a single question of how something works. By contrast,
biology, from which biogeography draws, asks an additional question
of its purpose. Biology offers both causal and functional explanations,
which are not mutually exclusive.43
Biogeography has been recognized as a distinct scientific discipline
only in the past few decades, but it traces its intellectual origins to scien-
tists such as Charles Darwin, Alfred R. Wallace and Alfred Wegener.
Contemporary biogeographers include Edward O. Wilson and Jared
M. Diamond. The discipline combines knowledge from geography,
ecology and evolution.44 Biogeography is a rapidly evolving and diverse
field. Two main approaches are ‘ecological biogeography’ and ‘historical
biogeography’. Ecological biogeography ‘analyzes patterns at the species
or population level, at small spatial and temporal scales, accounting
for distributions in terms of biotic and abiotic interactions that happen
in short periods of time’. Historical biogeography ‘analyzes patterns of
species and supraspecific taxa, at large spatial and temporal scales, being
more interested in processes that happen over long periods of time’.45
Biogeography is more suitable than physical sciences for PS and IR.
Humans are part of the living world. The questions we ask should be
similar to those asked by biologists because we should want to know the
purpose of any system of living things. Biogeography uses a constitutive
logic that our theoretically based descriptive studies are cumulative for
scientific study. Biogeography is an all-encompassing grand theory for
the history of life on earth. Biogeography is a more proven scientific

DOI: 10.1057/9781137593870.0005
Power, Order and Biogeography 13

discipline than economics. Biogeography asks really big questions, which


offer a needed corrective to the current tendency of political scientists to
focus on narrow topics. Biogeography opens new frontiers of research.
Biological and geographical approaches have been adopted by some in
PS and IR,46 but biogeography has largely been absent. A keyword search of
the Social Science Index produces few articles mentioning biogeography let
alone treating it as a central theme.47 A handful of scholars, mostly outside
the United States, have used biogeography to study early state formation
and long-term economic development.48 This book cannot provide full
coverage of a field as diverse as biogeography and offers instead a sample
of basic principles and theories in the following paragraphs.
The origin and dispersal of living things is a central concern for
biogeography, which is highly relevant for studies of political institutions.
Alfred Wallace, a central scholar in creating the discipline of biogeog-
raphy, advocated for a list of 17 biogeographic principles. Several are rele-
vant here. Principle 1: ‘Distance by itself does not determine the degree of
biogeographic affinity between two regions; widely separated areas may
share many similar taxa at the generic or familial level whereas those very
close may show marked differences—even anomalous patterns’. Principle
3: ‘Prerequisites for determining biogeographic patterns are detailed
knowledge of all distributions of organisms throughout the world, a
true and natural classification of organisms, acceptance of the theory
of evolution, detailed knowledge of extinct forms, and sufficient know-
ledge of the ocean floor and stratigraphy to reconstruct past geological
concerns between landmasses’. Principle 6: ‘Competition, predation, and
other biotic factors play determining roles in the distribution, dispersal,
and extinction of animals and plants’. Principle 8: ‘Speciation may occur
through geographic isolation of populations that subsequently become
adapted to local climate and habitat’. Principle 10: ‘Long-distance disper-
sal is not only possible but is also the probable means of colonization of
distant islands across ocean barriers; some taxa have a greater capacity
to cross such barriers than others’.49
We need to address a larger question of how we should determine
the degree and nature of similarities and differences between political
systems. Functional equivalents are not necessarily indications of simi-
lar structures. As Alexander Rosenberg noted, biology produces weaker
generalization than physical sciences because the mechanism of natural
selection chooses for effects, which means ‘it cannot discriminate between
differing structures with identical effects’. Rosenberg noted that ‘functional

DOI: 10.1057/9781137593870.0005
14 The Asian Infrastructure Investment Bank

equivalence combined with structural difference will always increase as


physical combinations become larger and more physically differenti-
ated from one another’.50 It is therefore difficult to differentiate political
systems if they exhibit functional equivalency and more so with greater
complexity in the political system. Put simply, if two states have produced
similar results in any functional arenas such as economic growth or
central banking or public educational achievement, we cannot conclude
that the two belong to the same category of political institutions. From
an evolutionary perspective, different animals may have similar forms in
different places due to a process known as ‘convergent evolution’: ‘Species
that live in similar habitats will experience similar selection pressure from
their environment, so they may evolve similar adaptations, or converge’.51
My discussion of functional equivalency earlier also provides a logical
reason for suggesting a ‘nonreciprocal principle’. Although a desirable
political regime may produce desirable outcomes the presence of desir-
able outcomes does not mean the political regime that has produced
such outcomes is desirable. Similar outcomes may result from different
political regimes. Thus, a political regime should be judged with polit-
ical philosophy. Aristotle himself wanted to measure constitutions by
comparing them to ideal types that draw from political theory. If one
insists on basing judgment of two systems empirically, one needs to at
least place the similar effects in the larger context of all the effects from
the two systems and all their ramifications for the whole ecosystems.
To help understand the taxonomy of political institutions, we should
differentiate ‘analogy’ from ‘homology’.52 Mario von Cranach defined
analogy as two systems having ‘something in common without being
related’ and homology as two systems having a common ancestor or simi-
larity based on information passing from one to the other. 53 Functionally
similar political regimes may be merely analogies, which provide only a
partial basis for comparison.
What difference does it make whether a functional institution is home-
grown or grafted? In some ways, there is little difference, particularly
if researchers focus on a narrow functional issue. One may also argue
that every single contemporary political regime is some sort of hybrid.
Functionally equivalent institutional components may be found in very
different political regimes. This may indicate a gradual convergence of
these political regimes or the pathways for them to converge. However,
I argue that it is logically important to differentiate institutional features
based on lineage or learning.

DOI: 10.1057/9781137593870.0005
Power, Order and Biogeography 15

First, there is a larger question of how functionally similar component


institutions fit in different political ecosystems. We thus need to exam-
ine the interaction effect between similar institutional components and
dissimilar ones in different political systems. There can be different types
of interaction such as competitive, repelling or compatible interaction. I
suggest a principle rather than a law here. What types of interactions exist
between native and learned institutional components and what conse-
quences we should expect are both empirical questions. For example, an
electoral system introduced into different political systems should lead
to different interaction effects. One could readily observe this on the
ground. It is thus important to look at different political regimes directly
and fit functional adaptations in them. Simply comparing and contrast-
ing these adaptations across the cases without thinking hard about the
larger context is insufficient. As a case in point, democratic institutions
are logically possible in the Islamic countries and empirically proven in
some cases. However, democracy interacts differently with traditional
institutions in the Islamic countries than those in the Western Christian
countries. Islamic and Christian countries so far have produced diver-
gent political paths.
Second, the interaction effect discussed earlier relates to an equilib-
rium effect. Introduction of novel institutions constitutes a shock to the
political equilibrium. This equilibrium could have already been shaken
as a reason for the introduction in the first place. The new institutions
could serve a channeling role for institutional learning but the outcomes
of political change are not predetermined.
Third, organically developed institutions tend to have greater resili-
ence than borrowed ones. This is partly due to the fact that the surviving
institutions have passed the tests of interaction and political equilibrium
effects. Moreover, native political institutions are associated with power-
ful nationalist sentiment in modern times.
Ultimately, there is no logical reason for all political institutions to blend
over time into a single winning system. Such an outcome is not impossible
but is highly unlikely partly due to the entrenched political traditions that
have different origins. Figure 1.1 illustrates two possible historical trajec-
tories, with A as a convergent trajectory and B as a briefly overlapping but
ultimately divergent model. Other possible trajectories exist.
In short, to understand types of political institutions, we cannot
simply look at their functions. Any conclusion that lumps analogies and
homologies is bound to be limiting and potentially misleading if it is

DOI: 10.1057/9781137593870.0005
16 The Asian Infrastructure Investment Bank

figure 1.1 Convergent versus divergent historical trajectories

used to answer questions such as the sustainability of a political regime.


Biologists and biogeographers have gone beyond taxonomy to system-
atics, which also studies the evolutionary histories and environmental
adaptations of different living organisms.
I will apply biogeographical analysis to the study of the AIIB in the
following chapters. Fundamentally, like any living being, an institution
has its own origin and lineage, which are consequential politically.
Chapter 2 offers a broad discussion of evolving political institutions in
the world, classifying them in a crude cladistic tree and mapping them
geographically. Chapter 3 focuses on how China has been constructing
the AIIB using both material and ideational resources at its disposal and
situates that initiative in the Chinese system of political economy. Put
simply, power is constructed within a particular national system of polit-
ical economy. Thus, a China-led order would be naturally different from
a US-led order even if the AIIB is compatible with the existing inter-
national order. Chapter 4 shows how the AIIB is a functional equivalent
of existing international financial institutions such as the World Bank
and the ADB, a hybrid nested to them. The chapter also demonstrates
how to measure institutional similarities and differences between the
AIIB and the two existing development banks.

Notes
1 P.C. Schmitter (2010) ‘Micro-Foundations for the Sciences of Politics’,
Scandinavian Political Studies, 33 (3), 316–330.

DOI: 10.1057/9781137593870.0005
Power, Order and Biogeography 17

2 D.A. Baldwin (1979) ‘Power Analysis and World Politics: New Trends versus
Old Tendencies’, World Politics, 31 (2), 161–194.
3 D.A. Baldwin (2002) ‘Power and International Relations’, in W. Carlsnaes, T.
Risse and B.A. Simmons (eds.) Handbook of International Relations (Thousand
Oaks, CA: Sage Publications), 177–191.
4 See, for example, J.S. Nye, Jr. (2011) The Future of Power (New York:
PublicAffairs).
5 H.J. Morgenthau (1973) Politics among Nations: The Struggle for Power and
Peace, 5th ed. (New York: Alfred A. Knopf), p. 5.
6 Ibid., 28.
7 Among political scientists, James Fearon and Alexander Wendt have
provided a good definition, contrasting causal theorizing and constitutive
theorizing. ‘Causal theorizing seeks to establish the necessary and sufficient
conditions relating a pre-existing cause to a subsequent effect in a more
or less mechanistic way. An assumption of such theorizing, therefore, is
that cause and effect are independently existing phenomena. Constitutive
theorizing, in contrast, seeks to establish conditions of possibility for objects
or events by showing what they are made of and how they are organized’. J.
Fearon and A. Wendt (2002) ‘Rationalism v. Constructivism: A Skeptical
View’, in W. Carlsnaes, T. Risse, and B.A. Simmons (eds.) Handbook of
International Relations (Thousand Oaks, CA: Sage Publications), p. 58. For a
discussion of various political science definitions of constitutive causality, see
R.N. Lebow (2009) ‘Constitutive Causality: Imagined Spaces and Political
Practices’, Millennium-Journal of International Studies, 38 (2), 211–239.
8 R.J. Huggett (2004) Fundamentals of Biogeography, 2nd ed. (London:
Routledge), pp. 187–216.
9 M. Mann (2012) The Sources of Social Power, Vol. 1, A History of Power from the
Beginning to AD 1760 (Cambridge: Cambridge University Press), p. 4.
10 Ibid., p. 30.
11 Ibid., pp. x–xi.
12 J.R. Searle (1995) The Construction of Social Reality (New York: Free Press), p.
16.
13 Mann, Sources of Social Power, pp. 34–70.
14 Ibid., p. 539.
15 The logic applied to the relationship between the Chinese empire and
nomadic empires. See O. Lattimore (1960) Inner Asian Frontiers of China
(Boston: Beacon Press), pp. 340–349; T. Barfield (1989) The Perilous Frontier:
Nomadic Empires and China (Cambridge: Blackwell); N. Di Cosmo (1999)
‘The Northern Frontier in Pre-Imperial China’, in M. Loewe and E.L.
Shaughnessy (eds.) The Cambridge History of Ancient China: From the Origins of
Civilization to 221 BC (New York: Cambridge University Press), pp. 960–966.

DOI: 10.1057/9781137593870.0005
18 The Asian Infrastructure Investment Bank

16 R.O. Keohane (1986) ‘Theory of World Politics: Structural Realism and


Beyond’, in R.O. Keohane (ed.) Neorealism and Its Critics (New York:
Columbia University Press), p. 173.
17 K.N. Waltz (1979) Theory of International Politics (Reading, MA: Addison-
Wesley), p. 77.
18 J.A. Coyne (2009) Why Evolution Is True (New York: Viking), p. 127.
19 A. Wendt (1999) Social Theory of International Politics (New York: Cambridge
University Press).
20 J.R. Searle (1995) The Construction of Social Reality (New York: Free Press), pp.
xi–xii.
21 Ibid., p. 9.
22 Ibid., pp. 13–29.
23 R.O. Keohane (1984) After Hegemony: Cooperation and Discord in the World
Political Economy (Princeton: Princeton University Press); R. Axelrod (1984)
The Evolution of Cooperation (New York: Basic Books).
24 R.O. Keohane (1982) ‘The Demand for International Regimes’, International
Organization, 36 (2), 325–355; S.D. Krasner (ed.) (1983) International Regimes
(Ithaca: Cornell University Press).
25 See, for examples, L.L. Martin (1993) ‘Credibility, Costs, and Institutions:
Cooperation on Economic Sanctions’, World Politics, 45 (3), 406–432;
B. Koremenos, C. Lipson and D. Snidal (2001) ‘The Rational Design of
International Institutions’, International Organization, 55 (4), 761–799.
26 Mann, Sources of Social Power, pp. 130–178.
27 For Mann, compulsory cooperation applies to a type of early ‘militant
society’: ‘Centrally, despotically regulated, it dominated complex societies
until the emergence of industrial society’. Mann, Sources of Social Power, p. 56.
28 Searle, Construction of Social Reality, p. 4.
29 H. Bull (1977) The Anarchical Society: A Study of Order in World Politics (New
York: Columbia University Press), p. 8.
30 B. Buzan (2014) An Introduction to the English School of International Relations:
The Societal Approach (Cambridge: Polity Press).
31 B.J. Cohen (2008) International Political Economy: An Intellectual History
(Princeton: Princeton University Press), pp. 44–65.
32 Ibid., p. 44.
33 S. Strange (1971) Sterling and British Policy: A Political Study of an International
Currency in Decline (London: Oxford University Press).
34 For Bull’s criticism of scientific approach, see H. Bull (1966) ‘International
Theory: The Case for a Classical Approach’, World Politics, 18 (3), 361–377.
35 J.A. Frankel (2010) ‘Globalization of the Economy’, in J.A. Frieden, D.A.
Lake and J.L. Broz (eds.) International Political Economy: Perspectives on Global
Power and Wealth, 5th ed. (New York: W.W. Norton), pp. 63–81.

DOI: 10.1057/9781137593870.0005
Power, Order and Biogeography 19

36 B.J. Cohen (2010) ‘The Triad and the Unholy Trinity: Problems of
International Monetary Cooperation’, in J.A. Frieden, D.A. Lake and J.L. Broz
(eds.) International Political Economy: Perspectives on Global Power and Wealth,
5th ed. (New York: W.W. Norton), pp. 273–285.
37 S.D. Krasner (1976) ‘State Power and the Structure of International Trade’,
World Politics, 28 (3), 317–347; S.D. Krasner (1981) ‘Power Structures and
Regional Development Banks’, International Organization, 35 (2), 303–329.
38 L. Gruber (2000) Ruling the World: Power Politics and the Rise of Supranational
Institutions (Princeton: Princeton University Press).
39 R. Gilpin (2001) Global Political Economy: Understanding the International
Economic Order (Princeton: Princeton University Press), pp. 148–195.
40 R. Gilpin (1996) ‘Economic Evolution of National Systems’, International
Studies Quarterly, 40 (3), 411–431.
41 P.J. Katzenstein (2005) A World of Regions (Ithaca: Cornell University Press).
42 For introduction, see Huggett, Fundamentals of Biogeography; M.V. Lomolino,
B.R. Riddle and J.H. Brown (2006) Biogeography, 3rd ed. (Sunderland, MA:
Sinauer Associates); Cox and P. D. Moore (2010) Biogeography: An Ecological
and Evolutionary Approach, 8th ed. (Hoboken, NJ: John Wiley & Sons); M.V.
Lomolino, D.F. Sax and J.H. Brown (eds.) (2004) Foundations of Biogeography:
Classic Papers with Commentaries (Chicago, IL: University of Chicago
Press); D. McCarthy (2009) Here Be Dragons: How the Study of Animal and
Plant Distributions Revolutionized Our Views of Life and Earth (New York:
Oxford University Press); J.J. Morrone (2009) Evolutionary Biogeography: An
Integrative Approach with Case Studies (New York: Columbia University Press).
43 J.M. Smith (1990) ‘Explanation in Biology’, in Dudley Knowles (ed.)
Explanation and Its Limits (Cambridge: Cambridge University Press), p. 65.
44 Huggett, Fundamentals of Biogeography, p. 3; Morrone, Evolutionary
Biogeography, p. 6.
45 Morrone, Evolutionary Biogeography, p. 9.
46 For example, J. Greaves and W. Grant (2010) ‘Crossing the Interdisciplinary
Divide: Political Science and Biological Science’, Political Studies, 58 (2),
320–339; R.D. Masters (1990) ‘Evolutionary Biology and Political Theory’,
American Political Science Review, 84 (1), 195–210; R.D. Masters (1991) The
Nature of Power (New Haven, CN: Yale University Press); R.D. Masters (1996)
Machiavelli, Leonardo, and the Science of Power (Notre Dame, IN: University of
Notre Dame Press).
47 C. Bjornskov and M. Paldam (2012) ‘The Spirits of Capitalism and Socialism’,
Public Choice, 150 (3–4), 469–498; E. Gundlach and M. Paldam (2009) ‘A
Farewell to Critical Junctures: Sorting Out Long-Run Causality of Income
and Democracy’, European Journal of Political Economy, 25 (3), 340–354; J.G.
Hariri (2012), ‘The Autocratic Legacy of Early Statehood’, American Political
Science Review, 106 (3), 471–494.

DOI: 10.1057/9781137593870.0005
20 The Asian Infrastructure Investment Bank

48 Hariri, ‘Autocratic Legacy of Early Statehood’; O. Olsson and D.A. Hibbs,


Jr. (2005) ‘Biogeography and Long-Run Economic Development’, European
Economic Review, 49, 909–38; M.B. Petersen and S-E. Skaaning (2010)
‘Ultimate Causes of State Formation: The Significance of Biogeography,
Diffusion, and Neolithic Revolutions’, Historical Social Research, 35 (3),
200–226.
49 Lomolino, Riddle and Brown, Biogeography, p. 27.
50 A. Rosenberg (2000) Darwinism in Philosophy: Social Science and Policy (New
York: Cambridge University Press), pp. 58–60. Emphasis in original.
51 Coyne, Why Evolution is True, pp. 92–94.
52 M. von Cranach (ed.) (1976) Methods of Inference from Animal to Human
Behaviour (Chicago, IL: Aldine).
53 M. von Cranach (1976) ‘Introduction: The Order of Topics in This Book’,
in Mario von Cranach (ed.) Methods of Inference from Animal to Human
Behaviour (Chicago, IL: Aldine), p. 2.

DOI: 10.1057/9781137593870.0005
2
The East Asian
International Orders
Abstract: Wan provides a broad historical institutional
account of world political development to contextualize
East Asian international relations and the AIIB. There
have been entrenched civilizational centers in the Eurasian
continent, with China as one of them. With their distinct
evolutionary paths, the traditional centers of civilization
have had difficulty adapting to democratic institutions and
the trend continues. A major institutional development
may be simply a functional equivalent resulting from
convergent evolution or borrowing from competitors.
Political lineage matters in that it dictates distinct mixtures
of unique and universal ideational forces and gives clues
about the interaction effect. All the civilizational centers
view power acquisition as a central objective and use
power broadly understood as policy instrument. The AIIB
is a symbol of that historical trend.

Keywords: AIIB; China; civilizations; democratization;


East Asian international relations; political lineages

Wan, Ming. The Asian Infrastructure Investment Bank:


The Construction of Power and the Struggle for the East
Asian International Order. New York: Palgrave
Macmillan, 2016. doi: 10.1057/9781137593870.0006.

DOI: 10.1057/9781137593870.0006 21
22 The Asian Infrastructure Investment Bank

For the past two millennia East Asia has gone through three stages of
international orders. These include the Chinese world order, modern
imperialism of the Western powers and Japan and American hegem-
ony. The Chinese world order lasted for about two millennia until the
mid-nineteenth century. Different from the Westphalian international
system, the Chinese world order was hierarchical and morality-based. It
operated as a tributary system with China on top most of the time. The
Europeans arrived in East Asia in the early sixteenth century but came to
dominate in all East Asia only after destroying the Chinese world order
in the late nineteenth century. Modern imperialism lasted less than a
century in East Asia, although much longer in Southeast Asia. European
powers forced modern sovereign states and capitalist economy on East
Asia, operating in a treaty system of open ports and extraterritoriality.
Much of East Asia was colonized in a legally equal Westphalian system.
As an exception, Japan embraced reforms after the Meiji Restoration of
1868 and grew quickly to join the rank of the imperialist powers after
1895. American hegemony established after World War II is now 70 years
old and counting.1 American hegemony differs from modern imperial-
ism in that it is a liberal democratic order. However, it shares the same
traditions as modern European imperialism. American hegemony of
course goes beyond East Asia. Yet the United States chose to emphasize
multilateralism in Europe and bilateralism in East Asia.2
Four features stand out in the East Asian international orders for the
past two millennia. First, East Asia had a long international relations
tradition distinct from that of the West. In all actuality, East Asia has
really experienced two international orders, one distinctly Asian and the
other Western. Both Western imperialism and American hegemony are
integral to the Westphalian system. Japan sought to establish its domin-
ance combining Western and Asian elements but failed.
Like every other Asian people, the Chinese are proud of their tradi-
tions, which they commonly refer to as ‘the world’s longest continuous
history’. They generally view China as the most important and powerful
country in Asia for much of the past two millennia and have a strong
sense of entitlement to be Asia’s leader again. That partly explains their
confidence in creating and leading the AIIB.
When Chinese seek to construct social reality, they necessarily draw
from their long traditions, although it is an empirical question how much
and in what way they may do so. On the basis of my past research, I hold
the view that the fact that China had a long distinct tradition does not

DOI: 10.1057/9781137593870.0006
The East Asian International Orders 23

mean that Chinese will necessarily favor them over modern experience.3
Rather, they can draw from a combination of traditions that are different
from those of other distinct historical regions such as the Middle East
and Europe. Put simply, they can realistically construct social reality that
is partially distinct. How much a particular tradition will be emphasized
is another empirical question.
Second, the pace of change in the East Asian international orders
has accelerated. While contemporaries and historians will see dramatic
events and transformations within the Chinese world order, what will
strike observers is how stable the system was from a historical compara-
tive perspective. We can argue rightly that the seeds for change were
already present within the Chinese world order, but there is no doubt
that the catalyst came from the West. East Asia has experienced a highly
volatile period of reforms, revolutions and revolts. The greater competi-
tive nature of the East Asian international relations and indeed the world
international system results largely from the fact that a politically frag-
mented Europe was particularly competitive, which led to innovations

4.5

3.5

2.5

1.5

0.5

0
1 1000 1500 1600 1700 1820 1870 1900 1913 1940 1950 1973 1992 2001 2008

India China Western Europe Former USSR


United States Japan Brazil Africa

figure 2.1 Achievement gaps in the world


Source: Wan, ‘Back to Nature’, 403.

DOI: 10.1057/9781137593870.0006
24 The Asian Infrastructure Investment Bank

that eventually paved the way for Europe to dominate the world and
accelerate competition globally in the process.
Growing competitiveness of the modern international system results
from and feeds back into innovative technologies and institutions. For
the first time in human history, we see a huge gap in performance by
different regions. As Angus Maddison has shown in his meticulously
gathered historical economic statistics, all the regions in the world had
similar GDP per capita until about 1700.4 I have argued previously that
if we make a simple manipulation of calculating a country’s relative size
of GDP divided by its relative size of population, we observe an even
sharper ‘achievement gap’ between the West and the rest. I argue that
such a sustained large gap is ‘unnatural’ and therefore inherently unstable
structurally.5
The competitive nature of the international system is far easier to
measure and forecast than individual choices. My own prediction is
that it should be less competitive and more stable. Emerging powers like
China and India have a large share of world population. Thus it is math-
ematically impossible for them to reach the height of achievement by
Western Europe, the United States and Japan. The rise of the rest means
a long-term trend to move ‘back to nature’.6 At the same time, how the
international order is being constructed right now is profoundly import-
ant. There are reasons to be concerned about the general trends in East
Asia.
Countries may respond to increased tension in different ways. East
Asia does not have a simple story of West advances and East responds.
The non-Western regions throughout the world faced similar challenges.
Yet East Asia is unique in that there were a few key countries such as
Japan and China that were not fully colonized by the West. This ensured
a degree of institutional continuity and national unity.
Third, power as a goal is prevalent in the strategic thinking in the
policy communities throughout East Asia. Power has always been intui-
tively understood broadly in the region despite much intellectual effort
to alter this understanding. Power has certainly been important for the
West, particularly at the start of the encounter when the West demon-
strated its superior brutal force.
Fourth, non-Western peoples have been expected to conform to the
Western international norms, standards and legal rules. Thus, scholars
have studied how West-defined and West-led international society
has expanded from Europe to the rest of the world, not necessarily

DOI: 10.1057/9781137593870.0006
The East Asian International Orders 25

endorsing the historical trend.7 These evolving Western norms and


standards constitute the contemporary international system and have
been highly consequential. Take East Asia, for example. Japan learned
early on that it could increase its power and elevate its international
standing by adopting at least the trappings of international norms and
legality. Japan also gained a significant strategic advantage and utilized
that advantage to the full vis-à-vis its Asian neighbors that were not as
quick in adapting to the new international realities.

The branching of the political institutions in the world

My discussion in the previous pages provides enough historical context


for basic analysis. However, the AIIB has been viewed as indicative of
larger historical trends. It is appropriate then to provide such a back-
ground consistent with my biogeographical analytical framework. First
of all, I propose a systematics of political institutions that emphasizes
lineages of political institutions. This is not a novel idea since political
scientists have been discussing ‘political traditions’. I am not suggesting
that lineages are all that truly matter. Traditions are not destiny and
people change all the time. It is entirely possible that later adaptations
and learning trump the ancient traditions. Yet it is important concep-
tually to recognize origins and evolution. The importance of this can be
assessed empirically. It is better to start with political lineages than from
an assumed universal category.
Figure 2.2 provides a rough cladistic tree of the early branching of
political traditions. The tree starts with the Homo sapiens migrating
from Africa to the rest of the world from 120,000 to 60,000 BP (before
present). Homo sapiens first reached the Middle East and North Africa.
They then branched out in two main directions, one eastward bending
along the shores of the Indian Ocean to South Asia, Southeast Asia, and
Australia, and the other northward to Eastern Europe and then eastward
to Northeast Asia and the Americas. Around Eastern Europe, one group
turned westward, joined by some from the eastern branch, moving into
Western Europe. It is difficult to know what social institutions the ances-
tors of modern humans possessed. While we may assume that the Homo
sapiens who left Africa in relatively small numbers must have had a single
social form at start, their social institutions must have evolved to diversify
greatly due to the different ecological environments they encountered,

DOI: 10.1057/9781137593870.0006
Sub- North Middle West South East Southeast North South
Europe Eurasia Oceania
sahara Africa East Asia Asia Asia Asia America America

American
Soviet Union
1960s hegemony
communist
nation-state
state
democracy

Scramble
for Africa 1607
1870s Jamestown
Mughal
empire
1500 1526
Columbus
Mongol empire 1492
thirteenth century
Islam rise starts
seventh century
221 BC China first
Alexander modern state
334–23 BC
City-state
democracy

40,000–30,000 43,000 BP 20,000–15,000


BP BP

60,000 BP
12,0000–
Africa 60,000 BP

figure 2.2 Evolving political institutions

DOI: 10.1057/9781137593870.0006
Note: The basic starting branching off followed the genotype study by Zhivotovsky et al. (2003).
The East Asian International Orders 27

the natural organizational drift that came from generational change and
the physical distance between communities that spread thinly across the
world.
Social barriers were also likely to be present when different lifestyles
shaped by different ecological environments came into contact with
one another. A German research team recently found the presence of
farmer immigrants from the Near East and indigenous hunter-gatherers
in Central Europe in the same cave. They conducted an analysis of bone
DNA and isotopes that helped determine different dietary habits between
the two groups. The team found that even though the two groups shared
the same burial site for 400–600 years they did not interbreed.8 That
fascinating scientific finding suggests the possibility that cultural norms
were stronger then than now. This example also gives us some reasons to
ponder the meaning of science. The finding was published in Science, one
of the most prestigious science journals in the world. Yet suppose social
scientists had access to the communities in the cave and conducted field
research. They then discovered that the two groups refused to mingle
even though they lived in close proximity due to strong social barriers
resulting from different lifestyles. I doubt that Science would consider
publishing that finding. However, the social science project is not inher-
ently inferior to the natural science project. The natural science project
is not based on a controlled experiment. Scientists cannot ethically and
practically put two groups in the same location for a few centuries to test
how they interact, nor can we predict that they would behave the same
way as the cave people studied in the project. While the methods used
are more precise and reliable, the science project can only infer about the
social barriers. By contrast, social scientists can study the social struc-
ture directly and are not prevented from conducting DNA tests to see
if interviewees are telling the truth. In the end, we need to think hard
about what counts as science broadly. As Jared Diamond has noted,
science is about ‘the acquisition of reliable knowledge about the world’.9
Put simply, rather than worrying whether one’s research looks scientific,
one should ask first whether reliable knowledge has been acquired.
We do not yet have sufficient evidence to make a definitive argument
about the nature and evolution of prehistorical political institutions.
Thus, I have left a gap in Figure 2.2, restarting the tree a few thousand
years BC. The figure does not capture the richness and dynamic of world
political history. It is a rough sketch of origins, evolutions and interac-
tions of political institutions.

DOI: 10.1057/9781137593870.0006
28 The Asian Infrastructure Investment Bank

Figure 2.2 illustrates four traditional civilizational centers, highlighted


with triangular bases, in the lower reaches of the Nile River in North
Africa, in the Tigris and Euphrates river basin, in the Indus Valley in
South Asia and in the region of the Yellow River and Yangtze River in
East Asia. Civilizational centers in Greece, Iran, Sub-Saharan Africa and
the Americas have been suggested as equally important.10 But the four
centers mentioned are the most accepted origins of civilizations. They
emerged in greater Eurasia from North Africa to East Asia, with China
the most distant in the group.
Since the AIIB is partially framed as a contest between a democratic
United States and an alternative authoritarian China, I want to pay
special attention to democracy as political institution in world history.
Democracy did not organically evolve in these four traditional centers.
It remains the case that the ‘cores’ of these regions are the most resistant
to democratization. The Polity IV dataset shows11 that Iraq started with a
−4 in 1924 and continued to deteriorate to an autocratic regime in 1968,
to a low −9 in 1979 that lasted until 2002. It had 78-year durability since
1924, which accounted for the whole period. Despite the US occupation
partially meant to install democracy from 2003 to 2009, an independent
Iraq ranked a nondemocratic 3 in 2010. Few expect democracy to be
established in that country any time soon. Syria did better in the 1940s
and 1950s but had a low from −7 to −9 since 1963. Egypt also started
better than Iraq, scoring 4 in 1922. The country became nondemocratic
in 1929, improved from 1935 to 1951, was again nondemocratic from 1952
to 2005 and improved again for the next few years until it achieved a
brief electoral democracy. Yet the country is back to autocracy. China
was independent throughout the 1800–2012 period but was nondemo-
cratic (−6) from 1800 to 1910. With the Republican Revolution in 1911,
China became less nondemocratic for a few years and then settled into a
low −5 from 1914 to 1936. China was in a war situation from 1937 to 1945
and then assumed the low −5 from 1946 to 1948. The People’s Republic of
China founded in 1949 has been solidly nondemocratic until now. India
is a major exception due to its long, direct and intense British colonial
administration, with high democracy scores almost continuously since
1950. In short, the ‘natural political tendencies’ of the traditional civiliza-
tional centers are nondemocratic.
Building on the cladistic figure in Figure 2.2 about the lineages of polit-
ical institutions, Table 2.1 illustrates the systematics of political regimes,
which puts democracy in a larger context. The table considers geographical

DOI: 10.1057/9781137593870.0006
table 2.1 Systematics of political regimes
Location Time period Innovations Learning
Mesopotamia Middle East ,– BC Writing, cities, temples, stratification Pristine
Islam Arabian peninsula  AD–present Universal values, integrating religion and politics Novel
Egypt North Africa ,– BC Writing, cities, temples, stratification Pristine

DOI: 10.1057/9781137593870.0006
Indus Valley South Asia ,–, BC Writing un-deciphered, cities, temples, stratification Pristine
Shang China East Asia ,–, BC Writing, cities, temples, stratification Pristine
Modern state China  BC–present Centralized bureaucracy, civil service Novel
Minoan Crete Mediterranean ,–, BC Writing un-deciphered, cities, temples Diffusion from
Middle East?
Democracy city-state Athens, Greece  BC– BC Town hall deliberation, government by eligible males Novel
Mesoamerica (Maya) Central America AD – Neolithic age tool technologies, stratification, Pristine
ceremonial centers, writing, the Long Count calendar
Peru South America AD – Neolithic age tool technologies, redistributive states Pristine
Inca AD – Writing equivalent, theocratic state, centralized Novel
administration
Sovereign states Western Europe –present Sovereignty, territoriality Novel
Democracy, nation- United States –present Federalism, government by people, for people, of Novel
state people
Authoritarianism Europe and Fifteenth century- Rule by individuals or a small group, limited political Partly novel
elsewhere present pluralism
Totalitarianism- Italy, German s Ideology, single party, mass mobilization Novel
fascism, Nazism
Totalitarianism- Russia  Ideology, single party, mass mobilization Novel
Communism
30 The Asian Infrastructure Investment Bank

locations, time periods, institutional innovations and learning. I also group


institutional innovations around their lineages in this table.
Table 2.1 shows that it makes sense to focus on the lineage of political
institutions as the starting point for analyzing democratic expansion.
This should not be surprising for earlier scholars who put much emphasis
on political traditions. Anyone who has done field research should also
know the importance of such political lineage and evolution.
Democracy started on a small scale, as a city-state political innovation
in Greece about five centuries BC, and lasted fewer than 200 years.
Democracy was an institutional mutation. As Francis Fukuyama has
pointed out, it is extremely difficult to have all three basic institutions
for a modern liberal democracy, namely, the state, the rule of law and
accountable government. Democracy was ‘unnatural’ because people
naturally attach to their kin. How do we explain the origin of democracy
then? From a functional perspective, Fukuyama has reasoned that the
political institutions of the state, the rule of law and accountable govern-
ment ‘come into being in the first place because people find that they can
protect their interests, and the interests of their families through them’.12
Self-interest and legitimacy thus form the basis of political order.
We need an evolutionary explanation rather than a physical science-
type causal explanation. The fact that things happened the way they did
is a fact that needs to be explained, but the type of explanation we come
up with does not mean things would happen again the same way even if
conditions were similar.
Democracy was innovated earlier than the modern state, which
emerged in China in 221 BC building on the practices and ideologies
developed earlier. Fukuyama is right that, to have a modern state, one
had to create a system that could handle a large population. China
created a centralized bureaucracy to rule a large empire without relying
on the nobility that might challenge the emperor’s absolute authority.
The Chinese system combined self-interest and Confucian legitimacy.
The Chinese imperial system was more successful than Athenian democ-
racy, judging by the space occupied and the time span. The Chinese
bureaucratic imperial system lasted until 1911, albeit with periodic chaos
and system breakdowns. Both the Chinese and Greek systems enjoyed
hegemonic influence, with the Chinese influencing the political systems
and cultures around it and the Greek civilization influencing the Roman
Republic. One may say that Greek democracy has the last laugh but the
Chinese system remains strong.

DOI: 10.1057/9781137593870.0006
The East Asian International Orders 31

Scale matters. China had an estimated population of 20 million


around 221 BC.13 However, one cannot infer a definitive institutional
response to demographic dynamics. The other three traditional centers
of urban civilizations also had sizable populations, although they were
more difficult to estimate than in China. China arguably has richer
historical demographic information than other ancient civilizations.14
We know that they all had well-developed cities with populations of tens
of thousands much earlier than in China.15 According to one estimate,
about half a million people lived in Southern Mesopotamia at the start
of history, sharing language, writing and culture.16 It is also reasonable
to assume that South Asia had a population size more or less similar
to that of East Asia, which remained the case throughout recorded
human history.17 The biggest urban concentration in Minoan Crete was
estimated at 50,000 residents.18 Existing around the same time as the
Chinese empire, the Roman Empire did not create a uniform admin-
istrative system for its empire.19 Western Europe had a larger absolute
population at 62.6 million in 160020 than China in 221 BC, but a modern
international system of sovereign states emerged in Europe. Thus, scale
operates in interaction with time and space.
The traditional systems were all different from one another even
though they shared some common features such as cities, written
languages, craftsmanship and social organizations.21 Political institu-
tions did not develop in a linear fashion. Both the Greek democracy and
Chinese centralized bureaucracy represented institutional revolutions. If
we believe it is desirable to have democracy and modern states, it is then
the case that not all good things happen in only one civilization. We did
not have all origins of novel political institutions from a single lineage.
New institutions should be compared to their contemporary alternatives
as well as against previous institutions.22 Democracy did not arise from
any of the earlier pristine political traditions and lasted only for a short
historical time on a small scale.
Scholars from Western democracies have dominated contemporary
political science. It is not surprising then that we have a democracy-
centered typology of political institutions. Authoritarian and totalitarian
regimes are simply defined as regimes that deprive citizens of their polit-
ical freedom. Some leading comparative scholars have already warned
about this tendency in Western scholarship.23 People are interested in
these nondemocratic regimes also because they are a threat to democ-
racy and should be replaced with democracy for the benefit of all. Not

DOI: 10.1057/9781137593870.0006
32 The Asian Infrastructure Investment Bank

nearly as much consideration has been given to those failed or failing


states that are difficult to characterize.
Earlier political scientists who studied political institutions thoroughly
often found it difficult to classify them, for good reasons. For Juan Linz,
totalitarianism refers to a system that has the following characteristics:
‘an ideology, a single mass party and other mobilizing organizations,
and concentrated power in an individual and his collaborators or a
small group that is not accountable to any large constituency and cannot
be dislodged from power by institutionalized, peaceful means’.24 By
contrast, authoritarianism refers to a political system ‘with limited, not
responsible, political pluralism, without elaborate and guiding ideol-
ogy, but with distinctive mentalities, without extensive nor intensive
political mobilization, except at some points in their development, and
in which a leader or occasionally a small group exercises power within
formally ill-defined limits but actually quite predictable ones’. Yet Linz
observed that various other types of political institutions do not fit well
in this three-way classifying scheme, such as militaristic Japan in the
1930–1940s and Fidel Castro’s Cuba. There are traditional authority and
personal rulership (particularly Sultanistic) regimes that are different
from modern authoritarian regimes. In fact, it is difficult to differenti-
ate even fascist, Nazi and communist regimes, which are often lumped
together as totalitarian. Authoritarianism could be found next to Athens
in Greece, and nation-state authoritarianism arguably originated earlier
than modern democracy. It differed from personalized dictatorships by
acquiring some representative institutions, and thus it was not an institu-
tional reaction to democracy that was nonexistent at that time. In a way,
the authoritarianism we observe now is a form of modern government
that evolved from different sources and it is strongly associated with a
country’s modernization drive. By contrast, totalitarianism was created
in the early twentieth century to address acute economic, social and
political crises.25
The typology of political institutions is indeed difficult. As for any
classifying system, judgment has to be made about the categories and
similarities or differences between those being classified. A clearer
classification may result from viewing these institutions as historical
phenomena. It is then crucial to trace the lineage of any particular type
of political institutions as embedded in the nations involved. The next
step is to determine whether functionally similar features of different
lineages have resulted from learning and diffusion. It is acceptable in

DOI: 10.1057/9781137593870.0006
The East Asian International Orders 33

my view to lump together functionally similar systems from different


lineages for any appropriate analytical task, but one has to recognize the
inherent limitation in that intellectual effort.

A halting expansion of democracy

A consensus exists about the lineage of democracy. Democracy was


not revived after the Athenian experience until two millennia later. The
United States built a nation-state democracy first. Some scholars have
argued that the United States founded in 1776 did not yet meet the
minimal democratic criteria. Samuel Huntington, for example, stated
that the United States became a minimal democracy around 1828 when
more than half of the male adult population gained the right to vote and
when the chief executive was chosen by a majority in a parliament or by
a periodic popular vote.26 There was no genetic or environmental reason
for the new United States to establish a democratic regime. Great Britain,
the mother country for most early immigrants to the colonies that
formed the basis of the United States, was not a democracy. There were
nondemocratic colonies from other European powers in the new world
as well. Since the early nineteenth century, democracy has expanded
albeit not in a straight line. Dahl traced the expansion of democracies
from merely 1 (out of the 37 countries in the world) in 1860 to 65 (out of
192) in 1990.27 By 2000 Freedom House counted 120 countries as demo-
cratic. However, democracy has experienced some setbacks since then.
Figure 2.3 illustrates the halting expansion of democracy over time,
both absolutely and relatively. Only the United States was a democracy
from 1809 to 1847. Democracy slowly expanded after 1848, suffering a
major setback in the 1930s and 1940s. It then shot up in the postwar
era. Democracy has gained ground relative to other political regimes.
Starting around the turn of the twentieth century, autocracies reversed
their previous losses and kept pace with democracies. They gained
significantly in the 1930s–1940s. They far outnumbered democracies for
three decades after the end of the 1950s but suffered a major decline with
the end of the cold war. Yet democracy has not scored a complete victory.
It only accounts for half of the countries measured.
An increasing share of the world population lives in democracies.
Only the United States was a democracy in 1828, with a population
of 12.6 million or merely 1.2 percent of the world total. There were 32

DOI: 10.1057/9781137593870.0006
34 The Asian Infrastructure Investment Bank

180

160

140

120
Number of countries

100

80

60

40

20

0
1800
1807
1814
1821
1828
1835
1842
1849
1856
1863
1870
1877
1884
1891
1898
1905
1912
1919
1926
1933
1940
1947
1954
1961
1968
1975
1982
1989
1996
2003
2010
Anocracies Autocracies Democracies

figure 2.3 Democratic expansion, 1809–2012


Note: Scores from −10 to −6 indicate autocracies, 6–10 correspond to democracies and from
−5 to 5 show ‘anocracies’, which refer to polities that lack power or control (Gurr 1974, 1487).
The total number of states does not include some countries not scored for various reasons
for particular years.
Source: Marshall et al. (2013).

democracies totaling 536.6 million (28.8 percent of world population)


in 1926, 52 democratic and semidemocratic countries totaling 1,593.3
million (50.8 percent) in 1962; an even larger share of the world popula-
tion came to live in democracies later on.28 According to Freedom House
calculations, 88 countries (45 percent of the world total) were free, 59
countries partly free and 48 countries not free in 2013. As shares of world
population, 40 percent lived free, 25 percent partly free and 35 percent
not free.29
The chart in Figure 2.3 does not take into consideration the geographic
distribution of democracies over time. Map 2.1 charts the geographic
distribution of the countries in the world based on the three Freedom
House categories of free, partly free and not free. Democracies are free.
Democracy gained much ground by 2014, prevailing in the Americas,
Europe, Oceania, South Asia and the southern tip of Africa. At the same
time, the map reveals a pistol-shaped nondemocratic greater Eurasia

DOI: 10.1057/9781137593870.0006
The East Asian International Orders 35

Freedom_2014
Not free
Partly free
Free

map 2.1 Distribution of freedom in the world


Note: This is an equal area map based on ESRI, World Cylindrical Equal Area. ArcGIS10.1
mapping software is used.
Source: Freedom House (2014b).

heartland that stretches from Algeria to China and also reaches down to
a nondemocratic heart in the African continent.
Huntington discussed three waves of democratization. The first wave
began in 1828 and ended in 1926 with 33 democracies, with a reverse
wave from 1922 to 1942. The second wave spanning from 1943 to 1962
increased the number of democracies to 52 and was stopped by a reverse
wave from 1958 to 1975. The third wave began on April 25, 1974, in the
Portuguese capital and lasted until 1990.30 Larry Diamond built upon
Huntington’s waves of democracy in his book Spirit of Democracy, adding
another burst to the third wave from 1989 to the middle of the first
decade in the twenty-first century.31
The waves of democracy take place in time and space, following
a pattern of diffusion. It is interesting to see where democratic break-
outs happen and how and where democracy spreads. There should be
hidden or not-so-hidden barriers shaping the pattern of distribution of
democratization.
All three waves of democracy started from the West and were most
successful in European countries, former British settlements, Latin

DOI: 10.1057/9781137593870.0006
36 The Asian Infrastructure Investment Bank

America, US-defeated countries and Western colonies. If one traces


the waves in Map 2.1, one should see that these waves do not always
spread continuously from one place to its proximity. They often exhibit
a long-distance dispersal pattern. The first wave moved within the
Anglo-American world, from North America to Europe to Australia.
There was some proximity effect as democracy also spread to France
and some small European countries, although one may say that France
was also a source of democratic inspiration in its own right. The second
wave was dominated by the United States when it installed democracy
in the defeated nations in Europe and East Asia. Some Latin American
countries flirted with democracy as well. The third wave started on the
southern edge of Europe, reflecting internal dynamics and the promo-
tion of democracy by Western Europe and the United States. The third
wave was a more global diffusion, exhibiting both proximity effect and
long-distance dispersal.
To understand the waves of democracy, we should not train our eyes
only to the waves but also to the global geography. Democracies march
or retreat against various types of political regimes. Thus, we should pay
attention to background political ecosystems. As shown in the cladistic
tree of political institutions in Figure 2.2, a different image would emerge
if we focus on the traditional core civilizational zones. There is a pistol-
shaped nondemocratic zone across the Greater Eurasian landscape. This
is a resilient zone revealed in various angles. Only India has a strong
democracy among the traditional civilizations. India was under British
rule from the late 1700s to 1947. Fukuyama has also shown that Indian
society had evolved in such a way that it did not allow a strong central-
ized state to emerge unlike in China.32
A common view holds that economic growth is conducive to democ-
ratization. But as Map 2.2 shows, the Eurasian pistol largely holds true
even if some countries in the zone have achieved economic growth.
This map is designed to reveal the inconsistency between the level of
political freedom and the level of economic development. A layer of
economic growth information is superimposed on the political freedom
layer. Green is used for countries that are consistently high, medium
or low in both categories, such as the United States and Pakistan. Blue
marks countries that have higher levels of political freedom than levels
of economic growth, such as India and Brazil. Red is used for countries
that rank lower politically than economically. The conservative pistol-
shaped corridor corresponds with the distribution of ancient political

DOI: 10.1057/9781137593870.0006
The East Asian International Orders 37

centers. Except India, none of the four ancient civilization centers is now
a democracy. China stands out in particular with its rapid economic
growth. In fact, China is providing a negative lesson about democracy
for some developing countries.
One may ask why we see such a democracy-resistant zone. Underlying
that specific question is a more fundamental question: why does democ-
racy not triumph more easily if it is such a good system? Biogeographers
ask similar fundamental questions about nature: ‘why hasn’t biotic
interchange been more complete? What processes are responsible for
the preservation of biogeographic provincialism, especially in organ-
isms that are good dispersers?’. The answer is: ‘Since biotic interchange
is due to dispersal and subsequent ecological success, the maintenance
of provincialism must be due largely to some combination of continued
isolation and resistance to invasion’.33 The same is true for patterns of the
dispersal of political institutions.

Comparing GDP_PPP with freedom


Freedom –
Same
Freedom +

map 2.2 Freedom versus economic development in the world


Note: An equal area base map is from ESRI, World Cylindrical Equal Area. ArcGIS 10.1
mapping software is used. The GDP per capita (PPP) data are broken into seven natural
breaks. The seven intervals are then consolidated into three to be comparable to the freedom
data. A new classification is as follows: low ($0–$2,239), middle ($2,240–$12,584) and high
($12,585–$78,357).
Source: Freedom House (2014b); International Monetary Fund (2009).

DOI: 10.1057/9781137593870.0006
38 The Asian Infrastructure Investment Bank

Geographic isolation helps create political ‘provincialism’. The pre-


Columbian American institutions were dramatically different from the
Eurasian ones, a rare case of vicariance in political institutions resulting
from humans migrating to the Americas who then became physically
separated from the old world.34 Vicariance, a biogeographic concept,
means that a geographical separation of a population, which creates
a physical barrier, leads to the emergence of two related but separate
species.
Despite modern technologies, geography still matters, more so than
most people realize. A country that has strategic depth horizontally
or vertically is difficult to penetrate. Russia is large and other coun-
tries cannot do much about it. Afghanistan has difficult mountains for
conquerors. The greater the distance from the Western democratic core,
the greater the political differences. Proximity of authoritarian regimes
facilitates mutual survival. And several large authoritarian countries
anchor the authoritarian status quo.
Barriers are both ecological and mental, and they interact with each
other. Political spatial dynamic is partly a social construction. Unlike
‘brute facts’ such as high mountains and narrow valleys, social barriers
are essentially ‘institutional facts’ that depend on human agreement.35
One salient example is Afghanistan. We now largely agree that it is next
to impossible for outsiders to change Afghanistan. That shared view
would then serve as a social barrier that deters such efforts. Geography
and social structure are closely related through a historical lens. The fact
that some countries have succeeded time after time against foreign inter-
vention means they are likely to do so again in the future. I am advocat-
ing principles rather than laws here. It is an empirical question of how
the real world works based on these principles.

Conclusion

This chapter has provided a broad historical institutional account of


world political development to contextualize East Asian international
relations and the AIIB. A broad discussion of history is necessary to
properly situate my study. The AIIB topic has often been framed as a
landmark event. And the bank is discussed in the context of China rise,
which is increasingly framed from a longer historical lens.36 In order
to engage that discourse, I need to clearly articulate my own historical

DOI: 10.1057/9781137593870.0006
The East Asian International Orders 39

view. This chapter has also highlighted democracy because China’s rise is
now viewed increasingly as presenting an alternative value system to the
United States.
The chapter shows that from a very long historical lens, there have
been entrenched civilizational centers in the Eurasian continent, with
China as one of them. They have been integral parts of the global process
but have been distinct in the scheme of things, importantly reflected in
their unique evolutionary paths. The traditional centers of civilization
have had difficulty adapting to democratic institutions and the trend
should continue. Geographical locations matter in and of themselves
and because of path dependence. If we combine distinct regional and
globalizing forces and consider the fact that social reality is constructed,
we know that there is nothing inevitable about what has happened and
nothing fully predictable about what will happen in the future. At the
same time, political lineage matters in that it dictates distinct mixtures
of unique and universal ideational forces and gives clues about the inter-
action effect.
Power matters. All the civilizational centers view power acquisition as
a central objective and feel entitled to it. They also use power broadly
understood as policy instrument. The key is to look at the whole range of
initiatives between the countries we want to compare, which would then
indicate systemically how close or distant they are. A major institutional
development alone cannot tell us that unless we situate it in the scheme
of things. It may be simply a functional equivalent resulting from conver-
gent evolution or borrowing from competitors.
What this historical context means is that China, as well as other great
powers that occupied the ancient centers of civilization, will have differ-
ent expectations and understanding of norms from the West and will
assert themselves more when a perceived balance of power is shifting in
their direction. The AIIB is indeed a symbol of that historical trend. The
United States has been able to collapse the layers of the world order and
Asian order to a large extent in the past decades. The United States is a
hegemon both in the world and in Asia. It is also widely believed in the
US policy community that the US-led world order will be in jeopardy if
Washington can no longer dominate in Asia. Thus, the AIIB does poten-
tially go to the heart of US-China rivalry about the rules of the game in
Asia.

DOI: 10.1057/9781137593870.0006
40 The Asian Infrastructure Investment Bank

Notes
1 M. Wan (2008) The Political Economy of East Asia: Striving for Wealth and
Power (Washington, DC: CQ Press), pp. 59–169.
2 Katzenstein, A World of Regions.
3 M. Wan (2015) ‘China and International Cooperation on the Environment:
Historical and Intellectual Roots of Chinese Thinking about the
Environment’, in G. John Ikenberry, Wang Jisi and Zhu Feng, eds., The United
States, China, and the Struggle for World Order: Ideas, Traditions, Historical
Legacies, and Global Visions (New York: Palgrave Macmillan), pp. 275–296;
M. Wan (2012) ‘Introduction: Chinese Traditions in International Relations’,
Journal of Chinese Political Science, 17 (2), 105–109.
4 A. Maddison (2008) ‘Historical Statistics of the World Economy: 1–2008 AD’,
3 September, http://www.ggdc.net/MADDISON/oriindex.htm. Date accessed
4 June 2014.
5 M. Wan (2013) ‘Back to Nature: An Achievement-Based Structural
Assessment of the Modern International System’, The Chinese Journal of
International Politics, 6 (4), 401–428.
6 Ibid.
7 See, for example, H. Bull and A. Watson (eds.) (1985) The Expansion of
International Society (Oxford: Oxford University Press); G.W. Gong (1984) The
Standard of ‘Civilization’ in International Society (Oxford: Oxford University
Press); Y. Zhang (1988) China in International Society (New York: Palgrave);
S. Suzuki (2013) Civilization and Empire: China and Japan’s Encounter with
European International Society (London: Routledge).
8 R. Bollongino, O. Nehlich, M.P. Richards, J. Orschiedt, M.G. Thomas, C. Sell,
Z. Fajkosova, A. Powell, J. Burger. (2013) ‘2000 Years of Parallel Societies in
Stone Age Central Europe’, Science, 342 (25 October), 479–481.
9 J. Diamond (2011) Collapse: How Societies Choose to Fail or Succeed (New York:
Penguin Books), p. 17.
10 For example, T. Ghose (2013) ‘Mysterious Minoans Were European, DNA
Finds’. LiveScience. 25 May, http://www.livescience.com/31983-minoans-were-
genetically-european.html. Date accessed 4 June 2014; J.W. Haas, W. Creamer
and A. Ruiz (2004) ‘Dating the Late Archaic Occupation of the Norte Chico
Region in Peru’, Nature, 432 (23 December), 1020–1023; J. Hughey, P. Paschou,
P. Drineas, D. Mastropaolo, D.M. Lotakis, P.A. Navas, M. Michalodimitrakis,
J.A. Stamatoyannopoulos, and G. Stamatoyannopoulos (2013) ‘A European
Population in Minoan Bronze Age Crete’, Nature Communications, 4 (1861),
14 May, http://www.nature.com/ncomms/journal/v4/n5/full/ncomms2871.
html. Date accessed 4 June 2014; A. Lawler (2007) ‘Middle Asia Takes Center
Stage’, Science, 317 (3 August), 586–590; C. Renfrew (1972) The Emergence of
Civilisation: The Cyclades and the Aegean in the Third Millennium B.C. (London:

DOI: 10.1057/9781137593870.0006
The East Asian International Orders 41

Methuen); R.S. Solis, J. Haas and W. Creamer (2001) ‘Dating Caral, a


Preceramic Site in the Supe Valley on the Central Coast of Peru’, Science, 292
(27 April), 723–726.
11 M. Marshall, T.R. Gurr and K. Jaggers (2013) ‘PolityTM IV Project: Political
Regime Characteristics and Transitions, 1800–2012’, 21 April, http://www.
systemicpeace.org/inscr/p4manualv2012.pdf. Date accessed 3 June 2014.
12 F. Fukuyama (2011) The Origins of Political Order: From Prehuman Times to the
French Revolution (New York: Farrar, Straus and Giroux), p. 16.
13 C-Q. Duan, X-C. Gan, J. Wang, and P.K. Chien. (1998) ‘Relocation of
Civilization Centers in Ancient China: Environmental Factors’, Ambio, 27 (7),
573.
14 J.D. Durand (1974) Historical Estimates of World Population: An Evaluation,
(Philadelphia, PA: Population Studies Center, University of Pennsylvania),
pp. 13–14.
15 For example, R.M. Adams (1981) Heartland of Cities (Chicago, IL: University
of Chicago Press).
16 Mann, Sources of Social Power, p. 90.
17 Maddison, ‘Historical Statistics of the World Economy’.
18 Mann, Sources of Social Power, p. 116.
19 Fukuyama, The Origins of Political Order, pp. 19–21.
20 Maddison, ‘Historical Statistics of the World Economy’.
21 Mann, Sources of Social Power, pp. 73–129; C. Renfrew (1972) The Emergence of
Civilisation: The Cyclades and the Aegean in the Third Millennium B.C. (London:
Methuen).
22 Hendrik Spruyt has used similar logic to study the sovereign state. See H.
Spruyt (1994) The Sovereign State and Its Competitors (Princeton: Princeton
University Press).
23 For example, G. Sartori (1993) ‘Totalitarianism, Model Mania and Learning
from Error’, Journal of Theoretical Politics, 5, 1, 5–22.
24 J.J. Linz (2000) Totalitarian and Authoritarian Regimes (Boulder, CO: Lynne
Rienner), pp. 67, 59.
25 For example, P. Farneti (1978) ‘Social Conflict, Parliamentary Fragmentation,
Institutional Shift, and the Rise of Fascism: Italy’, in J.J. Linz and A. Stepan
(eds.) The Breakdown of Democratic Regimes (Baltimore: Johns Hopkins
University Press), pp. 3–33; M.R. Lepsius (1978) ‘From Fragmented Party
Democracy to Government by Emergency Decree and National Socialist
Takeover: Germany’, in J.J. Linz and A. Stepan (eds.) The Breakdown of
Democratic Regimes (Baltimore, MD: Johns Hopkins University Press),
pp. 34–79.
26 S.P. Huntington (1991) The Third Wave: Democratization in the Late Twentieth
Century (Norman, OK: University of Oklahoma Press), pp. 16–17.
27 R.A. Dahl (1998) On Democracy (New Haven, CN: Yale University Press), p. 8.

DOI: 10.1057/9781137593870.0006
42 The Asian Infrastructure Investment Bank

28 The data for democracies are from S.P. Huntington (1991) The Third Wave:
Democratization in the Late Twentieth Century (Norman, OK: University of
Oklahoma Press), pp. 13–16. Huntington included 33 democracies for 1926,
but he split Germany into West and East Germany. Population information
is calculated from Maddison, ‘Historical Statistics of the World Economy’.
I used the world total from 1820 for 1828 and 1920 for 1926 since there are
world totals for those years in the database. The 1926 share did not include
Iceland, Estonia, Latvia and Lithuania. Judging by their populations available
in 1950, they should have had a few million in 1926.
29 Freedom House (2014a) ‘Freedom in the World 2014’, http://freedomhouse.
org/report/freedom-world/freedom-world-2014?gclid=CPivs_
XOn74CFYw7Ogod7zsA0Q#.U20x68_D9LN. Date accessed 5 June 2014.
30 Huntington, Third Wave, pp. 13–30.
31 L. Diamond (2008) The Spirit of Democracy: The Struggle to Build Free Societies
throughout the World (New York: Times Books).
32 Fukuyama, Origins of Political Order, p. 187.
33 Lomolino, Riddle and Brown, Biogeography, p. 365.
34 Recent discoveries have strengthened the migration from Siberia theory.
J.C. Chatters, D.J. Kennett, Y. Asmerom, B.M. Kepm, V. Polyak, A.N. Blank,
P.A. Beddows, E. Reinhardt, J. Arroyo-Cabrales, D.A. Bonick, R.S. Malhi,
B.J. Culleton, P.L. Erreguerena, D. Rissolo, S. Morell-Hart, and T.W. Stafford
(2014) ‘Late Pleistocene Human Skeleton and mtDNA Link Paleoamericans
and Modern Native Americans’, Science, 344 (16 May), 750–754.
35 Searle, Construction of Social Reality, p. 2.
36 For a more positive analysis of Chinese exceptionalism, see H. Kissinger
(2011) On China (New York: Penguin Press).

DOI: 10.1057/9781137593870.0006
3
The AIIB Tied in a Belt
Abstract: Wan examines how China has been constructing
the AIIB, successfully. The AIIB is one of the major policy
initiatives such as ‘One Belt, One Road’ adopted by the
Chinese government to expand its influence overseas. The
AIIB seems ‘natural’ in the scheme of things. The Chinese
system of political economy remains distinct from that of
the United States and other major economies. Different
branches may shoot up from the Chinese tree. The AIIB is
a branch that is more acceptable than most other Chinese
initiatives such as the large-scale land reclamation projects
in the South China Sea. The more members the Chinese
government is able to attract to this international financial
organization, the more pressure there is on Beijing to follow
the existing international practices.

Keywords: AIIB; China; Chinese system of political


economy; ‘One Belt, One Road’

Wan, Ming. The Asian Infrastructure Investment Bank:


The Construction of Power and the Struggle for the
East Asian International Order. New York: Palgrave
Macmillan, 2016. doi: 10.1057/9781137593870.0007.

DOI: 10.1057/9781137593870.0007 43
44 The Asian Infrastructure Investment Bank

This chapter examines how the Chinese government has been construct-
ing the AIIB. The AIIB is an ‘artificial’ selection and one of a series of
major policy initiatives adopted by the Chinese government to expand
its influence overseas, including a ‘Silk Road economic belt’ and a
‘21st-century maritime Silk Road’. Thus, the chapter scrutinizes how the
AIIB initiative fits in the overall Chinese strategy and domestic politics.
Now that China has become a global economic power, there is greater
integration of its foreign economic policy and domestic politics and of
domestic and international players in its decision-making process. Yet
the Chinese system of political economy remains distinct from that of
the United States and other major economies.

Constructing the AIIB

The Chinese government proposed the creation of the AIIB in October


2013 and launched the initiative in October 2014. Twenty-one countries
attended the launching ceremony, with no major developed countries on
board. Yet things would change. The deadline for becoming a founding
member of this institution was 31 March 2015. By that date, 57 coun-
tries including 37 from Asia had expressed interest in joining the bank
and became founding members. According to the working plan, the
representatives from these countries met in Beijing at the end of April
and in Singapore at the end of May for the fourth and fifth round of
negotiations. The Articles of Agreement were signed on 29 June. The
bank is expected to start operation by the end of the year. One should be
struck by the fact that the Chinese government has so far carried out the
plan as scheduled in contrast to some other major international cooper-
ation initiatives such as the Trans-Pacific Partnership (TPP) that have
frequently missed deadlines.

The origin of the AIIB


President Xi Jinping initially proposed the AIIB during his visit to
Indonesia on 2 October 2013. Five months later, Chinese finance minis-
ter Lou Jiwei told the Chinese media that the Chinese Finance Ministry
was speeding up the process of constructing the AIIB with around
$50 billion in authorized capital. The first multilateral working group
was convened on 24 January involving over a dozen interested Asian

DOI: 10.1057/9781137593870.0007
The AIIB Tied in a Belt 45

table 3.1 The ADB membership versus the AIIB membership


ADB AIIB
Founding members Other members Founding members
Initial Current Initial
voting voting voting
Year shares Year shares Year shares
Regional members

Afghanistan  . .


Armenia  .
Australia  . .  .
Azerbaijan  . 
Bangladesh  . 
Bhutan  .
Brunei  . 
Cambodia  . . 
China  .  .
Cook Islands  .
Fiji  .
Georgia  . 
Hong Kong, China  .
India  . .  .
Indonesia  . .  .
Iran 
Israel 
Japan  . .
Jordan 
Kazakhstan  . 
Kiribati  .
Korea, Republic of  . .  .
Kuwait 
Kyrgyz Republic  . 
Laos  . . 
Malaysia  . . 
Maldives  . 
Marshall Islands  .
Micronesia  .
Mongolia  . 
Myanmar  . 
Nauru  .
Nepal  . . 
New Zealand  . . 
Oman 
Pakistan  . . 
Palau  .
Papua New Guinea  .
Philippines  . . 
Qatar 
Continued
DOI: 10.1057/9781137593870.0007
46 The Asian Infrastructure Investment Bank

table 3.1 Continued


ADB AIIB
Founding members Other members Founding members
Initial Current Initial
voting voting voting
Year shares Year shares Year shares
Russia  .
Samoa  . .
Saudi Arabia 
Singapore  . . 
Solomon Islands  .
Sri Lanka  . . 
Taipei, China  . .
Tajikistan  . 
Thailand  . . 
Timor-Leste  .
Tonga  .
Turkmenistan  .
Turkey 
Tuvalu  .
UAE 
Uzbekistan  . 
Vanuatu  .
Vietnam  . . 

Total  .  . 


Nonregional members
Austria  . . 
Belgium  . .
Brazil  .
Canada  . .
Denmark  . . 
Egypt 
Finland  . . 
France  .  .
Germany  . .  .
Iceland 
Ireland  .
Italy  . . 
Luxembourg  . 
Malta 
The Netherlands  . . 
Norway  . . 
Poland 
Portugal  . 
South Africa 
Continued

DOI: 10.1057/9781137593870.0007
The AIIB Tied in a Belt 47

table 3.1 Continued


ADB AIIB
Founding members Other members Founding members
Initial Current Initial
voting voting voting
Year shares Year shares Year shares
Spain  . 
Sweden  . . 
Switzerland .  . 
Turkey  .
United Kingdom  . .  .
United States  . .

Total  .  . 

Grand Total  .  . 


Note: The initial voting share was as of 31 December 1967. Switzerland joined the ADB at the
end of 1967, taking a voting share of 1.04 percent. The current voting shares for the ADB are
as of 31 December 2013.
Turkey is viewed as a nonregional member at the ADB but a regional member at the AIIB.
Source: For the ADB membership and the current voting shares, see ADB, http://www.adb.
org/sites/default/files/page/30786/oi-appendix1.pdf. Date accessed 3 May 2015. For the ADB
voting share as of 31 December 1967, see ADB, ADB Annual Report for 1967, pp. 38–39. For the
ten shareholders at the AIIB, see Center for Strategic and International Studies Asia Program,
7 July 2015, http://cogitasia.com/by-the-numbers-china-the-asian-infrastructure-investment-
bank-aiib/. Date accessed 10 July 2015.

countries. Lou said that the Chinese government had recently created
a preparatory committee. He also commented that some of the dozen
countries at the first working level meeting had expressed interest in
becoming founding members and the Chinese government was engaged
in bilateral talks with some countries.1
On 24 October 2014, China and 20 other countries signed the memo-
randum of understanding to form the AIIB, including Bangladesh,
Brunei, Cambodia, China, India, Kazakhstan, Kuwait, Laos, Malaysia,
Mongolia, Myanmar, Nepal, Oman, Pakistan, the Philippines, Qatar,
Singapore, Sri Lanka, Thailand, Uzbekistan and Vietnam. We learned a
few important features about the bank. It would be located in Beijing. It
would now be capitalized with $100 billion, half of which would be initial
capital (20 percent paid-in). The shares would be decided by the size of
a member state’s GDP, which would mean that China would have the
largest share. Yet Lou Jiwei said that China would not seek dominance

DOI: 10.1057/9781137593870.0007
48 The Asian Infrastructure Investment Bank

and its share would shrink with more members. The plan now would be
to complete the preparation and start operation by the end of 2015.2
On 9 November 2014, at the APEC summit in Beijing, Xi Jinping
highlighted the AIIB along with some other important initiatives. New
Zealand expressed interest in joining the AIIB in early January 2015.
On 6 March the Chinese finance minister announced that the number
of interested countries had increased to 27, including some European
countries.3

The avalanche
The Chinese government set 31 March 2015 as the deadline for becoming
a founding member. On 12 March, Great Britain became the first major
industrialized country to join the bank. This generated a snowballing
effect. It was immediately recognized by analysts that Britain’s member-
ship would provide a cover for countries like Australia and South Korea
that wanted to join the bank because of their close economic ties with
China but were fearful of backlash from the United States.4 On 17 March,
Germany, France and Italy decided to join. Three days later Switzerland
came on board. It was reported on the same day that Australia would
soon announce its intention to join. Australia formally made that
announcement on 29 March. South Korea joined the bank on 26 March.
On 28 March Russia and Brazil told media that they would join. By 29
March, 41 countries had decided to join the bank. As shown in Table 3.1,
57 countries became founding members, as announced by the Chinese
Finance Ministry on 15 April.
As the AIIB became more realistic, there also emerged concerns
about the bank competing against the World Bank and the ADB. This
will be discussed in greater detail in the next chapter. The Chinese
government developed several arguments. One is that there was need
for investment in infrastructure, citing the ADB study about needing $8
trillion for the purpose in 2010–2020. They also argued that the AIIB
does not compete with the World Bank and the ADB directly since the
two established banks focus on poverty alleviation. The AIIB was viewed
as complementing the existing institutions for cofinanced projects.
Moreover, the Chinese officials noted that the World Bank and the ADB
are overly bureaucratic and often advocate goals unrelated to business.5
The Chinese analysts were more explicit in their analysis. They generally
agreed that Asia has sufficient funding to support infrastructure but not
adequate platforms to mobilize financial resources. They thus saw the

DOI: 10.1057/9781137593870.0007
The AIIB Tied in a Belt 49

AIIB as China’s offering of public goods and complained that the United
States had been urging China to take on more international responsi-
bilities but was now apparently opposed to the idea. They did recognize
that the AIIB reflects the changing ‘global financial ecology’ and would
weaken the dominance of the West in global finance.6

Getting down to business


By the middle of May, we heard that the AIIB would now have a
subscribed capital stock reaching almost $100 billion. Even though the
Chinese had indicated that they would take about half of the subscribed
capital stock, they now would have around 30 percent. In terms of voting
power, China would be followed by India, Russia and South Korea.7 There
was a reported exchange of words between the Chinese and Europeans
who wanted more than the 30 percent planned for nonregional states
and more seats at the board of directors.8 That is not surprising since
positioning for power is typical of any international institutions. What
is actually surprising is how little reported discord we can find in media
coverage.
The fifth chief negotiators’ meeting was held for three days in Singapore
on 20–22 May. It was then reported at the end of the round that China
would contribute 26–29 percent of the subscribed capital. India would be
the next largest contributor among regional members. About 30 percent
of the 12-member board of directors would go to nonregional members
ensuring a degree of influence for European countries and others. Yet the
board of directors would not be a permanent institution. China ensured
a de facto veto power over important bank matters. It will have at least
25 percent voting power resulting from its contribution of subscribed
capital. This will also influence important decisions over matters such
as change in subscribed capital that require a three-fourth majority. The
headquarters would be located in Beijing. The initial capital stock was
increased to $100 billion. And China’s Jin Liqun would be the first bank
president.9 The AIIB Articles of Agreements were now finalized and
ready for signature by the end of June. It was confirmed that the bank
would start operation by the end of the year.
By early June, the Chinese plan became more concrete. The Chinese
government wanted to create a different type of international institu-
tions. These institutions are designed to be more efficient and possess
more power for the developing countries. At least 75 percent of the
voting shares will go the Asia-Pacific countries, which would allow

DOI: 10.1057/9781137593870.0007
50 The Asian Infrastructure Investment Bank

smaller Asian members to have more voice. According to the Articles,


China would contribute $29.78 billion of the registered capital, thus
acquiring veto power over major decisions that require a 75 percent
supermajority. Other major contributors include India ($8.36 billion),
Russia ($6.53 billion) and South Korea ($3.74 billion) in the Asia-Pacific
region and Germany ($4.48 billion), France ($3.37 billion) and Brazil
($3.18 billion) from outside the region. The AIIB will have a nonresi-
dential, unpaid board of directors, unlike the World Bank and the ADB.
The bank can start operating once at least ten members with more than
half of the voting shares ratify the agreement.10 The plan became clear
on 16 June. It also became known that Australia would have a share of
$3.6 billion, Indonesia $3.3 billion and Great Britain $3 billion, rounding
up the top ten capital contributors to the bank. The members from the
region, including the Middle East, were given 75 percent of the shares.11
A cabinet-level meeting for signing the agreement was held on 29 June
in Beijing.
China’s share of nearly 30 percent is much larger than America’s share
in the World Bank (16.05 percent versus 8.94 percent for Japan and 5.76
percent for China) and Japan’s share in the ADB (15.7 percent versus
15.6 percent for the United States and 6.4 percent for China).12 Yet it also
became clear that the AIIB would be dominated by the emerging powers.
China, India and Russia would be able to appoint their own directors.13 If
we add Brazil and South Africa, the five BRICS countries count for 48.46
percent of the authorized capital in the bank.
There were some challenges for the AIIB. On 26 June, the Philippines
indicated that it would attend the signing ceremony but would not sign
due to its increased tension with China over the territorial dispute in the
South China Sea and concern that China might use the AIIB for political
reasons.
As scheduled, the AIIB was officially launched in Beijing on 29 June
2015. As it was becoming clear, China acquired a 26.06 percent voting
share, which gives it effective veto power since 75 percent voting share
is required for important decisions but that veto power would be gone
if more countries join the bank. The Philippines decided not to sign
the Articles of Agreement and reportedly wanted to review whether
or not to join later.14 Six other countries (Denmark, Kuwait, Malaysia,
Poland, South Africa and Thailand) did not sign because they were yet
to receive domestic approval but would sign by the end of the year. The
AIIB requires 75 percent of the capital coming from within the region.

DOI: 10.1057/9781137593870.0007
The AIIB Tied in a Belt 51

Nonregional shares may increase with new members but will not reach
beyond 30 percent. The AIIB is now scheduled to start operation by the
end of the year. Jin Liqun is still the presumed first AIIB president. The
bank will be headquartered in Beijing with possible regional centers
elsewhere. The working language is English. As reported previously, the
AIIB will differ from the existing international financial institutions by
having a nonresidential, nonpaid board of directors. It will also open
bids to all countries rather than just the member states.15 Greater detail
about the operation of the AIIB will be provided in the next chapter that
compares it to the World Bank and the ADB. On 6 July, the Chinese
government formally nominated Jin as the candidate for AIIB president.

‘One Belt, One Road’

The AIIB initiative came straight from the top, Chinese president Xi
Jinping himself. Thus, who Xi is and what he wants China to be is a
central question. We do not know for sure how successful Xi will ultim-
ately be and indeed what the standards for success will be defined. Yet
we do know that Xi has been far more ambitious than his two cautious
predecessors, has acquired more power and has been more willing to use
that power as well. Xi’s ideas have been highly publicized in China. Xi
Jinping’s book The Governance of China was issued in October 2014. The
book has also been translated into seven other foreign languages.
Is this a case that an assertive leader will necessarily emerge when a
country has arisen to a certain level? It might and might not be. The most
logical thing we can say is that a strong leader can but does not have to
rise in a rising country. We just have to accept that there are fundamental
uncertainties what people choose to do individually or collectively. The
fact is that Xi is more ambitious by Chinese standards.
The AIIB is firmly situated in Xi Jinping’s bigger initiative called ‘One
Belt, One Road’.16 Xi first discussed the idea about a ‘Silk Road economic
belt’ when visiting Kazakhstan in September 2013. In October of that
same year, Xi proposed a ‘21st century maritime Silk Road’ while in
Indonesia. On 28 March 2015, the Chinese government published its
plans for the initiative and identified the AIIB as playing an important
role in all this. China has committed $40 billion for a ‘Silk Road fund’. The
emphasis would be on transportation, energy and telecommunications.
Some compare China’s funding to the Marshall Plan. Xi is open about

DOI: 10.1057/9781137593870.0007
52 The Asian Infrastructure Investment Bank

his ambition. As the Economist noted, ‘Mr. Xi, it appears, is guided by a


dream of regional hegemony . . . This is not a plot. It is a long-term—and
even credible—plan, albeit one that does little to inspire the rest of Asia’.17
With Xi pushing the initiative, the Chinese bureaucracy is responding
predictably. For example, the China Development Bank announced on
28 March 2015 that it had already built a ‘One Belt, One Road’ project
database including about 900 projects for 64 countries totaling around
$800 billion.18 The Chinese provincial governments also compete with
each other to hitch on the ‘One Belt, One Road’ train. They see this as a
golden opportunity to stimulate their economies. Chinese officials esti-
mate that the number of infrastructure projects in planning or construc-
tion related to the ‘One Belt, One Road’ scheme already amount to 1.04
trillion yuan (around $168 billion). They also contend that this will
stimulate investment by 400 billion yuan in 2015 alone.19 Some of them
already appeal directly to the AIIB for support.20 A coalition of think
tanks was formed in April 2015.21
One should not blame the analysts and officials from outside China
for using hyperbole about Xi’s ambitious plans. The high pitch within
China about the ‘One Belt, One Road’ initiative is deafening. A major
publicity campaign is going on in the country. As is often the case when
it comes to Chinese discourse, everyone cheers for President Xi’s bril-
liant initiative but also exhibits different degrees of warmth and subtle
concerns. I do not intend to analyze the Chinese discussion here and will
point out simply that the Chinese see the initiative as indicative of a new
type of great power at work, open and cooperation-based. Yet there is no
question that the initiative is viewed as central to raising China’s status
and influence in the world. The initiative is most likely to become an
integral part of China’s 13th Five-Year plan to start in 2016.
There is also discussion of where the initiative came from in the first
place. Some observers pointed to several influential Chinese scholars.22
It is reported more recently that the AIIB idea came from China’s influ-
ential China Center for International Economic Exchanges (CCIEE),
a Chinese think tank founded in 2009 by former vice premiers and
ministerial-level officials.23 It is difficult to authenticate the accuracy of
various accounts. Yet it appears to be the case that some Chinese stra-
tegic thinkers advocated a strategy to look west around 2012 after facing
increased tensions with Japan and the United States in the Pacific region.
That strategic reorientation proposal merged with other strategic inter-
est in recycling China’s massive foreign reserves in a more efficient and

DOI: 10.1057/9781137593870.0007
The AIIB Tied in a Belt 53

beneficial fashion for the country. The ‘One Belt, One Road’ initiative
was broader, including Southeast Asia as well as Central Asia and West
Asia, and more economic than political. One should immediately note
that the initiative is not meant to be overly confrontational with the
United States. The Chinese government has also been promoting other
regional schemes. In November 2014, Xi promoted FTAAP and pushed
to start the process of creating a roadmap to achieve that goal. Finally, in
the scheme of things, China has used its financial power in a way that is
not detrimental to the United States and Japan. After all, it lends trillions
of dollars to the United States and would to Japan if allowed. The AIIB is
also open to the United States and Japan, thus less provocative than the
Trans-Pacific Partnership initiative led by the United States and strongly
supported by Japan that explicitly excludes China.
At the same time, one should indeed see the strategic implications
of the Chinese initiatives. The geostrategic calculations are embedded
in the larger plan. As a case in point, when Xi visited Pakistan in April
2015, he pledged $46 billion of Chinese investment in the country by
2030. This will mainly go to infrastructure called the China-Pakistan
Economic Corridor (CPEC) to link China’s Xinjiang to Pakistan’s deep-
water port Gwadar to reduce dependence on the Malacca Strait. And
the economic corridor may go through Kashmir, which is contested by
India.24 Moreover, greater influence by China, however achieved, would
pose a greater challenge for the United States. The Chinese government
has also pursued assertive security policy in recent years.

The China model

I have discussed in the previous section how the AIIB has resulted from
an ambitious Chinese leader’s grand initiatives. At the same time, we
need to understand that the AIIB is consistent with the Chinese political
economy system.
The shorthand for the contemporary Chinese political economy
system is ‘the China model’. Having spent several years writing a book
on this very topic, I know firsthand that there is no easy way to charac-
terize the Chinese system. In my own thinking, the China model started
with Deng Xiaoping’s economic reform and opening in 1978. Therefore,
this is different from the revolutionary Mao model before then. It is hard
to pin down because it is multifaceted and evolves. Yet at its essence the

DOI: 10.1057/9781137593870.0007
54 The Asian Infrastructure Investment Bank

China model represents a system of authoritarianism combined with


increasingly market-oriented economic activities, making it different
from virtually all other great powers. The Chinese approach is pragmatic
and gradual. The China model has helped the country deliver strong
economic performance because it is a hybrid system that allows a posi-
tive feedback loop with global capitalism. Put simply, the Chinese system
is a hybrid system that is largely compatible with the global economy
system we have.25
Consistent with the China model, the AIIB is a hybrid institution. It
would make sense for the China-led AIIB to borrow the experience of the
World Bank and the ADB. Indeed, it is reported that at least eight former
World Bank employees, including David Dollar, have been advising the
Chinese government over the AIIB since the start of the year. Some ADB
employees, including Japanese nationals, have also participated in offer-
ing advice on the AIIB.26 Moreover, the Chinese government has been
conscious of the reaction to its AIIB initiative. For example, right before
the signing of the Articles of Agreement, Jin Liqun told journalists
that the AIIB would treat high-quality environmental protection as its
highest priority.27 Thus, the bank is within the realm of acceptability and
respectability. This helps to explain the Chinese success so far. The fact
that the United States and Japan do not like the project has much to do
with perceived loss of power and privileges. Not surprisingly, those that
do not have that power and privileges to start with have had little trouble
accepting this China-led financial institution. In fact, if we juxtapose the
AIIB to compare both to other existing financial institutions in the world
and to China’s ancient institutions, we can see immediately that the AIIB
is far more familiar to the contemporary non-Chinese than to the ancient
Chinese. For one thing, the AIIB uses English as its working language. If
one imagines a spectrum of institutions with different degrees of simi-
larities to the Western institutions, one should put China’s participation
in the existing international financial institutions at one end with a high
degree of similarity to the West. The AIIB would be close by but one step
toward the other end of ancient traditions. By an extreme contrast, the
Islamic State would be largely familiar in its basic beliefs to the people
from the past even though it has also adapted to modern conditions. Its
use of social media would be one example.
More broadly, the AIIB is a central part of the ‘One Belt, One Road’
initiative that is designed partly to find an outlet for China’s overcap-
acity in industry and construction. This is particularly relevant since the

DOI: 10.1057/9781137593870.0007
The AIIB Tied in a Belt 55

country is making a difficult transition from an investment and export-


led development strategy to a more balanced approach. China is thus
also trying to gain from its commitment of financial resources overseas.
Finally, the Chinese government has been able to make large finan-
cial commitments for the past 15 years or so. This is largely due to the
Chinese system in which average citizens have little say over such
matters. If China were a democracy, it would be hard to image how
Chinese voters would have approved such largeness so quickly. After all,
China is not yet a developed country and has significant social needs.
The AIIB and the related ‘One Belt, One Road’ initiative have much to
do with the interests of the producers that have an oversupply of capacity
and limited domestic markets.

Conclusion

The AIIB is not fully predictable based on Chinese domestic politics.


Indeed, China has been rising. At the same time, we know that China has
been seeking greater power as a goal. There has been some lag between
China’s newly acquired power and its willingness to use power. Jiang
Zemin and Hu Jintao were cautious. Now we have a more ambitious
Chinese leader in Xi Jinping.
Although not fully predictable, the AIIB seems ‘natural’ in the scheme
of things. Even the Chinese government was surprised by how successful
this initiative has become. However, power operates differently within
an international institution. Ironically, the more members the Chinese
government is able to attract to this international financial organization,
which will help to make it more credible and prestigious, the more pres-
sure there is on Beijing to follow the existing international practices.
China has been successful. It has assigned a function to a new entity
of its influence. There is more than sufficient collective intentionality
to allow the bank to materialize. At the same time, whether the AIIB
will ultimately succeed as a funding institution is a different question.
Different branches may shoot up from the Chinese tree. The AIIB should
be viewed as a branch that is more acceptable than most other Chinese
initiatives. China’s land reclamation projects in the South China Sea
would be at the other end of the spectrum.

DOI: 10.1057/9781137593870.0007
56 The Asian Infrastructure Investment Bank

Notes
1 Xinhua net, 7 March 2014, http://news.xinhuanet.com/politics/2014-
03/07/c_119658822.htm. Date accessed 6 November 2014.
2 Xinhua net, 24 October 2014, http://news.xinhuanet.com/finance/2014-
10/24/c_1112965880.htm. Date accessed 6 November 2014.
3 Reported in Mainichi shimbun, 6 March 2015, http://mainichi.jp/select/
news/20150307k0000m020027000c.html. Date accessed 6 March 2015.
4 J. Perlez (2015) ‘With Plan to Join China-Led Bank, Britain Opens Door
for Others’, New York Times, 13 March, http://www.nytimes.com/2015/03/14/
world/asia/asian-infrastructure-investment-bank-britain-china.html?_r=0.
Date accessed 14 March 2015.
5 Xinhua net, 24 October 2014, http://www.chinanews.com/gn/2014/10-
24/6715973.shtml. Date accessed 2 May 2015.
6 Xinhua net, 25 October 2014, http://news.xinhuanet.com/world/2014-
10/25/c_127139472.htm. Date accessed 6 November 2014.
7 Yomiuri shimbun, 16 May 2015, http://www.yomiuri.co.jp/economy/20150516-
OYT1T50008.html?from=ytop_main2. Date accessed 15 May 2015.
8 Nikkei shimbun, 16 May 2015, http://www.nikkei.com/article/
DGXLZO86882190W5A510C1FF2000/?n_cid=TPRN0005. Date accessed 15
May 2015.
9 Yomiuri shimbun, 22 May 2015, http://www.yomiuri.co.jp/world/20150522-
OYT1T50128.html?from=ytop_ylist. Date accessed 22 May 2015; Sankei
shimbun, 22 May 2015, http://www.sankei.com/economy/news/150522/
ecn1505220028-n1.html. Date accessed 22 May 2015.
10 M. Magnier (2015) ‘How China Plans to Run AIIB: Leaner, with Veto’, Wall
Street Journal, 8 June, available at http://www.wsj.com/articles/how-china-
plans-to-run-aiib-leaner-with-veto-1433764079. Date accessed 10 June 2015.
11 Yomiuri shimbun, 16 June 2015, http://www.yomiuri.co.jp/economy/20150616-
OYT1T50073.html?from=ytop_main5. Date accessed 16 June 2015.
12 World Bank, ‘Everything You Always Want to Know about the World Bank’,
http://treasury.worldbank.org/cmd/pdf/WorldBankFacts.pdf. Date accessed
17 June 2015; ADB (2014) ‘Capital Structure’, 31 December, http://www.adb.
org/site/investors/credit-fundamentals/capital-structure. Date accessed 17
June 2015.
13 Yomiuri shimbun, 17 June 2015, http://www.yomiuri.co.jp/economy/20150617-
OYT1T50019.html?from=ytop_ylist. Date accessed 17 June 2015.
14 Yomiuri shimbun, 29 June 2015, http://www.yomiuri.co.jp/economy/20150629-
OYT1T50068.html?from=ytop_main2. Date accessed 29 June 2015.
15 Asia Unhedged (2015) ‘China Gets 30 Stake in AIIB as Bank Takes Shape’,
Asia Times, 29 June, http://atimes.com/2015/06/china-gets-30-stake-in-aiib-
as-bank-takes-shape/. Date accessed 29 June 2015; G. Wildau and C. Clover

DOI: 10.1057/9781137593870.0007
The AIIB Tied in a Belt 57

(2015) ‘AIIB Launch Signals China’s New Ambition’, Financial Times, 29 June,
http://www.ft.com/intl/cms/s/0/5ea61666-1e24-11e5-aa5a-398b2169cf79.
html#axzz3ePJT0krw. Date accessed 29 June 2015.
16 For a useful analysis of the initiative, see Asia Center of the European
Council on Foreign Relations (2015) ‘One Belt, One Road: China’s Great Leap
Outward.
17 ‘Through a Fog of Hazy Slogans, the Contours of China’s Vision for Asia
Emerge’, The Economist, 11 April 2015, 41.
18 China News Agency, 28 March 2015, http://finance.chinanews.com/
cj/2015/03-28/7166871.shtml. Date accessed 8 April 2015.
19 Zhengquan ribao, 1 April 2015, http://finance.chinanews.com/stock/2015/04-
01/7175864.shtml. Date accessed 8 April 2015.
20 See for example Xinjiang’s top leader Zhang Chunxian’s talk with the AIIB
interim officials. China News Agency, 2 April 2015, http://www.chinanews.
com/gn/2015/04-02/7178289.shtml. Date accessed 8 April 2015.
21 China News Agency, 8 April 2015, http://www.chinanews.com/gn/2015/04-
08/7192994.shtml. Date accessed 8 April 2015.
22 See for example, Cao X., Financial Times Chinese site, 8 June 2015, http://
www.ftchinese.com/story/001062389?full=y. Date accessed 13 June 2015.
23 B. Goh and K.G. Qing (2015) ‘China-Backed Multilateral Bank to Take
Concrete Shape This Week’, Reuters, 28 June, http://www.reuters.com/
article/2015/06/28/asia-aiib-idUSKBN0P802E20150628. Date accessed 28
June 2015. For the information about CCIEE, see their website http://english.
cciee.org.cn/index.aspx.
24 China News Agency, 1 June 2015, http://www.chinanews.com/gn/2015/06-
01/7314706.shtml. Date accessed 1 June 2015.
25 M. Wan (2014) The China Model and Global Political Economy: Comparison,
Impact, and Interaction (New York: Routledge).
26 Mainichi shimbun, 28 June 2015, http://mainichi.jp/select/
news/20150628k0000m020109000c.html. Date accessed 28 June 2015.
27 Yomiuri shimbun, 28 June 2015, http://www.yomiuri.co.jp/world/20150628-
OYT1T50068.html. Date accessed 28 June 2015.

DOI: 10.1057/9781137593870.0007
4
The AIIB versus the World
Bank and the ADB
Abstract: Wan compares the AIIB with the World Bank
and the ADB, particularly at the moment of creation.
The World Bank was truly a novel international financial
institution but fully consistent with the American systems
and legal practices. Japan successfully built the ADB,
which was a hybrid of the World Bank and the Japanese
institutions. Yet it failed in its attempt to create a Japan-
led Asian Monetary Fund in 1997. The material and
ideational resources China is using to construct the bank
are not drastically different from those employed by the
Americans and Japanese. The AIIB is nested to the World
Bank and the ADB, thus firmly situated within the existing
international financial order. But China is now further
away from the US-led international structure.

Keywords: AIIB; Asian Development Bank; China; Japan;


United States; World Bank

Wan, Ming. The Asian Infrastructure Investment Bank:


The Construction of Power and the Struggle for the
East Asian International Order. New York: Palgrave
Macmillan, 2016. DOI: 10.1057/9781137593870.0008.

58 DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 59

This chapter compares the AIIB to the World Bank and the ADB, particu-
larly at the moment of creation. Areas of comparison include the larger
international relations context and the embedded purposes and institu-
tional designs. Although China differs from the United States and Japan,
the AIIB reveals so far hybrid features that are only partially different
from the existing international financial institutions. The material and
ideational resources the Chinese government is using to construct the
bank are not drastically different from those employed by the Americans
and Japanese. This chapter also examines the US and Japanese reactions
to the AIIB initiative.

The United States and the World Bank

The United States did not start with the World Bank in its construction
of a liberal international economic order. It is generally agreed that the
United States turned to free trade with the Reciprocal Trade Agreements
Act (RTAA) in 1934, which changed the US trade policy institution and
prepared the country for future leadership in international trade. The law
mandated reciprocal tariff reduction and authorized trade agreements
approved by a simple majority rather than a supermajority stipulated in
the US Constitution.1 The RTAA case reveals a clear trace of how the
United States came to be the type of leader it did. For China, one may
trace a more liberal thinking to 1978 when Deng Xiaoping decided to
conduct economic reform and opening.
RTAA was adopted in a larger historical context of the United
States’s efforts to avoid a leadership role in the interwar period. Charles
Kindleberger famously argued that the Great Depression was inter-
national in nature and resulted from the absence of a stabilizing greater
power. ‘Britain could not act as a stabilizer, and the United States would
not. When every country turned to protect its national private interest,
the world public interest went down the drain and with it the private
interests of all’.2 The United States would learn a lesson and begin concep-
tualizing a world economic order under its leadership during World War
II. The United States built a liberal international order consistent with its
democratic, market economy domestic system.3 Some have challenged
what they view as myths about a liberal American hegemony.4 Yet my
own view is that a country does not have to possess complete domin-
ance to create an order. The United States was certainly more liberal than

DOI: 10.1057/9781137593870.0008
60 The Asian Infrastructure Investment Bank

any alternatives at the end of World War II. Unlike the previous British
hegemony, the United States endorsed what John Ruggie terms ‘embed-
ded liberalism’ in setting up intergovernment organizations for greater
international cooperation and building domestic welfare institutions to
cushion potential losers in sovereign states participating in free trade
against volatility in the global market.5
Along with the International Monetary Fund (IMF), the World Bank
was created during the negotiations at Bretton Woods in New Hampshire
before World War II ended. In hindsight, it seemed only natural that the
great power that won a great war would create a new international order.
Yet it was not obvious for contemporaries how this institution would
look like. In fact, E.S. Mason and R.E. Asher who wrote an authoritative
work on the World Bank noted that looking back, ‘one is struck by both
the magnificence of the achievement and the lack of prescience of the
founding fathers’.6 After all, there was no ready blueprint for the framers
of the Bretton Woods system. The Japanese would later benefit from the
World Bank experience when they were ready to build the ADB. The
Chinese are in a better still position in this regard.
While purposes were crucial in terms of the nature of the international
order, power was central to whether the international order could
be constructed in the first place. The United States had emerged from
World War II as a world hegemon. The World Bank was created based
on the American plan, with some input from Great Britain. Unlike the
United Nations General Assembly, the IMF and the World Bank do not
give equal voting power to their members. The United States contributed
$3.175 billion of the initial $10 billion capitalization and a 37.20 percent
voting power. The United States dominated and provided a larger share
of subscribed capital because Great Britain and others were not in a
strong financial position. They preferred that the United States take on
a bigger share of the burden in a development bank. Despite resistance
from Great Britain, the United States also secured the headquarters
in Washington, DC,7 US nationals by practice have always headed the
World Bank.
The Bretton Woods conference was held on 1–22 July 1944. The
44 allied nations that attended the conference signed the Articles of
Agreement on 22 July 1944. The US Congress passed the Bretton Woods
Agreements Act signed by President Harry Truman on 31 July 1945.
The Articles of Agreement were signed into effect by 28 countries on 27
December 1945 and the bank opened to business on 25 June 1946. Not

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 61

every country that attended the Bretton Woods conference ratified the
Articles of Agreement. Most noticeably, the Soviet Union decided not to
join the IMF and the World Bank. Thus, the AIIB compares favorably to
the World Bank on this score.
The World Bank had 38 members in 1946. Currently known as the
World Bank Group, it has 188 members in its International Bank for
Reconstruction and Development (IBRD) and 172 members in its
International Development Association (IDA). The World Bank was
only part of a US strategy. Immediately after the war, the United States
resorted to a bilateral approach, launching the Marshall Plan to assist the
European countries in their reconstruction.
The World Bank has not moved in a straight line. Rather, it has
gone through different stages of lending policy driven by real world
challenges and ideological conventional wisdoms.8 With the Marshall
Plan for the European countries, the World Bank focused on the non-
European countries. The bank focused on infrastructure projects until
1968. Under Robert McNamara’s leadership from 1968 to 1980, the
World Bank emphasized basic human needs, and lending expanded in
size and in areas from infrastructure to social service. The bank took a
neoclassical ideological turn in the 1980s, focusing on market efficiency
and structural adjustment for indebted developing countries. The World
Bank has incorporated environmental protection and participation by
nongovernmental organizations since 1989.9 The World Bank has been
severely criticized for a whole range of issues, particularly its structural
adjustment loans that were perceived as worsening poverty in indebted
developing countries.10 Jim Yong Kim became World Bank president
in April 2012. He has discussed the funding needs for infrastructure
frequently in the context of increasing the scale of World Bank lending.11
The World Bank Group financed $24 billion of infrastructure projects or
nearly 40 percent of the total in fiscal year 2014.12
Japan joined the IMF and the World Bank in 1952 after regaining its
sovereignty earlier that year. Japan was a major beneficiary from the
IBRD in the early years and kept a low profile in the World Bank and the
IMF through the 1970s. With its rising economic power, Tokyo sought a
higher status in the global financial institutions in the 1980s. It achieved
a number two position in the World Bank in 1984 and a joint number
two position with Germany in the IMF in 1990. Yet Japan had more
limited policy influence, creating the image of a one-dimensional power.
In response, the Japanese attempt at greater intellectual and policy

DOI: 10.1057/9781137593870.0008
62 The Asian Infrastructure Investment Bank

influence in the 1990s led to a clash of state-guided development phil-


osophy with the Washington Consensus in the early 1990s. Sponsored
by the Japanese government in defense of its development philosophy
and practice, the Japanese thinkers and analysts argued that Japan had
a different but effective approach to development as vindicated by the
economic miracle achieved by East Asian countries. The World Bank
studied East Asian development experience and concluded in its 1993
book The East Asia Miracle that East Asia had grown mainly because of
policies consistent with neoclassical economics. The Japanese continued
to fight for their views, but the Asian Financial Crisis undermined their
intellectual campaign in 1997.13 With its bubble economy burst before the
crisis, Japanese felt less confident in challenging the Western views on
development. With China’s recent rise, Japan has become increasingly
focused on protecting its hard-won status against newcomers.
China joined the World Bank and the IMF in 1980, as part of its over-
all process of ‘joining the world’.14 China has benefited from the World
Bank. It has also been given due respect from the World Bank. As a case
in point, Justin Lin, an economics professor from Peking University, was
appointed World Bank Chief Economist in June 2008 serving a four-year
term. Lin was the first World Bank chief economist from a developing
country. More broadly, China has also come to influence the World
Bank since the turn of the new century to the extent that some scholars
have described a new two-way socialization process between the World
Bank and China. As a case in point, China’s Export-Import Bank and
the World Bank signed a memorandum of understanding in April 2007,
which allowed China to act as a co-donor rather than simply following
the World Bank’s lead.15
Yet as China began to rise, the gap between its financial power and its
voting shares in the IMF and the World Bank became ever larger. This
was primarily due to resistance to adjustment from the US Congress. The
IMF agreed on a governance reform in 2010 that would give China and
other emerging powers more voting shares as well as almost doubling the
Fund’s financial resources. Yet the US Congress has refused to authorize
IMF governance reform, partly due to concerns over diminished US
influence. In the IBRD, China now ranks third, with a voting share of
4.85 percent as of 8 April 2015. This trails behind the United States (16.21
percent) and Japan (7.51 percent).16
China’s success in establishing the AIIB lies partly in the fact that its
action seems justified. In fact, some former US financial officials and

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 63

scholars view the US Congress as responsible for pushing China to


create its own bank since its share in the World Bank and the IMF are so
low. Former Treasury Secretary Lawrence Summers commented shortly
after the 31 March deadline that ‘largely because of resistance from the
right, the United States stands alone in the world in failing to approve
International Monetary Fund governance reforms that Washington
itself pushed for in 2009. By supplementing IMF resources, this
change . . . would come closer to giving countries such as China and India
a share of IMF votes commensurate with their increased economic heft’.17
Former Federal Reserve Board Chair Ben Bernanke said at a confer-
ence in Hong Kong on 2 June 2015 that ‘I can understand why China
and other countries might want to say, “Well, we’re going to set up our
own system” ’ because the US Congress refused to ‘allow the governance
system of the International Monetary Fund to appropriately reflect the
changing economic weights’.18 Some American think tanks and former
financial officials have viewed the Obama administration’s initial oppos-
ition to the AIIB as a mistake and have urged the US government to
join the AIIB. Yet it is widely recognized that this is unrealistic because
Congress would not approve any financial contribution that would allow
the United States to participate in the AIIB.
China’s own foreign aid program has constituted a challenge to the
World Bank in developing countries, particularly in Africa. It is difficult
to compare China’s policy banks active in Africa and elsewhere with a
multilateral financial institution in the World Bank or their relative size
of lending to Africa. The World Bank has also largely been positive about
China’s role in Africa. China provides badly needed financial resources.
At the same time, China’s way of doing business and its rapidly growing
foreign aid program has inevitably put pressure on the World Bank to
adapt its ‘modus operandi and the norms of governance that it repre-
sents’.19 China follows a ‘noninterference principle’ in its aid program.
Although that approach favors the status quo and the powerful, Chinese
aid is thus often more attractive for developing country governments
that often resent the stringent conditionality imposed by the IMF and
the World Bank based on the free market neoliberal principles. But one
should keep in mind that China’s current foreign aid program is dras-
tically different from its pre-1978 aid policy that aimed at supporting
anti-West insurgencies and communist revolutions around the world
starting in the early 1950s and then competing with the Soviet Union in
places like Africa. With economic reform and opening, China began to

DOI: 10.1057/9781137593870.0008
64 The Asian Infrastructure Investment Bank

accept foreign aid and was influenced by how aid works based on their
collaborations with foreign donors, particularly Japan. In fact, there are
striking similarities between China’s aid program and Japan’s early ODA
projects.20
The World Bank leadership has sounded mostly supportive of the
AIIB. World Bank President Jim Yong Kim has repeatedly expressed
strong interest in cooperation with the AIIB. The AIIB would be yet
another regional development bank, adding to the existing ones. Kim
also observed that the funding need for infrastructure in the develop-
ing countries is ‘simply enormous’.21 In his recent visit to China, Kim
told journalists in Beijing on 17 July 2015 that the World Bank and the
AIIB would start discussions later in the year about specific cofinancing
projects.22 The AIIB would be more a challenge for the ADB than for
the World Bank. More broadly, the US government has not been overly
critical of the AIIB since its setback suffered when Great Britain decided
to join the AIIB on 12 March. Rather, the United States has focused on
what it does the best, namely, more motivated to conclude the TPP nego-
tiations and to shore up alliances and friendships with the East Asian
countries. By contrast, the Japanese leaders have been far more willing to
criticize the Chinese project.

Japan and the ADB

The ADB is the institution that the AIIB competes against the most. The
ADB was founded on 22 August 1966, almost half a century ago and 20
years after the World Bank. The ADB now has 67 members, with 48 from
Asia. The Japanese media has been far more focused on the AIIB and its
implications for the ADB than the American media.
Why did Japan build the ADB? It seemed natural for Japan to take
such a step for those who wrote about the bank in the 1970s. There had
been an extensive practice of foreign aid by developed countries and
multilateral financial institutions. There was an Asian regional dynamic
for greater cooperation. Japan had recovered and was now looking
outward. Japan wanted greater prestige and influence.23 Japan would be
the first country to match the United States in its financial contributions
to a major international organization. Japan was ambitious. Japan sought
to establish a regional development organization less than ten years after
it regained sovereignty in 1952.

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 65

Yet Japan sought to achieve its goals cautiously, leveraging partner


countries and the strategic environment. A lesson had been learned
by the earlier efforts made by Prime Minister Kishi Nobusuke. Kishi
proposed three schemes to promote regional economic cooperation,
all in vain. The United States was not supportive since all the Kishi
initiatives relied on American financing without giving the United States
managerial control. Moreover, the Asian countries were also opposed
to Kishi’s ideas. The initial idea for an Asian Development Bank came
from a private citizen Ōhashi Kaoru. Ōhashi was well connected with
politicians and Ministry of Finance officials. He organized a private
study group in 1962 to produce a concept proposal on a regional devel-
opment bank modeled after the World Bank and the Inter-American
Development Bank (IADB) to supplement the World Bank in Asia. The
plan called for an initial capitalization at $1 billion. Japan and the United
States would contribute about $300 million each. The headquarters
would be located in Tokyo and the bank would be headed by a Japanese
president.24 The group came to be chaired by Watanabe Takeshi, who
would later become the first ADB president. Watanabe sounded out
American reaction to the proposal but received little support during his
visit to Washington, DC, in 1963. Yet fortunately for Japan, the United
Nations’ Economic Commission for Asia and the Far East (ECAFE) was
exploring the establishment of a regional development bank independ-
ently. The two institution-building streams eventually merged. Thus, it
was an Asian group that formally initiated the ADB project. The ADB
was officially created under the ECAFE auspices, and ECAFE organ-
ized the first meeting about the creation of such a bank.25 Watanabe
represented Japan at the ECAFE experts’ meeting. The proposal of the
Japanese study group essentially became the ECAFE recommendations
as the principal writer for the recommendation was a Japanese Ministry
of Finance official on loan to the ECAFE.26 Watanabe deliberately chose a
low-profile approach, anticipating negative Asian reaction to a Japanese
leadership role. He did not disclose the private Japanese plan to others at
the meeting.27
The ADB was a major diplomatic initiative that a rising Japan took
in the early 1960s within the US-led international order. It would be
inconceivable for Japan to proceed with the ADB initiative without US
support. Japan also needed the United States to share the burden of
financing and improving the creditworthiness of the bank in the global
financial market. The bank needed to raise capital at a favorable rate.

DOI: 10.1057/9781137593870.0008
66 The Asian Infrastructure Investment Bank

Japan saw a niche. As Watanabe recalled, the Japanese participants in


the Japanese study group agreed that there was a need for an Asian devel-
opment bank since ‘requirements of Asian development were too large to
be met solely by the World Bank whose activities in Asia—except in India
and Pakistan—were far from adequate’.28 Moreover, the Japanese were
fully aware of such regional developments in Latin America and Europe.
Japan did not achieve all its goals, particularly the goal of hosting the
headquarters in Tokyo. It did acquire the presidency and important staff
positions to ensure Japanese dominance in the bank. And it could not
push down the percentage of the voting shares to be distributed equally
among the member states. Japan preferred 10 percent rather than the 20
percent formally adopted by the bank.
The Working Group of Experts organized by ECAFE agreed that a
regional development bank would facilitate regional trade liberalization
and regional coordination for economic growth.29 Also, similar to Japan,
most ECAFE countries wanted to invite nonregional developed coun-
tries to enhance the bank’s capacity to raise capital in the global finan-
cial market while maintaining the Asian character of the ADB. They
studied the experience of the Inter-American Development Bank and
the African Development Bank (AfDB) and decided not to follow their
examples.30 In terms of voting power, for example, after much debate,
the ADB agreed to set 20 percent of voting power on the basis of equal-
ity for both regional and nonregional members and 80 percent on the
basis of proportionality. Both the United States and Japan had wanted a
lower percentage of voting shares based on equality. Japan actually had
reservation on the final decision. It was known to the people involved in
the creation of the ADB that the African Development Bank distributed
50 percent of voting power on the basis of equality, the IBRD about 10
percent and the IDB about 3.3 percent.31 As mentioned earlier, the AIIB
will distribute 12 percent of the voting power on the basis of equality,
which is similar to the IBRD.
While the Japanese often emphasize the Japan-US-led ADB now, there
were times when the Japanese and Americans fought within the bank,
and Japan was still worried about financial costs in the mid-1960s. Yet
by 1972 Japan had quietly and skillfully established its leadership in the
bank, forging a strong institutional tie between the bank and the Japanese
Ministry of Finance. Japan now has an institutional advantage similar to
what the United States has had in the World Bank. As an ‘Asian’ institu-
tion, the ADB acquired Japan’s organizational culture to this day.32 Curtis

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 67

Chin, a former US ambassador to the ADB and an executive director


at the bank under President Bush and President Obama, confirms what
observers of the ADB have known, namely, that ‘management and staff
of that Japan-led institution were able to undercut or “slow walk” initia-
tives that the US and European shareholders had long advocated for’. In
particular, the head of the bank’s budget and personnel department is
typically seconded from the Japanese government.33 Japan can achieve its
objectives through closed-door, painstaking consensus building.
With a strong ‘un-Japanese’ president in Fujioka Masao (1981–1990),
Japan sought to establish hegemony in the bank in the late 1980s through
‘harmonization’ between voting shares and special fund contributions,
the latter of which came mainly from Japan. Yet Japan could not achieve
its objective due to fierce US opposition. While not willing to make
greater financial contributions, the US government succeeded in main-
taining parity with Japan in the bank. When push comes to shove, the
Japanese government had to weigh its overall relations with the United
States. The Japanese also used the ADB along with the World Bank and
the IMF to recycle their balance of payment surpluses to demonstrate
Japanese contribution to the international system instead of more contro-
versial defense contributions to the United States. The Japanese reverted
back to a more cautious leadership style in the bank in the 1990s.34
The ADB came under US criticism in the 1980s for focusing too much
on the expansion of loans for large projects. The Japanese leadership
yielded to most US requests. Yet while the ADB policy now put greater
emphasis on poverty alleviation, the content of its projects had changed
little, with continuous emphasis on economic growth and meeting
lending targets.35 The Japan-US tension took place in a larger context
of Japan-US tensions in the late 1980s and the early 1990s when many
in both Japan and the United States felt that Japan was surpassing the
United States. Many in the United States were determined to maintain
American supremacy and demanded that Japan play ‘fairly’. The United
States remained vigilant even after the bubble burst in Japan in the early
1990s. As a case in point, the United States killed the Japanese proposal
for the Asian Monetary Fund (AMF) during the Asian Financial Crisis
of 1997–1998. Ironically, the success of the US government strategy left
the field more open for China to move in.
China became interested in the ADB once it began reform and open-
ing in 1978. The Chinese government, for example, invited Watanabe
Takeshi to lecture on the ADB. Beijing formally sought membership in

DOI: 10.1057/9781137593870.0008
68 The Asian Infrastructure Investment Bank

1983, three years after it joined the World Bank. Much of the negotiation
was about the Republic of China, which was an original member. After
a shuttle diplomacy conducted by Fujioka Masao, the ADB president,
China joined in March 1986 while Taiwan changed its name in the ADB
to ‘Taipei, China’.36 There was a long delay in China being accepted into
the ADB due to concern over greater financial burden on the bank and
US congressional opposition.37 Politics has always mattered for the ADB,
including its operations.
China has benefited from its ADB membership. With China’s rise, a
gap has emerged and grown between China’s growing economic power
and its voting share in the bank. When China joined the ADB, it was
given a voting share of 6.2 percent, slightly ahead of India (6.1 percent),
and behind Japan (12.5 percent) and the United States (12.3 percent).38
China’s voting share in the ADB has actually decreased over time. China’s
share decreased to 5.4 percent in 2006 while Japan’s share increased to
12.8 percent, therefore a 15 percent decrease relative to Japan.39 That ratio
between China and Japan remains largely unchanged. In fact, China
fares much better relative to Japan in the World Bank (64.6 percent of
Japan’s voting share) than in the ADB (42.6 percent).40
As Joel Rathus pointed out correctly in his 2008 article, China’s rising
power had not come at Japan’s expense in the ADB. Japan had begun
decreasing ADB loans to China due to concern over that country’s mili-
tary development. He did forecast potential tensions between the two
countries if China became an aid great power.41 If we look at the overall
Sino-Japanese relations, we realize that the ADB has not been a source of
tension. Now that we have the AIIB drama, one might go back and dig up
some issues related to China and the ADB. Mark Magnier of Wall Street
Journal, for example, has commented on two incidents. In 2009, China
attempted but failed to prevent an ADB project in an area in India that
China claims. In 2010, China blocked the ADB investigation of whether
an ADB environmental protection project in a coastal Chinese city had
treated the residents properly. The Chinese government proceeded with-
out ADB funding.42 Yet as a specialist who has followed Sino-Japanese
relations closely, I know that the ADB has virtually never come up
voluntarily for both the Chinese and Japanese experts and officials. The
two governments have had enough tensions since the start of the 2000s.
The ADB has not been one of them.
For the ADB infrastructure has traditionally been an important
component of its efforts though its declared policy preference is now

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 69

poverty alleviation. As a case in point, Japanese Finance Minister Asō


Tarō told the attendees at the annual meeting in May 2014 that Japan
would mobilize its capital, technology, knowledge and experience to
assist infrastructure in Asia because infrastructure is the foundation for
sustainable growth.43
The Japanese have followed the development of the AIIB far more
closely than any other nations, driven by concern over growing Chinese
influence at the expense of the ADB. Given its growing tension with
a rising China, Japan’s position is hardly surprising. They had already
begun to view virtually all Chinese actions as directed against them.
When the news of Xi’s proposal for an AIIB broke on 3 October 2013,
Japanese media immediately saw it as a challenge to the ADB.44
It was reported on 5 July 2014 that the Chinese government had
requested Japanese participation in a meeting with the Japanese
government in June. Yet the Japanese government had declined. They
contended that Japan could not join based on the current plan that failed
to clarify division of labor with the ADB. Yet the real Japanese concern
was over China gaining influence through aid to Asian countries. Japan
was reportedly following a strategy of cooperating with the United States
and asking Australia and Southeast Asia not to participate in the China-
led AIIB.45
It is not possible or necessary to go through the intense Japanese media
coverage of the AIIB issue. There have been supportive views expressed,
particularly framed as helping shape the AIIB the right way from inside
or helping Japanese firms to compete better. Yet the mainstream assess-
ment has been highly negative. Different reasons have been given, some
sounding like mantras after a while. Examples are as follows: since
the ADB has a proven record in assisting Asian development, why the
duplication? The AIIB will facilitate the rise of the yuan at the expense
of the yen. The operation of the AIIB is not transparent. Japan does not
really need to be in the AIIB since it will not have as much influence as
desired anyway. It is not clear how many gains the Japanese companies
can realistically expect from the bank. Thus far, Japanese companies have
not been particularly competitive in winning bids from the multilateral
development institutions including the ADB. Finally, Japan cannot be
seen in Washington as yielding to China while working hard to persuade
the United States to counter China.
By end of October 2014, the Japanese did not feel overly concerned
since the AIIB had attracted only 21 countries at that point in time, with

DOI: 10.1057/9781137593870.0008
70 The Asian Infrastructure Investment Bank

the largest power being India. The Japanese believed that Australia and
South Korea would not join the bank. When New Zealand joined in early
January 2015 amid stories about Australia’s keen interest, the Japanese
became more concerned and paid particular attention to South Korean
moves. The British decision to join the AIIB was a shock for the Japanese
government. Prime Minister Abe Shinzō had previously been assured
by the Ministry of Foreign Affairs and Ministry of Finance that no G-7
country would join the AIIB. Much resentment against Great Britain
was expressed within the Japanese government but there was nothing
Japan could do about it. The Japanese became even more shocked when
continental European powers such as Germany and France decided to
join as well. They had explained away Britain’s decision as driven by
special circumstances such as the scheduled general election in May.
Abe had just met German Chancellor Angela Merkel eight days earlier.
They talked about the AIIB and Merkel did not give any indication that
Germany would join the bank according to Japanese media report.46
There was some support within the Japanese government to join as
well.47 On 20 March Finance Minister Asō briefly entertained the possi-
bility of Japan joining the AIIB if the bank met the standards of transpar-
ency in project decision and the environment, but both the chief cabinet
secretary and the foreign minister maintained a cautious stance.48 Asō
would toe the government line later. The Japanese Foreign Ministry and
Prime Minister Abe prioritized relations with the United States.49 With
Abe’s upcoming visit to the United States, Japan did not want to appear
to be breaking away from the United States. Another perceived oppor-
tunity was the end of June when the founding members would sign the
Articles of Incorporation. Yet Abe did not want to make a move so close
to his successful visit to the United States. Japan has a larger strategic
interest that is different from the distant European powers.
While it is difficult to predict what will happen, we already know
that the AIIB has added competition to the development institutional
landscape in Asia and beyond. In fact, the Japanese have already begun
to respond by adapting the ADB, something they would not have done
judging by the recent history of the bank and the reform-resistant nature
of the Japanese bureaucracy.
Pressure was building on the ADB even before the AIIB caught on. It
was reported in Japanese media after the British decision on 12 March
that the ADB now wanted to increase its financing by 1.5 times to around
$20 billion a year from 2017 on to compete for leadership with the AIIB.50

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 71

The ADB leadership typically expressed interest in cooperation with the


AIIB but always urged the AIIB to have transparency in governance and
follow the international standards. Once the China-led bank became a
certainty, the ADB had to respond. The ADB held its annual meeting in
Baku, Azerbaijan, on 2–5 May 2015. This naturally attracted much media
attention, particularly the Japanese media. Everything was indeed viewed
from the lens of competing with the AIIB. The ADB first announced that
the bank would combine its ordinary and special fund lending to $20
billion, an increase of 50 percent. Nakao announced at the closing speech
on 5 May that the bank would seek increasing contributions, but he did
not mention whether the emerging countries like China and India would
now have a greater voting power.51 This could be contentious. Moreover,
the US Congress has not been particularly interested in making greater
financial contributions to multilateral financial institutions for years
now.
It seems to a large number of observers outside Japan that there is suffi-
cient room for both financial institutions to grow. The ADB estimated
an infrastructure funding need of $8 trillion in 2010–2020. As a repre-
sentative view, Indonesian Finance Minister Bambang Brodjonegoro
told the media in Baku that ‘we need both AIIB and ADB because the
infrastructure financing need is very big, it cannot be fulfilled by only
one institution. We need strong collaboration between ADB and AIIB; it
is critical not only for Indonesia but for most of the developing countries
in Asia’.52 As the challenger, the Chinese delegation struck a conciliatory
tone.
Not surprisingly, the Japanese feel that they have the most to lose.
Despite much branding, the ADB has always been about infrastructure
projects. As ADB President Nakao Takehiko told the journalists at the
meeting, 80 percent of the ADB projects are for infrastructure.53 Unlike
the World Bank, the ADB is more tightly controlled by the Japanese
Ministry of Finance, with the ADB presidents typically being the ‘old
boys’ of the ministry and some senior positions taken up by the minis-
try officials on secondment. Thus, the Japan-China rivalry is felt more
strongly in the ADB position. Fundamentally, this is about power and
influence. One should also keep in mind that the ADB has played a
significant role in Japan’s vision for Asian regionalism.54 And Japan has
arguably leveraged its dominance in the ADB for greater global influ-
ence.55 In a typical Japanese fashion, the ADB president announced a
plan to increase public-private partnership in project development,

DOI: 10.1057/9781137593870.0008
72 The Asian Infrastructure Investment Bank

setting up a special fund for the purpose. They also signed an agreement
with several major banks including HSBC Holdings and Bank of Tokyo-
Mitsubishi UFJ to accomplish this goal.
Besides increasing the capacity of the bank, the Japanese government
has also sought to differentiate the bank from the AIIB by emphasiz-
ing the quality of Japanese aid programs. That is exactly what Finance
Minister Asō said at a panel discussion at the annual meeting with the
Chinese present. Prime Minister Abe also made a similar pitch for high-
quality Japanese investment in infrastructure at the G-7 summit held in
Germany in May 2015.
Right before the G-7 summit, Abe had announced that Japan would
commit $110 billion to fund Asian infrastructure projects. This is a larger
amount of money than the AIIB subscribed capital. What is striking is how
drastically different Japan’s approach is now compared to its past. Japan
used to act regarding the ADB in a way suggesting that it did not particu-
larly care how much concrete benefits it would gain from the bank as long
as it maintained its high status.56 This is part of a broader change in Japanese
official development assistance (ODA) policy.57 There is little visible resist-
ance in Japan to this drastic change as if it is only natural. A long-term
economic slowdown and China’s intensifying competition have contributed
to this change, but such a sharp turnaround raises a fundamental question
about the nature of the Japanese political economy system. Although Japan
has been a mature, functioning democracy since the end of the World War
II, it is hardly liberal. Thus, a more nativist, nationalist instinct resurfaces
as soon as the system is under duress. In that context, Japan is focusing on
‘doing well’ rather than ‘doing good’ in its economic foreign policy.58
On 4 July, Abe pledged 750 billion yen ($6 billion based on the
exchange rate of the day) of ODA in three years starting in Fiscal Year
2016 to Thailand, Vietnam, Cambodia, Laos and Myanmar at the
Japan-Mekong summit held in Tokyo. Abe emphasized the importance
of the Mekong River region for Japan and ‘high-quality’ infrastructure
investment. The pledge is much bigger than the 600 billion yen pledge
in the previous three-year cycle. The Japanese media again saw the Abe
administration’s clear intention to counter the AIIB.59 Like the previous
Democratic Party of Japan administration, the Abe government has also
been promoting infrastructure exports as a way to bring Japan out of
a two-decade-long economic slowdown. Yet the Japanese have faced
tough competition from the Chinese who have been able to deliver large
infrastructure projects at a faster time and lower cost.

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 73

It makes sense for the Japanese to emphasize quality given the higher
costs of Japan-exported infrastructure projects. Japan needs to go to that
niche and put China down at the same time. Yet a project has to be cost-
effective for the recipient countries. Sino-Japanese rivalry in this area
is fundamentally good news for the recipient countries given greater
quantity of assistance and a greater variety of products and services
available. Better infrastructure in East Asia, funded by whomever, would
be beneficial for all. Moreover, the competition will necessarily force
the Japanese to lower costs and the Chinese to improve quality, gener-
ating even more benefits for the recipient countries. The Chinese do not
appear threatened by Abe’s moves.60 They are on the rise and have proven
competitive with their aid packages that often are suitable for developing
countries. It is also arguably easier for China as a catch-up economy to
improve quality than for Japan as a mature economy to lower costs.
The Japanese keep talking about the importance of transparency.61 At
the same time, the integrational projects Japan and the United States
have championed are not transparent either. As a case in point, the
details of the TPP were not disclosed to the members of the Japan Diet
as late as early May 2015. The Japanese government made it clear on May
5 that the Diet members would be shown the detail of the negotiations
in the next week on the conditions that they not reveal the secrets.62 The
members of US Congress can view the texts in a secure room but cannot
discuss them in public. In fact, the content of the ongoing TPP negoti-
ations have been such a closely kept secret that WikiLeaks announced an
award of $100,000 to anyone who can get a copy of the TPP agreement.
WikiLeaks had already published some chapters of the agreement under
negotiations but had not been able to have its hand on the whole thing.63
The Japanese have also been talking about ‘governance’. Yet the ADB
did not take on this issue until the mid-1990s and only under US pressure.
The ADB adopted a board-approved policy on governance in October
1995. The governance issue was controversial for the multilateral devel-
opment banks because their articles of agreement typically emphasize a
principle of political noninterference. Recipient countries also typically
resent what they view as infringement upon their sovereignty. China
and a number of other ADB member countries were especially opposed
to any linkage between policy and capital. The ADB adopted a narrow
definition of governance. It chose the definition in the 1979 edition of
Webster’s New Universal Unabridged Dictionary that says that govern-
ance is ‘the manner in which power is exercised in the management

DOI: 10.1057/9781137593870.0008
74 The Asian Infrastructure Investment Bank

of a country’s social and economic resources for development’. On the


global level, the dominant view in the West was that good governance is
democracy and democratization.64 In fact, it is well recognized that the
ADB has not followed the World Bank’s lead in linking development to
human rights.65 What the Japanese mean by governance in the discourse
on the AIIB is mainly about the internal governance of the bank. Their
concern is over China’s dominance in the bank.
As discussed in Chapter 2, Japan was far quicker in adapting to the
West-dominated international system and used that head start against
other Asian nations. To a large extent, the Japanese identity as the most
modernized Asian country and teacher to other Asian countries remains
strong. It is to Japan’s advantage to ask China or other countries to adapt
to the international norms defined by the United States since Japan has a
stronger alliance with that country than anyone else in the region.
It is not unreasonable to expect the AIIB to be less conforming to
the existing international financial institutions than the ADB. After all,
as a country that views itself as between Asia and the West, Japan has
sought to balance between insistence on its own way of doing things
and compromising with the adoption of Western features. These include
accountability and transparency to the extent that observers often draw
different assessment about the ADB.66 China is in a different place in the
global system and behaves differently from Japan. Nevertheless, the fact
that it has been mainly the Japanese lecturing China over the AIIB has not
been well received in Beijing. The Japanese position reflects both anxiety
over loss of power and influence and long-standing identity that they are
the most qualified in Asia to understand the international norms. All
the comments are subconsciously meant to check China’s advance and
achieve some results in shaping the AIIB from outside. Yet so far it only
serves to annoy the Chinese government. On 18 June 2015, the Chinese
Foreign Ministry spokesman commented that ‘we also understand those
who choose not to join at the current stage. But if some countries, who
themselves are not willing to join, keep carping about others’ efforts to
solve problems, then that is not quite desirable’.67

The AIIB compared to the World Bank and the ADB

The World Bank, the ADB and the AIIB were created in different points
of time and the three key players were situated in different places in the

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 75

global system. The United States was a world hegemon and especially
powerful in the economic and financial arena at the end of World War
II. The winning great power gets to restructure the postwar international
order. As a defeated and protected country, Japan sought to enhance
its standing within American hegemony, which largely explains why it
proceeded with the ADB project. The Japanese commentators viewed
the creation of the ADB in which Japan held as high a share of voting
power as the United States as indication of its growing importance in
world economy. By contrast, the Chinese government was willing to
push ahead without the United States.
Different from Japan, the Chinese government has been far more
assertive. The AIIB initiative came straight from the top, which partly
explains the fast pace of its creation. This difference results from differ-
ent positions the two Asian great powers occupy and the different nature
of their relationships with the United States. Japan was not as powerful
relatively speaking in the early 1960s as China is in the mid-2010s. Japan
was an ally with the United States and had been occupied by the United
States merely a decade ago. Japan wanted to elevate its position vis-à-vis
the United States but did not want to challenge the hegemon. In fact, the
Japanese government viewed securing US participation as central to the
success of the ADB project. Moreover, Japan did not want to shoulder
the financial burden alone. Conversely, the US government was initially
indifferent to the ADB initiative.68 By contrast, the China-led AIIB
greatly alarmed the United States.
In the scheme of things though, China has started at a slower pace
than Japan did with the ADB. Japan began to think about creating a
regional development bank merely ten years after regaining its sover-
eignty. By contrast, it took longer for China to take this step—34 years
after its opening and reform in 1978. One important reason is that Japan
was a developed country while China is yet to reach that stage.
The AIIB is commonly viewed in Japan as a rival with the ADB in
terms of membership: 67 for the ADB and 57 for the AIIB. But we should
also compare the two banks at their birth. The AIIB is relatively more
successful judging by the size of membership. The ADB was founded by
31 member states, which were divided into two categories of 19 regional
and 12 nonregional members. The 19 regional included Afghanistan,
Australia, Cambodia, India, Indonesia, Japan, South Korea, Laos,
Malaysia, Nepal, New Zealand, Pakistan, Philippines, Samoa, Singapore,
Sri Lanka, Taipei (China), Thailand and Vietnam. The nonregional

DOI: 10.1057/9781137593870.0008
76 The Asian Infrastructure Investment Bank

members included Austria, Belgium, Canada, Denmark, Finland,


Germany, Italy, the Netherlands, Norway, Sweden, United Kingdom and
the United States.
The AIIB membership can be even bigger. The ADB membership
includes Taiwan (Taipei, China) and Hong Kong (China). Taiwan actu-
ally applied to the AIIB but was not accepted over its proposed name.
Beijing wants to emphasize the ‘One China’ principle. The Chinese
government has welcomed Taiwan to be a member, just not a found-
ing member. Hong Kong has also indicated that it wants to join. China
wants to differentiate sovereign states from other entities. The ADB
membership also includes a number of small Pacific island countries not
currently in the AIIB.
The ADB could have been much larger as well. Israel, Saudi Arabia
and Kuwait wanted to join the new bank, but the ADB decided against
including nonregional developing countries. The United States and other
countries were interested in inviting the Soviet Union and other East
European socialist countries but those countries decided not to join
based on the argument that the ADB does not give equal voting rights
to all members. Iran was active in the preparatory stage but did not
join largely because it failed to win the headquarters to Tehran. Burma
also stayed away from the ADB initially because it wanted to invite the
Asian socialist countries like China, North Korea and North Vietnam.69
Twenty-two countries signed the Articles of Agreement on 4 December
1965, the last day of the Conference of Plenipotentiaries and nine other
countries by 31 January 1966. The agreement provided that the member
countries deposit their instruments of ratification or acceptance by 30
September 1966. All signatory countries except Iran did so by the dead-
line.70 Thus, the AIIB is at least moving as smoothly as the ADB did.
Looking at Table 3.1, one should see that the AIIB is more Asian than
Pacific when compared to the ADB. Since Japan and the United States
have the largest voting shares and Canada is a member country, the
center of gravity for the ADB is in the Pacific Ocean. By contrast, the
center of gravity for the AIIB is in the western part of China, close to
the heart of the Eurasian continent, with China, Russia and India as the
top three voting shareholders.
Map 4.1 and Map 4.2 reveal more clearly the geographical difference
between the AIIB and the ADB. Map 4.1 contrasts the geographical
distribution of the ADB membership when created with the AIIB found-
ing membership in 2015. The ADB membership in the mid-1960s was

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 77

ADB members only

AIIB members only

Both ADB and AIIB members

map 4.1 ADB membership in 1966 versus AIIB membership in 2015


Note: This is an equal area map based on ESRI, World Cylindrical Equal Area. ArcGIS10.1
mapping software is used. For the ADB membership, Germany rather than West Germany is
marked and Taiwan is not marked for technical reasons.

centered in the Pacific Ocean and spread into Western Europe, Australia,
some Southeast Asian countries and India. It overlapped with the Cold
War divide. The AIIB membership overlaps with the ADB original
membership in Southeast Asia, South Asia and Oceania, but sharply
differs from the ADB in that it occupies almost all of the Eurasian
continent, plus two BRICS countries in Brazil and South Africa. Map 4.2
shows that the two banks now overlap much more, but still differ in the
ADB’s tilting to the Pacific and the AIIB centered in Eurasia.
With the AIIB, the Chinese intend to improve international financial
institutions. They view the World Bank and the ADB as overly bureau-
cratic, overstaffed and cumbersome. This is an assessment on which
some longtime World Bank insiders agree. On the eve of the official
signature for the Articles of Agreement on 29 June 2015, Jin Liqun,
the Chinese candidate to be the first AIIB president, told journalists
that the AIIB would learn both positive and negative lessons from the

DOI: 10.1057/9781137593870.0008
78 The Asian Infrastructure Investment Bank

ADB members only

AIIB members only

Both ADB and AIIB members

map 4.2 ADB membership versus AIIB membership in 2015


Note: This is an equal area map based on ESRI, World Cylindrical Equal Area. ArcGIS10.1
mapping software is used. Taiwan and Hong Kong are not marked for technical reasons.

existing international financial institutions but will not be their clone.71


The Chinese government wants the AIIB to be nimbler and use elec-
tronic communications more.72 The fact that the existing international
financial institutions need improvement should not be controversial. By
definition all institutions can be improved. The international financial
institutions have been criticized from all angles over the years. The more
important question is whether China can indeed do better, which is not
knowable at this point.

The AIIB nested to the World Bank and the ADB


Whether Beijing will actually succeed or not, its efforts to create the
AIIB are within the realm of acceptability and respectability in the exist-
ing international order. Using the evolutionary terminology, the AIIB is
nested to the World Bank and the ADB. There is an unmistakable evolu-

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 79

tionary linkage from the World Bank and the ADB to the AIIB even
though they took place in different historical contexts.
The World Bank was unquestionably the original multilateral devel-
opment institution. The ADB borrowed much from the World Bank.
Participants such as Watanabe had direct experience with the World
Bank. The World Bank also provided valuable advice. The ADB was thus
a strong functional equivalent to the World Bank within Asia. There were
necessarily institutional adaptations from the World Bank and existing
regional development banks such as the IDB and the AfDB.73
The ADB was nested to the World Bank and the West-led international
order. As discussed earlier, the ADB was officially created under the
auspices of ECAFE, a UN organization. There were also other nesting
links. For example, the ‘Agreement Establishing the Asian Development
Bank’ signed in December 1965 stated in Article 3 of Chapter 1 that
‘membership in the Bank shall be open to: (i) members and associate
members of the United Nations Economic Commission for Asia and
the Far East; and (ii) other regional countries and nonregional devel-
oped countries which are members of the United Nations or of any of
its specialized agencies’. The instruments of ratification or acceptance
needed to be deposited with the secretary general of the United Nations.
As discussed in the previous paragraph, there were all these experience-
based and personnel linkages with the existing institutions.
China has borrowed from both the World Bank and the ADB. China
did not need the filter of the ADB to learn about contemporary inter-
national financial system. China joined the World Bank six years before
the ADB admitted Beijing. China has gained practical experience from
its participation in the ADB just as it has gained experience from the
World Bank and other international organizations. Most noticeably, Jin
Liqun, the AIIB’s secretary general of the Multilateral Interim Secretariat,
worked as an ADB vice president (August 2003–July 2008). Jin also had
extensive experience working with the World Bank, including as an
alternate executive director to the World Bank groups in 1988. The AIIB
is nested to the ADB, the World Bank and other international financial
institutions just like the ADB before it. However, it is arguably less so than
the ADB. Such nestedness is an indication of evolution in international
financial institutions. As Coyne has argued, ‘the nested arrangement of
life is precisely what evolution predicts’.74 I argue that institutions that are
not evolutionary cannot be nested. The AIIB is evolutionarily linked to
the World Bank, the ADB and other postwar international institutions.

DOI: 10.1057/9781137593870.0008
80 The Asian Infrastructure Investment Bank

According to the Articles of Agreement for the AIIB, the bank defines
‘Asia’ and ‘region’ as ‘the geographical regions and composition classified
as Asia and Oceania by the United Nations, except as otherwise decided
by the Board of Governors’. And the AIIB membership is open only to
the members of the IBRD or the ADB. This is not convergent evolution
because of time difference. There were no historical precedents in China’s
own traditional institutions.
In Table 4.1 I compare the Articles of Agreement for the IBRD, the
ADB and the AIIB. The table reveals a striking similarity between the
three institutions, at least on paper. In the following paragraphs, I will
elaborate on a few evolutionary traits between the three documents.
The starting point for comparing international agreements is their
preambles and objectives. The Articles of Agreement for the IBRD (as
amended effective 27 June 2012) goes directly to five purposes, namely,
to assist reconstruction and development, promote private foreign
investment, promote balanced growth of trade, arrange loans for more
useful and urgent projects, and bring about a smooth transition from
a wartime to a peacetime economy. Both the ADB and AIIB Articles of
Agreements have a preamble that look similar except that the AIIB high-
lights infrastructure as its core mission. The ADB charter and the AIIB
charter both emphasize economic development and regional cooperation
as key purposes. Then the ADB charter lists six functions and the AIIB
lists four, which are similar to the listed purposes for the IBRD except
that they both emphasize the need to ‘promote investment in the region
of public and private capital for development purposes’, using identical
languages, for Function (i). The IBRD charter does not mention public
capital. Thus, the AIIB is more similar to the ADB than to the IBRD in
purposes. Note, however, that both the ADB and AIIB documents follow
the conventional format of international agreements.
In terms of membership, the AIIB is closer to the IBRD because it is
open to virtually all countries in the world. The ADB restricts nonre-
gional members to developed countries. Yet similar to the ADB, the
AIIB differentiates regional from nonregional member states and gives
preference to the former. The AIIB is fundamentally a regional financial
institution. What is defined as regional for the ADB is not exactly the
same for the AIIB. As shown in Table 3.1 Turkey is considered a nonre-
gional member at the ADB but a regional member at the AIIB.
Both the ADB and the AIIB follow the authorized and voting share
model established by the IMF and the World Bank. Yet the AIIB is closer

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 81

table 4.1 The AIIB versus the IBRD and the ADB
IBRD ADB AIIB

Purpose Reconstruction Regional economic Sustainable


and development, development and development, regional
promote private cooperation cooperation
investment, promote Functions: Functions:
long-range balanced Promote public and Promote public and
growth, arrange loans private investment, private investment,
for most useful, most utilize is resources to utilize its resources to
urgent projects first, finance development, finance development,
assist transition from meet requests from encourage private
wartime to peacetime members to assist investment, other
economy them in development services
policy, provide
technical assistance,
cooperate with UN,
ECAFE
Membership International ECAFE members, IBRD or ADB members
Monetary Fund other regional Regional: Asia and
members countries and Oceania as defined by
Total members in nonregional United Nations
IBRD:  developed countries Nonregional
that are UN members founding members
Total members: 
Authorized  billion in ,  billion in ,  billion, 
capital  paid-in,   paid-in,  paid-in,  callable
callable callable initially  for regional
At least  for members
regional members  for nonregional
 for nonregional members
members
Currency Gold, US or  gold or US or convertible
other currencies as convertible currency currencies
specified  the currency of
the member
Governance Board of governors Board of governors Board of governors
Executive directors Board of directors Board of directors
(five from five largest (seven regional and (nine regional and
share holders each, three nonregional, three nonregional),
seven elected by resident in nonresidential and not
governors), resident headquarters, meet as paid
in headquarters, meet often as required President and vice
as often as required President and vice presidents
President and vice presidents President Chinese?
presidents President Japanese by
President American practice
by practice

Continued

DOI: 10.1057/9781137593870.0008
82 The Asian Infrastructure Investment Bank

table 4.1 Continued


IBRD ADB AIIB
Voting . Basic votes: . Basic votes: . Basic votes:  of
. of all votes  of all votes all votes distributed
distributed equally distributed equally equally
. One vote for one . One vote for one . One vote for one
share of authorized share of authorized share of authorized
capital capital capital (, a
share)
.  votes each for
founding members
Top five voting . United States: . Japan: . . China: .
share holders . . United States: . India: .
. Japan: . . . Russia: .
. China: . . China: . . Germany: .
. Germany: . . India: . . South Korea: .
. France/United . Australia: .
Kingdom: .
Headquarters Washington, DC Manila, Philippines Beijing, China
Working English by practice English by rule English by rule
language
Source: Chinese Ministry of Finance, ‘Asian Infrastructure Investment Bank: Articles of Agreement’,
http://www.mof.gov.cn/zhengwuxinxi/caizhengxinwen/201506/P020150629360882722541.pdf. Date
accessed 1 July 2015; World Bank, ‘International Bank for Reconstruction and Development:
Articles of Agreement’ (as amended effective 27 June 2012), http://siteresources.worldbank.
org/BODINT/Resources/278027-1215526322295/IBRDArticlesOfAgreement_English.pdf.
Date accessed 1 July 2015; World Bank, ‘World Bank Finances’, https://finances.worldbank.org/
Shareholder-Equity/IBRD-Statement-of-Subscriptions-to-Capital-Stock-a/rcx4-r7xj#column-
menu. Date accessed 1 July 2015; ADB, ‘Agreement Establishing the Asian Development Bank’,
http://www.adb.org/documents/agreement-establishing-asian-development-bank-adb-charter. Date
accessed 1 July 2015; Table 3.1. The voting shares for the AIIB come from news stories. For the
voting shares of the top five in the AIIB, see Center for Strategic and International Studies Asia
Program, 7 July 2015, http://cogitasia.com/by-the-numbers-china-the-asian-infrastructure-
investment-bank-aiib/. Date accessed 10 July 2015.

to the IBRD in terms of basic votes that are distributed equally among
member states. The AIIB has a 12 percent basic vote arrangement,
compared to 5.55 percent for the IBRD and 20 percent for the ADB. Both
Japan and the United States had hoped to keep the basic vote ratio to
10 percent but to no avail before the founding of the ADB. The AIIB
innovated by giving the founding members 600 votes, differing in prac-
tice from the IBRD and the ADB. Unlike both the IBRD and the ADB,
the AIIB has given greater prominence to emerging powers like India.

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 83

Though not in the Articles of Agreement, the AIIB reportedly calcu-


lates the shares of authorized capital by giving a 40/60 percent weight
to purchasing power GDP, which allowed India to become the second
largest shareholder in the bank.75
One of the well-publicized institutional departures by the AIIB is that
its board of directors will not be in residence in the headquarters in
Beijing and will not be paid. The Chinese government has argued that
it is wasteful and inefficient to have a permanent board that interferes
in bank operations on behalf of their home governments. Yet the criti-
cism is that such a system may give the president, presumably a Chinese
national, excessive power and influence.
We should recognize that the three documents are strikingly similar
or we would have heard from analysts and journalists, some of whom
are intensely scrutinizing the AIIB design. My discussion earlier is
largely consistent with the thrust of the comments and analyses on the
AIIB. That discourse matters because it helps shape policy response. At
the same time, as a social scientist I want to provide a more complete
and precise analysis of the similarities and differences between the three
documents.
The three documents are long. The IBRD Articles of Agreement has
11 articles, totaling 50 sections, as well as 2 schedules attached at the
end. The ADB document has 10 chapters with 66 articles, as well as 2
annexes at the end. The AIIB has 11 chapters that are divided further into
60 articles plus 2 schedules. Altogether, there are 87 features that can be
analyzed based on my tally.
As shown in Appendix, I have devised a simple method to measure
the similarities and differences between the three Articles of Agreement.
I treat linguistic composition as similar to DNA that stores informa-
tion. Thus, use of language provides evolutionary clues. I use my own
judgment to score the similarities between the documents, including
overlapping articles and unique ones. Any article that overlaps scores at
least 1 and 4 if there is a perfect match. Any article that is only in one
document but not in the other scores zero. In a three-way relationship,
if Document A has a clause but Documents B and C do not have it, A is
0 relative to B and C while B and C score 4. I focus mostly on substance.
Yet I give some consideration to how provisions are treated in the three
legal documents. If a feature is essentially the same but is listed as an
independent section or article but as only part of a section or article,
I score it as 3.5. An average of similarities would allow us to compare

DOI: 10.1057/9781137593870.0008
84 The Asian Infrastructure Investment Bank

the documents. To simplify things, I give equal weight to every article


and do not take into consideration different sequences. I also follow a
chronological order, comparing the second in line to the first and the
third in line to both the first and second.
It is conceivable to create a methodology that is more precise and even
machine-coded to avoid subjectivity. However, I am trying to provide a
prototype at this point. Moreover, it would be a methodological overkill
for studying only three documents.
Even a simple method yields at least three key findings, as captured in
Appendix. First, the AIIB is indeed much more similar to the ADB than
to the IBRD, but it has features from both. The ADB scores an average
2.477 out of 4 in terms of similarities to the IBRD. By contrast, the AIIB
has an average 2.241 with the IBRD but 3.098 with the ADB. If we itemize
the similarities, the AIIB is more similar to the ADB than to the IBRD in
54 of the 87 total features. At the same time, the AIIB is actually closer to
the IBRD than to the ADB in nine features. Put simply, the AIIB is not a
grandson to the IBRD through the ADB, but a cousin of the ADB.
Second, considering the fact that the IBRD and the ADB would look
somewhat different from themselves if they were redesigned from scratch
today, the three financial institutions are clearly related. On paper at least,
the newcomer AIIB is strikingly nested to the IBRD and the ADB. While
there is innovation and novelty in the content of some key features, the
AIIB has come up with only two new features as captured in Appendix,
namely, Article 15 on technical assistance and Article 36 on references,
arguably trivial in the scheme of things. Another way to see the striking
similarities between the three documents is that the three documents
use identical or almost identical languages in 17 features, mostly in areas
that people take for granted. The legal language used in the documents is
also uniformly and solidly Western.
Third, power is embedded in the three documents. As discussed earl-
ier, the fact that much of the documents have been taken for granted
reflects the legitimacy and socialization of Western power in the first
place. The underlying power structure of the liberal international order
is thus not being challenged by the AIIB per se. Moreover, as a financial
institution, the AIIB is bound by the rule-based global financial market.
Power drives competition. This is reflected in primarily definition and
subscription of authorized capital, shares of voting power, management
and operations. Divergence takes place in all of these areas. That is the
most dynamic part of institutional evolution also because people care

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 85

about these features and have made them more important independent
of their intrinsic importance for an organization. At the same time, if we
follow the definition of regime change by international regime theory, the
AIIB constitutes change within a regime rather than change of a regime
because it does not challenge the fundamental purpose and norms of
the existing international organizations.76 As a comparison, the AIIB is
nothing similar to the Organization of Petroleum Exporting Countries
(OPEC) that is an illiberal production cartel.
Since the AIIB is yet to start its lending operation, we cannot compare
it to the World Bank and the ADB in that regard yet. Yet my discus-
sion previously in the chapter should show that it is not always easy to
compare the AIIB to the World Bank because the latter has gone through
different stages of ideologies and lending practices. In some way, the
AIIB looks similar to the early stage of the World Bank that also focused
heavily on income-generating big projects.77 We can imagine the growth
of the World Bank as a crooked tree. It is then difficult to compare the
ADB or the AIIB against it. One can imagine a three-dimensional grove
of institutional trees. Closeness or distance would look different when
we look at the trees in the grove from different angles.
We should expect to see conflictual forces at work. The Chinese
government faces a dilemma even if it wants to differ completely from
the existing institutions. This is not the case because a successful insti-
tution needs to attract more member states. Success ironically would
reduce its control over the direction and operation of the bank. If we
look into the organizations more closely, we see the active participants
in the AIIB and other financial institutions know each other and have all
largely been socialized into a similar mindset.

Conclusion

The World Bank was truly a novel international financial institution but
it was fully consistent with the American systems and legal practices.
The United States has overtime reduced financial support for multilat-
eral institutions and become seemingly more focused on military and
defense. This has opened up the institutional landscape for newcomers.
Moreover, US resistance to expanded Japanese role in the ADB and other
regional institutions made it more possible for China to fill up the vacant
institutional space.

DOI: 10.1057/9781137593870.0008
86 The Asian Infrastructure Investment Bank

Both Japan and China have leveraged on the existing international


order, which has fed into their rising power. The United States constructed
a global political economy order after World War II, which included
Japan as a defeated nation. Overtime, Japan has acquired greater capabil-
ities and has been able to rise in the international economic order. It has
been harder for Japan to rise within established international institutions
in proportion to its rising overall economic power. Thus, Japan has
had periodic urge to demand greater voices or sought to create its own
institutions. Japan successfully built the ADB, which was a hybrid of the
World Bank and the Japanese institutions. Yet it failed in its attempt to
create a Japan-led Asian Monetary Fund in 1997.
China joined the US-led international order in the early 1980s. China
is building its own international institutions. It is novel in that the United
States does not dominate in them. China’s AIIB promises to be faster
and more nimble than the existing financial institutions, thus putting
pressure on them to reform. This is particularly the case for the ADB,
which is reforming and owning up to its somewhat hidden agenda of
infrastructure projects rather than solely poverty alleviation. The AIIB
itself is nested to the World Bank and the ADB, thus firmly situated
within the existing international financial order. Put differently, the AIIB
is a functional equivalent to the existing international financial institu-
tions. However, in the scheme of things, China is now further away from
the US-led international structure. To understand the larger strategic
significance of the AIIB, I now turn to the last chapter.

Notes
1 M. Bailey, J. Goldstein, and B. Weingast (1997) ‘The Institutional Roots of
American Trade Policy’, World Politics, 49 (3), 309–338.
2 C.P. Kindleberger (1986) The World in Depression, 1929–1939, revised and
enlarged ed. (Berkeley: University of California Press), 290–291.
3 G.J. Ikenberry (2012) Liberal Leviathan: The Origins, Crisis, and Transformation
of the American World Order (Princeton: Princeton University Press).
4 A. Acharya (2014) The End of American World Order (Cambridge: Polity
Press), pp. 33–45.
5 J.G. Ruggie (1982) ‘International Regimes, Transactions, and Change:
Embedded Liberalism in the Postwar Economic Order’, International
Organization, 36 (2), 379–415.

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 87

6 E.S. Mason and R.E. Asher (1973) The World Bank since Bretton Woods
(Washington, DC: The Brookings Institution), p. 1.
7 Ibid., pp. 11–33.
8 P. Krugman (1995) ‘Cycles of Conventional Wisdom on Economic
Development’, International Affairs, 71 (4), 717–732; W. Easterly (2014) The
Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor
(New York: Basic).
9 G.A. Cornia, R. Jolly and F. Stewart (eds.) (1987) Adjustment with a Human
Face: Protecting the Vulnerable and Promoting Growth (New York: Oxford
University); P. Mosley, J. Harrigan and J. Toye (1995) Aid and Power: The
World Bank and the Policy Based Lending, Vol. 1, Analysis and Policy Proposals,
2nd ed. (London: Routledge); M. Goldman (2005) Imperial Nature: The World
Bank and Struggle for Social Justice in the Age of Globalization (New Haven: Yale
University Press).
10 R. Peet (2009) Unholy Trinity: The IMF, World Bank and WTO, 2nd ed. (New
York: Zed Books); T.W. Pogge (2002) World Poverty and Human Rights:
Cosmopolitan Responsibilities and Reforms (Cambridge: Polity Press); N.
Woods (2006) The Globalizers: The IMF, the World Bank, and Their Borrowers
(Ithaca, NY: Cornell University Press).
11 See, for example, his interview with the Wall Street Journal, 22 June 2015,
http://www.wsj.com/articles/jim-yong-kim-on-progress-in-emerging-
nations-1434739648. Date accessed 22 June 2015; J.Y. Kim (2014) ‘Tackling
the Most Difficult Problems: Infrastructure, Ebola and Climate Change’,
at IMF/World Bank annual meeting, Washington, DC, 10 October, http://
www.worldbank.org/en/news/speech/2014/10/10/speech-world-bank-group-
president-jim-yong-kim-tackling-difficult-problems-infrastructure-ebola-
climate-change. Date accessed 22 June 2015.
12 Jim Yong Kim, ‘Tackling the Most Difficult Problems: Infrastructure, Ebola
and Climate Change’, at IMF/World Bank annual meeting, Washington,
DC, 10 October, http://www.worldbank.org/en/news/speech/2014/10/10/
speech-world-bank-group-president-jim-yong-kim-tackling-difficult-problems-
infrastructure-ebola-climate-change. Date accessed 22 June 2015.
13 M. Wan (2001) Japan between Asia and the West: Economic and Strategic Balance
(Armonk: M.E. Sharpe), pp. 126–150.
14 N.R. Lardy (1999) ‘China and the International Financial System’, in E.
Economy and M. Oksenberg (eds.) China Joins the World: Progress and
Prospect (New York: Council on Foreign Relations Press), pp. 206–230.
15 G. Chin (2012) ‘Two-Way Socialization: China, the World Bank and
Hegemonic Weakening’, Brown Journal of World Affairs, 19 (1), 211–230.
16 World Bank, ‘World Bank Finances’, https://finances.worldbank.org/
Shareholder-Equity/IBRD-Statement-of-Subscriptions-to-Capital-Stock-a/rcx4-
r7xj#column-menu. Date accessed 1 July 2015.

DOI: 10.1057/9781137593870.0008
88 The Asian Infrastructure Investment Bank

17 L. Summers (2015) ‘A Global Wake-Up Call for the US?’ The Washington Post,
6 April, A17.
18 B. Robertson (2015) ‘Bernanke Blames US Congress for Pushing China
to Launch AIIB’, South China Morning Post, 3 June, http://www.scmp.com/
business/banking-finance/article/1815568/bernanke-blames-us-congress-
pushing-china-launch-aiib. Date accessed 6 June 2015.
19 D. Kopinski and Q. Sun (2014) ‘New Friends, Old Friends? The World Bank
and Africa When the Chinese Are Coming’, Global Governance, 20 (4), 615.
20 M. Wan (2015) Understanding Japan-China Relations: Theories and Issues
(Singapore: World Scientific), pp. 200–201.
21 Kim, ‘Tackling the Most Difficult Problems’.
22 Nikkei Shimbun, 17 July 2015, http://www.nikkei.com/article/
DGXLASGM17H5B_X10C15A7FF1000/?dg=1. Date accessed 17 July 2015.
23 P.-W. Huang, Jr. (1975) The Asian Development Bank: Diplomacy and
Development in Asia (New York: Vantage Press), pp. 11–18; D.T. Yasutomo
(1983) Japan and the Asian Development Bank (New York: Praeger), pp. 24–26.
24 For the draft private plan, see T. Watanabe (1977) Toward a New Asia (Manila:
ADB), pp. 3–4.
25 For the role of ECAFE, see R. Krishnamurti (1977) ADB: The Seeding Days
(Manila: ADB).
26 Huang, Asian Development Bank, pp. 16–43.
27 Yasutomo, Japan and the Asian Development Bank, pp. 39, 52.
28 Watanabe, Toward a New Asia, pp. 1–2.
29 Krishnamurti, ADB, p. 3.
30 Ibid, p. 43.
31 Ibid., pp. 75–78.
32 S. Park (2014) ‘Institutional Isomorphism and the Asian Development Bank’s
Accountability Mechanism: Something Old, Something New, Something
Borrowed, Something Blue?’ Pacific Review, 27 (2), 217–239.
33 C.S. Chin (2015) ‘What Is Next for the AIIB?’ Japan Times, 1 July, http://www.
japantimes.co.jp/opinion/2015/07/01/commentary/world-commentary/whats-
next-aiib/#.VZXymijOCwA. Date accessed 2 July 2015.
34 Wan, Japan between Asia and the West, pp. 150–170.
35 R. Wihtol (1988), The Asian Development Bank and Rural Development: Policy
and Practice (New York: St. Martin’s Press).
36 D. Wilson (1987), A Bank for Half the World: The Story of the Asian Development
Bank 1966-1986 (Manila: ADB), pp. 269–272.
37 Wihtol, Asian Development Bank and Rural Development, p. 102.
38 Ibid., p. 102.
39 J. Rathus (2008), ‘China, Japan and Regional Organisation: The Case of the
Asian Development Bank’, Japanese Studies, 28 (1), 92–93.

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 89

40 Calculated from World Bank, ‘World Bank Finances’; ADB, http://www.adb.


org/sites/default/files/page/30786/oi-appendix1.pdf. Date accessed 3 May
2015.
41 Rathus (2008), ‘China, Japan and Regional Organisation’.
42 M. Magnier (2015) ‘AIIB Tests Beijing’s Management Style’, The Wall
Street Journal, 28 June, http://www.wsj.com/articles/aiib-tests-beijings-
management-style-1435516224. Date accessed 29 June 2015.
43 Kyodo News Agency, 4 May 2014, http://www.47news.jp/CN/201405/
CN2014050401001651.html. Date accessed 3 May 2015.
44 Kyodo News Agency, 3 October 2013, http://www.47news.jp/CN/201310/
CN2013100301001018.html. Date accessed 3 May 2015.
45 Kyodo News Agency, 5 July 2014, http://www.47news.jp/CN/201407/
CN2014070501001476.html. Date accessed 3 May 2015.
46 Asahi shimbun, 12 April 2015, http://www.asahi.com/articles/
ASH4B3SV5H4BULFA00V.html?iref=reca. Date accessed 3 May 2015.
47 Nihon keizai shimbun, 21 March 2015, http://www.nikkei.com/article/
DGXLASFS20H5A_Q5A320C1EA2000/. Date accessed 22 March 2015.
48 Nihon keizai shimbun, 20 March 2015, http://www.nikkei.com/article/
DGXLASFS20H0S_Q5A320C1EAF000/. Date accessed 19 March 2015.
49 But there were subtle differences within the Japanese Foreign Ministry as
well. Not surprisingly, Japan’s ambassador to the United States was most
opposed to the AIIB vocally. He told journalists on 13 March that he was
concerned about the AIIB being the ‘bad money’ that drives out the ‘good
money’ if it does not follow international standards and transparency in
governance. Yomiuri shimbun, 14 March 2015, http://www.yomiuri.co.jp/
economy/20150314-OYT1T50109.html?from=ytop_main2. Date accessed
14 March 2015. By contrast, the Japanese ambassador to China had more
accommodating remarks to say about the AIIB.
50 Nihon keizai shimbun, 14 March 2015, http://www.nikkei.com/article/
DGXLASGM13H4I_T10C15A3MM8000/?n_cid=TPRN0003. Date accessed
13 March 2015.
51 Japanese media rightly saw the move as a transparent attempt at
shoring up Japan’s position against the China-led AIIB; see, for
examples, Mainichi shimbun, 5 May 2015, http://mainichi.jp/select/
news/m20150506k0000m020032000c.html. Date accessed 5 May
2015; Sankei shimbun, 5 May 2015, http://www.sankei.com/economy/
news/150505/ecn1505050019-n1.html. Date accessed 5 May 2015; Nikkei
shimbun, 5 May 2015, http://www.nikkei.com/article/DGXLASFS04H0E_
U5A500C1MM8000/?dg=1. Date accessed 4 May 2015.
52 Cited in A. Andrianova, Z. Agayev and K.L.M. Yap (2015) ‘Japan-Led
Development Bank Starts Feeling Competition from Chinese Rival’,

DOI: 10.1057/9781137593870.0008
90 The Asian Infrastructure Investment Bank

Chicago Tribune, 5 May, http://my.chicagotribune.com/#section/-1/article/


p2p-83454765/. Date accessed 5 May 2015.
53 Ibid.
54 For the relationship between the ADB and Asian regionalism, see C.M. Dent
(2008) ‘The Asian Development Bank and Developmental Regionalism’,
Third World Quarterly, 29 (4), 767–786.
55 D.W. Mao and J.R. Vreeland (2013) ‘Regional Organizations and
International Politics: Japanese Influence over the Asian Development Bank
and the UN Security Council’, World Politics, 65 (1), 34–72.
56 M. Wan (1995/1996) ‘Japan and the Asian Development Bank’, Pacific Affairs,
69 (4), 509–528.
57 Wan, Understanding Japan-China Relations, pp. 183–206.
58 I borrowed the terms from a critical study of Japanese ODA. M. Ensign
(1992) Doing Good or Doing Well? (New York: Columbia University Press).
59 Yomiuri shimbun, 4 July 2015, http://www.yomiuri.co.jp/politics/20150704-
OYT1T50065.html?from=ytop_ylist. Date accessed 4 July 2015.
60 See, for example, China News Agency, 22 May 2015, http://finance.
chinanews.com/fortune/2015/05-22/7293343.shtml. Date accessed 26 May
2015.
61 For a theoretical discussion of what transparency means for the World Bank
and the IMF, see D. Gartner (2013) ‘Uncovering Bretton Woods System:
Conditional Transparency, the World Bank and the International Monetary
Fund’, The George Washington International Law Review, 45 (1), 121–145.
62 Yomiuri shimbun, 5 May 2015, http://www.yomiuri.co.jp/economy/20150505-
OYT1T50075.html?from=ytop_top. Date accessed 5 May 2015.
63 C. Itkowitz (2015) ‘Know How the TPP Ends? Spoiler Is Worth Big Bucks’,
The Washington Post, 3 June, A19.
64 M. Bøas (1998) ‘Governance as Multilateral Development Bank Policy: The
Cases of the African Development Bank and the Asian Development Bank’,
European Journal of Development Research, 10 (2), 117–134.
65 A. Byrnes (2011) ‘The Asian Development Bank and the Role of Human
Rights in the Pursuit of Just and Sustainable Development in the Asia-Pacific
Region: An Advocacy Role for Australia?’, Australian International Law
Journal, 18 (8), 1–21.
66 See, for examples, Park, ‘Institutional Isomorphism and the Asian
Development Bank’s Accountability Mechanism’; K. Sims (2015) ‘The
Asian Development Bank and the Production of Poverty: Neoliberalism,
Technocratic Modernization and Land Dispossession in the Greater
Mekong Subregion’, Singapore Journal of Tropical Geography, 36 (1), 112–126;
A. Uhlin (2011) ‘National Democratization Theory and Global Governance:
Civil Society and the Liberalization of the Asian Development Bank’,
Democratization, 18 (3), 847–871.

DOI: 10.1057/9781137593870.0008
The AIIB versus the World Bank and the ADB 91

67 Chinese Foreign Ministry, 18 June 2015, http://www.fmprc.gov.cn/mfa_eng/


xwfw_665399/s2510_665401/2535_665405/t1274400.shtml. Date accessed 1
July 2015.
68 Huang, Asian Development Bank, pp. 45–50.
69 Krishnamurti, ADB, pp. 49–58.
70 Ibid., pp. 32–35.
71 Yomiuri shimbun, 28 June 2015, http://www.yomiuri.co.jp/world/20150628-
OYT1T50068.html. Date accessed 28 June 2015.
72 M. Magnier (2015) ‘How China Plans to Run AIIB: Leaner, with Veto’, The
Wall Street Journal, 8 June, available at http://www.wsj.com/articles/how-china-
plans-to-run-aiib-leaner-with-veto-1433764079. Date accessed 10 June 2015.
73 For discussion over the institutional design and operational principles, see
Krishnamurti, ADB, pp. 61–153.
74 Coyne, Why Evolution Is True, p. 9.
75 Chinese media has reported on a 40 purchasing power GDP and 60
nominal GDP. China News Agency, 29 June 2015, http://www.chinanews.com/
cj/2015/06-29/7372434.shtml. Date accessed 29 June 2015.
76 For differentiation between change within regime and change of regime, see
S.D. Krasner (1983) ‘Structural Causes and Regime Consequences: Regimes
as Intervening Variables’, in S.D. Krasner (ed.) International Regimes (Ithaca:
Cornell University Press), pp. 3–4.
77 As D. Kopinski and Q. Sun have noted, ‘however original the current
Chinese approach may seem, it is a strategy the West abandoned a long time
ago and now is slowly rediscovering’, Kopinski and Sun, ‘New Friends, Old
Friends? The World Bank and Africa When the Chinese Are Coming’, 611.

DOI: 10.1057/9781137593870.0008
5
A New Hegemonic
Order in Asia?
Abstract: The AIIB is a major diplomatic success for
China. China has the necessary financial power to
accomplish its objective. Virtually every country has
accepted China’s leading role in a financial institution, a
global social reality construction process that legitimizes a
greater Chinese influence. But the global financial market
affects China just like anyone else. The AIIB does not
measure up to the ordering projects by the United States.
Yet it still constitutes more of a change to the status quo
powers than the Japanese attempt at institution building.
While the AIIB is a hybrid borrowing much from the
existing international order, the birth and operations of
such institutions will weaken the liberal international
order because the dominant country in it is not a liberal
democracy.

Keywords: AIIB; China; global financial market;


hybridity; liberal democracy; United States

Wan, Ming. The Asian Infrastructure Investment Bank:


The Construction of Power and the Struggle for the
East Asian International Order. New York: Palgrave
Macmillan, 2016. doi: 10.1057/9781137593870.0009.

92 DOI: 10.1057/9781137593870.0009
A New Hegemonic Order in Asia? 93

This chapter seeks to accomplish three analytical tasks. First, I will


provide a more focused discussion of China’s power and strategies.
Second, I will combine my arguments in the previous chapters to exam-
ine how the AIIB affects the ongoing struggle for hegemonic order in
Asia. Finally, I will offer some forecasting into the future.

China’s financial power and the AIIB

Why did China choose to build this AIIB? The answer is straightfor-
ward. The Chinese government under Xi Jinping is seeking greater inter-
national influence that also addresses China’s domestic challenges. What
does the case say about China’s power and strategic competency? This is
a harder question to answer.
The AIIB is a major diplomatic success for the Chinese government.
China has the necessary financial power to accomplish its objective in
this area. Beijing’s commitment of $6 billion paid-in capital for the AIIB
is nothing in the scheme of things. The Chinese government has commit-
ted infrastructure funding all around the world. China has pledged $250
billion in infrastructure investment in Latin America in the next decade.
China has poured investment money into Africa for over a decade now.
The ‘One Belt, One Road’ initiative simply adds more financial resources
to a region in which China has already invested significantly. According
to the Chinese government statistics, China has an FDI stock of $161.2
billion in 64 countries along the belt and road as of May 2015, which is
20 percent of its overall outward FDI.1 One needs to be mindful of these
large numbers of financial commitment, some of which are exaggerated or
double-counted. Yet China has invested in a major way around the world.
The global financial market affects China just like anyone else. The
recent Chinese stock market crash is a case in point. China is not immune
to the volatility of the global financial market. At the same time, China
can mobilize more financial resources at this point because of relatively
low entitlements and the dominance of the Chinese state.
What matters here is why China has chosen to use its financial power
in this particular way and what objectives it has chosen to advance. The
Chinese government has been assertive in terms of the goals it has set for
itself, namely, greater influence in global finance and Asian geoeconom-
ics and geopolitics. However, it has not been heavy-handed in its actual
conduct in this case. What is notable is how little expressed discord there

DOI: 10.1057/9781137593870.0009
94 The Asian Infrastructure Investment Bank

has been. Some Japanese journalists reporting on the AIIB have apparently
been searching for any sign of trouble that supports their assertion that
China would not succeed. Yet they have had precious little to report in this
regard. On the contrary, we read reports of the Chinese government being
magnanimous rather than vindictive in their wooing of new members. As
a case in point, even though Australia and South Korea appeared to pull
away from the AIIB in late 2014 due to US pressure, the Chinese govern-
ment signed free trade agreements with them instead of saying any harsh
words.2 Beijing has also openly extended invitation to the United States and
Japan to join the bank. A key reason for China’s interest in having developed
countries join the AIIB is to boost the credit rating of the bank in the finan-
cial market. In a way, the more successful in attracting new members, the
more ‘constrained’ Beijing would be in running the bank. The fact that we
hear little open complaint from the developed country members is that the
Chinese government is addressing their concerns. Australian Treasurer Joe
Hockey announced on 24 June 2015 that Australia would contribute $720
million of paid-in capital as the sixth largest shareholder in the AIIB. He
said that Australia had initial concerns but was now confident that China
will ensure ‘appropriate transparency and accountability’ in the bank.3
What is striking about the AIIB case is how quickly virtually every
country has accepted China’s leading role in a financial institution, as
discussed in Chapter 3. Although we cannot predict how any rising
power would behave in a particular area we can determine whether
what it has done can be explained for what reasons. Fundamentally,
we observe a global social reality construction process that legitimizes
a greater Chinese influence in global finance. China is aware of that
expectation and is now actively pushing the process further along.
Yet there are also natural limitations to how much Beijing can do. In
a way, it would not be realistic for the Chinese government to act overly
aggressively because it would be hard to force people to join their multi-
lateral institutions against their will. Besides, the Chinese government
has recently suffered a major defeat. After the Chinese fishing boat
collision incident in September 2010, the Chinese government used its
dominance in rare earths supplies as a weapon against Japan. However,
this tactic has backfired. China abolished its export quota in January 2015
after losing the case in the WTO and then removed export tariffs on rare
earths in May. China lost badly in this fight.4 Like every other country in
the world, China is both powerful and weak.
Liberal institutionalism helps to partially explain China’s conduct around
the AIIB. As liberal institutionalists would predict, China has chosen to
DOI: 10.1057/9781137593870.0009
A New Hegemonic Order in Asia? 95

create the AIIB because the bank presumably gives Beijing something
valuable not readily available in the bilateral route. At the same time, the
AIIB would condition China’s behavior just as the World Bank for the
United States and the ADB for Japan before China. It is well recognized
inside and outside China that it takes more than brute financial power to
make an intergovernmental financial institution work. Ironically, the more
successful China becomes in attracting member states, the more it has to
accommodate them and see its relative power diminish in the process.
Moreover, if we look beyond the AIIB, we see that China cannot seek to
dominate in all the financial institutions. It needs to share influence and
prestige to allow these institutions to succeed. The Development Bank
of the BRICS is a case in point. Although the bank is headquartered in
Shanghai, five member countries have equal shares of authorized capital.
The position of president will be rotated among the five countries start-
ing with an Indian national.
At the same time, one should not neglect the importance of power
related to the China-led bank. Beijing has chosen to create its own
institutions because it expects status quo powers like the United States
and Japan to resist its effort to gain greater influence in the existing
international financial institutions. Furthermore, China has visibly given
more attention to the AIIB than to the BRICs development bank.
From a broader, evolutionary perspective, China is adapting to the
existing international order, an ecosystem that favors liberal international
arrangements. The AIIB has to be more liberal as well or to meet ‘the
international standards’ as the United States. Japan and some others
have urged Beijing to do so as well. Thus, we hear the Chinese leaders
frequently sound outright liberal and altruistic. On the official launch
day, President Xi emphasized to the representatives of the member states
that ‘Our motivation [for setting up the bank] was mainly to meet the
need for infrastructure development in Asia and also satisfy the wishes of
all countries to deepen their co-operation’. Finance Minister Lou said that
‘This is China assuming more international responsibility for the develop-
ment of the Asian and global economies’.5 One may dismiss such remarks
as merely rhetoric. Yet it is still meaningful that the Chinese leaders feel
that it is important to say the right things because of the larger global
environment. More importantly, they will have to walk the walk as they
have already done to some extent to make the AIIB a success. The AIIB
looks like a functional equivalent to the World Bank and other existing
international financial institutions. As discussed in the previous chapter,
the bank is nested to the existing development financial institutions.
DOI: 10.1057/9781137593870.0009
96 The Asian Infrastructure Investment Bank

China has been rising economically. Regardless of how solid that


growth has been and whether it is sustainable, the country has grown
impressively for three decades. Yet converting that economic success to
greater influence is a different story. One reason is that China’s success
has resulted from participating in the existing international order, which
logically makes it less likely to desire a direct challenge to the arrangement.
This is not a case in which the United States has allowed China to ascend.
From an ecological perspective, a country’s success changes the inter-
national structure and provides both costs and opportunities for other
countries. No country has been or arguably ever will be able to impose
direct administrative control over the whole world. There is a discrepancy
between its political, military, economic and cultural reach. A successful
country creates an economic network of influence far beyond its political
control. This is due to its need for resources and outlets for its competi-
tive production capacity. That economic network allows other political
entities to grow although it does not guarantee success. Thus, an empire
inevitably declines because it is most likely to become overextended over
imperial commitments over time and its power will diffuse over time.6
China will not be an exception to that rule of history.
China has not been that strategic, admiration by some commentators
aside. Beijing is being opportunistic. There has not been that much space
for China to maneuver in the current international system in terms of
politics, security or even economics. China has gradually opened up
space to make its moves. Yet the country is still constrained. Reaction
to China’s land reclamation in the South China Sea by the international
community, including some countries in the AIIB, is drastically different
from the international reaction to the AIIB. In the scheme of things, the
AIIB primarily demonstrates how the Chinese government is gaining
fleeting influence the hard and expensive way. As mentioned just earlier,
a successful country provides opportunities for other countries in its
economic network. China’s determined efforts to enhance that network
will also hasten its own relative decline, not particularly strategic in
terms of optimizing self-interests from a longer historical lens.

The AIIB and East Asian international orders

The AIIB has been viewed by some as all about a struggle for hegemonic
order in East Asia, particularly in the United States, Japan and China.
Objectively speaking, the AIIB does not measure up to the ordering

DOI: 10.1057/9781137593870.0009
A New Hegemonic Order in Asia? 97

projects by the United States. Yet it still constitutes more of a change to


the status quo powers than the Japanese attempt at institution building
in the postwar era, as discussed in the previous chapter. However, the
AIIB goes to the heart of East Asian international relations.
The AIIB is a hybrid institution nested to the existing international
financial institutions. At the same time, the AIIB is consistent with China’s
recent foreign policy trajectory. In the spectrum of Chinese foreign policy
initiatives, the ADB is the best China can do from a US perspective. China
is not only creating the AIIB. It is also constructing man-made islands
in the South China Sea. One should not expect China to do America’s
bidding. China and the United States are not the same countries. As
discussed in Chapter 2, China is an ancient center of civilization situated
in the democracy-resistant, pistol-shaped zone in the Eurasian continent.
The AIIB for now at least overlaps with that zone better than the ADB
does. As the AIIB case shows, China and the United States are not immut-
able to each other. China, in particular, has learned from the United States.
Yet odds are that if China succeeds in its current political form, the East
Asian order will be somewhat or quite different from what we have now.
The larger theoretical claim is that the countries in the world are not
like units as Kenneth Waltz and John Mearsheimer assume them to be.7
There is competitive pressure on the states to become more alike but
the same pressure may also push them apart in their effort to seek their
niches. Empirically, the states are just very different politically, econom-
ically, socially and culturally. They have not fundamentally converged.
That matters particularly when hegemony weakens.
If one desires continuity and stability, one should be greatly discour-
aged observing what is going on around the world. Some well-established
expectations or myths have been burst, sure signs that the established
international order is under severe stress. Russia burst the postwar
myth that no country can seize another sovereign country’s territories.
It is suffering some consequences but there is no evidence that it can
be forced to give up Crimea. The ISIL has challenged the assumption
that a Muslim caliphate is buried in the distant past. The proto-state may
not succeed but its audacious effort and appeal to the Muslims around
the world would have been unimaginable only a few years back. Greek
voters potentially burst the myth of the irreversibility of the European
integration project. Japan’s prime minister has undermined the postwar
myth of Japan never using military force again. All the developments and
many more are important because they may start a trend. Underlying

DOI: 10.1057/9781137593870.0009
98 The Asian Infrastructure Investment Bank

all these historical processes is a simple question of what and whom


the existing international order is designed to serve. Challenges arise
fundamentally because countries or groups or movements do not wish
to accept the purposes embedded in the existing order. In this global
context, China’s AIIB challenge is less bold and more conservative. Yet
the initiative comes from a rising great power and one naturally wonders
what more will come from the same country.
A dominant theme in East Asia is a ‘division of labor’ between the
United States and China, essentially a dual hegemonic structure, the
security dimension for the United States, and economic dimension for
China. In such a structure, most countries behave predictably, turning to
the United States for security and to China for commercial benefits. Yet
this structure is inherently unstable. With greater economic capabilities
and higher stakes, China is building up its military might, which has led
to stronger desire by some regional countries for the United States to
balance against Beijing. The United States, on the contrary, has a strong
stake in asserting its economic leadership as well.
Since around 2009, the United States has indeed sought to shore up its
influence in the economic realm through the TPP project. Secretary of State
Hillary Clinton promoted the TPP as an economic pillar to complement
Pentagon’s military moves in the Asia Pacific region. Some participants
would recall that after they visited China in 2009 they felt even stronger
support for the TPP initiative.8 From the US perspective, this is not about
containing China but about countering China’s assertiveness. That fine
difference is largely lost in China. What they see is a regional economic
project that explicitly excludes them. It does not help that from President
Obama on down, American officials often portray the TPP as about letting
the United States rather than China write the rules for East Asia.
The United States does have a strategic motive behind the TPP. It is not
just rhetoric. In their highly influential analysis for the East-West Center,
Peter Petri, Michael Plummer and Fan Zhai used a computable general
equilibrium model to calculate that the TPP-12 countries may gain $285
billion by 2025. Yet if China, Indonesia, South Korea, the Philippines and
Thailand are added to TPP, the gains would increase to $892.8 billion.
A lower-quality Free Trade Area of Asia Pacific (FTAAP) would also
increase the gains to a high $759.5 billion.9 The Petri, Plummer and Zhai
study has been credited for the often-heard US government’s claim that
the United States would gain $77 billion from the TPP.10 However, the
same government should note that the study has shown far greater gains
from a China-included free trade agreement.
DOI: 10.1057/9781137593870.0009
A New Hegemonic Order in Asia? 99

While the Obama administration has been emphasizing the rulemak-


ing objective of the TTP, it is actually less about rules than about locking
up friends and denying China closer ties to the same countries. East Asia
has been immersed in international rules already, including trade rules.
What the TPP hopes to accomplish is a tougher set of rules. Hillary
Clinton called the TPP ‘the gold standard’ trade treaties in a speech given
in Adelaide, Australia, in 2012. Yet the TPP may well be too sophisticated
and complicated for the world we actually live in. The TPP is a highly
demanding arrangement consistent with the United States’s practices.
China’s FTAs are simpler and narrower. In a similar way, the Chinese
government has framed the AIIB as more nimble and focused than the
US-led financial institutions. Thus, we will continue to see a rivalry in
this area even if the TPP is concluded.
The AIIB goes to the heart of a strategic triangle between the United
States, China and Japan. The United States and Japan have moved much
closer, partly thanks to the AIIB. Japan has been pursuing a strong
alliance with the United States. The United States has been seeking to
shore up its position in East Asia. Four weeks after over 50 countries had
agreed to join the AIIB, Prime Minister Abe visited the United States.
The United States welcome a more assertive Japan as crucial for counter-
ing a rising and more assertive China.11
From a narrower realist perspective, even though the United States
has relatively declined, the balance of power does not yet favor China. If
we examine the economic power, measured as shares of total world GDP,
among the five great powers in Asia, namely, China, India, Japan, Russia
and the United States, as shown in Figure 5.1, we can see that the United
States is still almost twice as big as China. If we use purchasing power
parity, China actually surpasses the United States in 2014. Yet if we look
at the military capabilities, the United States continues to commit far
more resources to defense than China does, as revealed in Figure 5.3.
Three reasons explain why the struggle for hegemonic order has
intensified. First, the relative trend of China gaining in power and influ-
ence is encouraging for Chinese analysts and alarming for the United
States and its allies. Second, China may not yet match the United States
but is now more than powerful against other Asian nations, as shown
clearly in the three graphs.12 Third, the United States faces challenges
elsewhere. Challenges to the existing order come from all players in the
international arena and domestic context. The ISIL wants to destroy the
modern international system. Russia does not mind undermining the
postwar order by annexing territories along its boarders. By contrast,
DOI: 10.1057/9781137593870.0009
100 The Asian Infrastructure Investment Bank

45.0

40.0

35.0
Shares of world total GDP

30.0

25.0

20.0

15.0

10.0

5.0


1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Japan China India United States Russia

figure 5.1 Power distribution among the Big Five, 1960–2014 (Current $US)
Source: Calculated from World Bank, World Development Indicators online.

25.0

20.0
Percentage of world total GDP

15.0

10.0

5.0


1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Japan China India United States Russia

figure 5.2 Power distribution among the Big Five, 1980–2014 (PPP)
Note: GDP PPP constant 2005 international $ for 1980–2012 and GDP PPP constant 2011
international $ for 2013–2014.
Source: Calculated from World Bank, World Development Indicators online

DOI: 10.1057/9781137593870.0009
A New Hegemonic Order in Asia? 101

800.000

700.000

600.000
Constant 2011 $US million

500.000

400.000

300.000

200.000

100.000

0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
United States Russia China Japan India

figure 5.3 Big Five military expenditure, 1988–2014


Source: SIPRI, SIPRI Military Expenditure Database.

China is only partially challenging the liberal international order and is


gaining influence without firing a shot. Thus, not everyone in the United
States is willing to view Beijing as the primary opponent.
East Asia is not all about China and the United States of course. Other
state or nonstate actors are making their own moves. The AIIB and other
developments related to China are more likely to put pressure on Japan
to revert to its ‘roots’ than to adopt more Western-style reforms. So we
should expect to see more ‘East Asian’ in East Asian international order
in the coming years. East Asia has a far wider diversity of political and
economic institutions than most other regions but if we consider features
such as developmental state as a key characteristic of East Asian inter-
national political economy, the region will move more in that direction.
It is useful only to some extent if we focus on whether a country is
finally balancing against China as realist theory predicts. There is a
whole range of strategies that countries can use and they typically mix
them up. One should not be surprised. After all, even the United States
has consciously adopted a mixture of engagement and containment to
China, varying only in relative saliency of each approach. From a biogeo-
graphical perspective, we can view Asian international relations as part
of a multilayered, multidirectional political economy ecosystem.
DOI: 10.1057/9781137593870.0009
102 The Asian Infrastructure Investment Bank

Besides substantive issues, I want to emphasize that we are in the start


of a fundamental shift in international relations, however one wants to
frame it. Thus, how we conceptualize what we are observing affects how
the emerging international order will be structured. For a fast book, I
cannot provide a detailed study of the analyses of the AIIB specifically
and East Asian international relations broadly.13 More importantly, I
should not pretend to be able to observe from above. I am one of the
analysts. The policy discourse is important because it is a window into
how new social reality is being constructed and how power factors in.
With all this complexity, how do we understand what is going on? As
discussed in Chapter 1, one solution is to determine the past patterns of
behavior for all the players. Put simply, what kinds of games have they
been playing all this time? One should be able to observe readily that
countries typically play different games and mix things up. Put simply,
they do what seem natural for them. To see if a country is balancing or
not is too simplistic to capture the rich and consequential mixed plays
countries and nonstate actors have been utilizing.

Looking into the future

It is difficult to predict what will happen because of random events and


developments. Having said that, I intend to forecast what might happen
related to the AIIB and the East Asian international order.
The AIIB is most likely to have a strong presence in the international
development financial scene. China will work hard to make the bank
work because the country’s and President Xi’s reputation is at stake.
There is no reason to believe, however, that the AIIB will necessarily be
more successful than the World Bank and the ADB in facilitating devel-
opment in a broad sense. Economic development is possible since a good
number of countries have already done that. At the same time, we do not
know the magic formulae to engineer economic growth. China will not
be an exception to the rule.14
While the AIIB is a hybrid borrowing much from the existing inter-
national order, the birth and operations of such institutions will weaken
the liberal international order because the dominant country in it is
not a liberal democracy. As I have discussed in the book previously, all
political institutions have a single origin. That means that any learning
of an institution from another lineage faces the question of compatibil-
ity with the native institutions, affecting the survivability of the learned
DOI: 10.1057/9781137593870.0009
A New Hegemonic Order in Asia? 103

institution. Put simply, lineage reveals what comes more naturally for
a country. Moreover, the spread of political institutions is necessarily
constrained by natural and man-made barriers.
Many people focus on performance, and they may be attracted to
nondemocratic countries that exhibit some functional equivalency with
democracies or even perform better in certain areas. Thus, the prospect
of alternative and emerging political institutions is improving. Some
democracies may well learn from these models or change to compete,
weakening their democracy in the process either way. One needs to watch
particularly the non-Western democratic great powers such as India and
Japan. Democracy is likely to weaken in these countries because they are
under competitive pressure to adapt to a changing international envir-
onment drawing from their predemocracy traditions.
Specific to some Asian countries, China is most likely to experience
greater economic challenges and will have a financial crisis sooner or
later like any major country that operates fully or partially on market
principles. How the Chinese government handles a crisis will be at least
as consequential as the crisis itself. At the same time, China will continue
to grow, albeit at a lower pace than over the previous three decades,
and will continue to gain power and influence in Asia and the world.
Beijing will continue to make power moves, which will increase tension
with the United States, which can be expected to make its own moves
to reinforce its position in Asia. Japan will continue to be a major rival
with China, strengthening its alliance with the United States and finding
and supporting friends against China. Japan may at some point join the
AIIB because all other East Asian countries are already in and because it
makes strategic sense to be in as many groups as possible.
The rest of East Asia is already hedging but will face greater pres-
sure from both China and the United States to do things that might be
viewed as unfriendly by the other great power, an awkward but likely
inescapable situation. All eyes will be on South Korea. Southeast Asia
is already divided over appropriate response to China and will continue
to be divided given the asymmetry of stakes and ties with China among
the ASEAN members. China both benefits and loses from its central
geographical location in East Asia, particularly compared to the United
States. China will not move away and other countries have strong incen-
tives to deal with China. Some Asian countries like Vietnam believe that
they have learned how to deal with China based on the experience of
millennia of interaction. But China will also pose greater immediate
threat to some of its neighbors than any outside great powers. In short,
DOI: 10.1057/9781137593870.0009
104 The Asian Infrastructure Investment Bank

we are entering a highly volatile and uncertain period in East Asian


international relations.
When future historians and political scientists study East Asian inter-
national relations, they are likely to view the establishment of the AIIB
as a pivotal event, as both a reflection of a changed power equation in
Asia and as a catalyst for further strategizing and action for the countries
involved. With the benefit of hindsight, they will be able to study how
the AIIB evolved in a larger institutional landscape. For contemporary
observers, we should not pretend that we can predict what will happen.
Random events may occur to impact fundamental dynamics, and our
own actions may create self-fulfilling or self-denying effects. But we
should recognize the complexity of the political institutions and events
we study and how they make sense from an evolutionary perspective. I
have written this book in that spirit.

Notes
1 People’s Daily site, 7 July 2015, http://finance.people.com.cn/n/2015/0707/
c1004-27267033.html. Date accessed 7 July 2015.
2 ‘The World Is Xi’s Oyster,’ The Economist, 6 December 2014, p. 48.
3 J. Scott (2015) ‘Australia Pledges A$930M to Become 6th-Largest AIIB
Shareholder,’ Bloomberg, 24 June, http://www.bloomberg.com/news/
articles/2015-06-24/australia-pledges-a-930m-to-become-6th-largest-aiib-
shareholder. Date accessed 24 June 2015. He also indicated that the American
and Japanese officials understood Australia’s position.
4 Wan, Understanding Japan-China Relations, pp. 165–182.
5 Quoted in Wildau and Clover, ‘AIIB Launch Signals China’s New Ambition’.
6 For the imperial overreach argument, see P. Kennedy (1987) The Rise and Fall
of the Great Powers (New York: Random House).
7 Waltz, Theory of International Politics; J.J. Mearsheimer (2001) The Tragedy of
Great Power Politics (New York: W.W. Norton).
8 Cited in David Nakamura, “Clinton’s Hedging Leaves Obama without
Political Cover”, The Washington Post, 13 May 2015, A5.
9 P.A. Petri, M.G. Plummer and F. Zhai (2014) ‘The TPP, China and the
FTAAP: The Case for Convergence’, East-West Center, 19 May.
10 ‘A Weighting Game,’ The Economist, 30 May 2015, p. 77.
11 See, for example, the Washington Post editorial board, “Past, Present and
Future: America Should Welcome Japan’s Moves toward a More Assertive
Role in the World,” The Washington Post, 28 April 2015, A16.

DOI: 10.1057/9781137593870.0009
A New Hegemonic Order in Asia? 105

12 For a detailed analysis along this line, see T.J. Christensen (2015) The China
Challenge: Shaping the Choices of a Rising Power (New York: W.W. Norton).
13 For some representative views on the AIIB, see K. Mahbubani (2015) ‘Why
Britain Joining China-Led Bank Is a Sign of American Decline,’ Huffington
Post, 16 March 2015, http://www.huffingtonpost.com/kishore-mahbubani/
britain-china-bank-america-decline_b_6877942.html?ir=World&ncid=newsl
tushpmg00000003. Date accessed 24 June 2015; L. Summers (2015) ‘Rescuing
the Free-Trade Deals,’ The Washington Post, 15 June, A17.
14 H. Root (2015) ‘China’s $100 Billion Infrastructure Bank: Bumpy
Road Ahead,’ The Fiscal Times, 3 May, http://www.thefiscaltimes.com/
Columns/2015/05/03/China-s-100-Billion-Infrastructure-Bank-Bumpy-
Road-Ahead. Date accessed 8 May 2015.

DOI: 10.1057/9781137593870.0009
Appendix

106 DOI: 10.1057/9781137593870.0010


Comparing the Articles of Agreement for the IBRD, the ADB and the AIIB

IBRD ADB AIIB

Similarity Similarity to Similarity to


Articles Content Articles Content to IBRD Articles Content IBRD ADB

Introductory Have agreed to (Preambles) Considering, . (Preambles) Considering, . .
Article operate based on realizing, recognizing, acknowledging,

DOI: 10.1057/9781137593870.0010
following rules convinced, have agreed realizing convinced,
have agreed

ARTICLE I Purposes Chapter I Purposes, Chapter I Purposes,


functions functions and
and membership membership
Purposes Reconstruction, Article 1. Purpose Development, regional  Article 1. Purpose Development through  .
development, cooperation, infrastructure, regional
cooperation
private investment Article 2. Functions Public and private Article 2. Functions Public and private
investment, investment, private
development policy, investment in
technical assistance infrastructure projects

ARTICLE II Membership in and


capital of the bank
Section 1. IMF members Article 3. ECAFE members, other . Article 3. Membership IBRD or ADB members . 
Membership Membership regional members and Regional versus
nonregional developed nonregional
countries that are UN founding members
members
Chapter II Capital Chapter II Capital
Section 2.  billion, , Article 4.  billion, , . Article 4. Authorized  billion,  million . .
Appendix

Authorized shares only for Authorized capital shares only for capital shares only for members
capital members members
107
108

IBRD ADB AIIB

Similarity Similarity to Similarity to


Articles Content Articles Content to IBRD Articles Content IBRD ADB

Section 3. (a) Minimum shares Article 5. . Initial subscription . Article 5. Subscription . Initial subscription . 
Appendix

Subscription of for original members Subscription of for original members of shares for original members
shares based on Schedule shares based on Annex. A. based on Schedule A.
A. Shares of new Initial shares by new . Initial shares by new
members determined members determined members determined by
by the bank by board of governors. the board of governors.
(b) The bank Regional members Regional members
determines shares minimum  of minimum  of
additional to the subscribed capital subscribed capital
minimum . Board of governors . Board of governors
(c) May increase within every five may increase a
subscription in years review capital member’s share at
proportion when stock. In case there request, but regional
authorized stock is an increase of members at least  of
increases subscription, members subscribed capital
may increase shares in . Board of governors
proportion within every five years’
. Board of governors review capital stock.
may increase a In case of increase
member’s share at subscription, members
request, but regional may increase shares in
members at least  proportion
of subscribed capital
Section 4. Initial subscription Article 5.4. Initial subscription at  Article 6. Payment of Payment in own  
Issue price of at par, other par, other subscription subscriptions currency equivalent
shares subscription at par at par unless decided Article .. (b) (ii) to full value in terms
unless decided by the by board of governors of US
bank with a majority with a majority
Section 5.  paid-in,  Article 4.2.  paid-in,   Article 4.2.  paid-in,  . 
Division and callable callable callable
calls of subscribed

DOI: 10.1057/9781137593870.0010
capital
Section 6. Liability of members Article 5.6. Liability of members . Article 7. Terms of Liability of members . .
Limitation on limited to unpaid limited to unpaid shares limited to unpaid
liability portion of issue price portion of issue price Article .. portion of issue price

Article 5.7. No member liable for  Article 7.4 No member liable for  
obligation of the bank obligation of the bank
Section 7.  in gold or US Article 6. Payment  in gold or . Article 6.2. Each installment in US . .
Method of dollar,  in the of subscription convertible currency, dollar or convertible
payment of currency of the Article 6.2.  in the currency of currency
subscriptions for member the member

DOI: 10.1057/9781137593870.0010
shares
Section 8.  days after Article 6.1.  days after AOA  Article 6.1  days after AOA  
Time of payment operation begins enters into force enters into force
of subscriptions
Section 9. Adjusting for Article 6.4; The bank shall . Article 6.5. (b) (iii), Adjustment payment . .
Maintenance of change in par value Article 25. determine what (iv) (v) depending on foreign
value of certain or foreign exchange Maintenance of constitutes the full exchange change.
currency value of a currency. value of the dollar equivalent of May be waived by the
holdings of the May be waived by currency holdings payment. bank
bank the bank of the bank May be waived by the
bank
Section 10. Shares transferable Article 5.5. Shares transferable . Article 7.2 Shares transferable only . .
Restriction on t only to the bank only to the bank to the bank
he disposal of
shares
Article 7. Ordinary  Article 8. Ordinary  
capital resources resources

ARTICLE III General Provisions Chapter III Operations Chapter III. Operations of the bank
relating to loans and
guarantees
Section 1. Exclusively for Article 8. Use of Exclusively for . Article 9. Use of Exclusively for members . 
Use of resources members for resources members in resources in accordance with the
development and accordance with the purposes and functions
Appendix

reconstruction purposes  functions in Article  and Article


in Article  and  and in accordance
Article  with sound banking
109

principles
IBRD ADB AIIB
110

Similarity Similarity to Similarity to


Articles Content Articles Content to IBRD Articles Content IBRD ADB

Article 9. Ordinary  Article 10. Ordinary  .


and special and special operations
Appendix

operations Article .


Article 10. Separation  Article 10.2  .
of operations
Article 11. Recipients  Article 11. Recipients  .
and methods of and methods
operation operation
Section 2. The bank and   
Dealings between members deal with
members and the each other only
bank through treasury or
similar fiscal
agencies
Section 3. Not exceeding Article 12. Not exceeding   Article 12. Not exceeding  of  
Limitations on  of unimpaired Limitations on of unimpaired Limitations on unimpaired subscribed
guarantees and subscribed capital, ordinary operations subscribed capital, ordinary operations capital, reserve and
borrowing of the reserve and surplus Article . reserve and surplus Article . surplus of the bank
bank of the bank of the bank
Article 12.2. Limit on commitment   
of a specific currency
Article 12.3. Equity investment  Article 12.2 Equity investment  
not exceeding  of not exceeding total
unimpaired paid-in unimpaired paid-in
capital stock capital and general
reserves
Section 4. Seven Article 15. Terms Three . Article 14. Terms and Four  
Conditions on and conditions for conditions for The bank may finance
which the bank direct loans and financing its operation in the
may guarantee guarantees currency of the country
and borrowing of concerned

DOI: 10.1057/9781137593870.0010
the bank
 Article 15. Technical  
assistance
Section 5. Article 14. Article  (ix). . Article 13. Article 13.8. . 
Use of loans Operating principles Provisions for Operating principles Provisions not
guaranteed, member countries restricted to member
participated in or only countries
made by the bank
Section 6.   
Loans to the

DOI: 10.1057/9781137593870.0010
International
Financial
Corporation
Article 19.  Article 17.  .
Special funds Special funds
Article ., ., .
Article 20.  Article 17.4  .
Special funds
resources

ARTICLE IV Operations Chapter IV. Borrowing and other Chapter IV Finances of the bank
miscellaneous powers
Section 1. Lend, guarantee and Article 21. Detailed, more than  Article 16. General Detailed  
Methods of borrow General powers AIIB powers
making or
facilitating loans
Section 8.
Miscellaneous
operations
Appendix
111
IBRD ADB AIIB
112

Similarity Similarity to Similarity to


Articles Content Articles Content to IBRD Articles Content IBRD ADB

Chapter V Currencies
Article 23. IMF definition .* Article 19. 2 By the bank . .
Determination of
Appendix

convertibility
Section 2. Four items Article 24. Five items, and  Article 19.1 Members shall not . .
Availability and Use of currencies members shall not impose restrictions on
transferability of impose restrictions on currencies
currencies currencies
Section 3. Provide currencies Article 13. Provision Provide currencies  Article 14.4 The bank may finance  
Provision of other than that of the of currencies for other than that of the its operation in the
currencies for member in whose direct loans member in whose currency of the country
direct loans territory the project territory the project concerned
concerned is carried concerned is carried
out. out.
May provide local May provide local
currency for local currency for local
expenditure expenditure
Section 4. –. commission Article 16.  commission, .  
Payment Commission and guarantee fee, other
provisions for fees charges
direct loans
Section 5. Guarantee Article . Guarantee fee .  
Guarantees commission
Section 6. Article 17. Special .  
Special reserve reserve
Section 7. Article 18. Methods Far more detailed than . Article 20. Methods of  .
Methods of of meeting liabilities the IBRD and AIIB meeting liabilities of
meeting liabilities of the bank versions the bank
of the bank in case
of defaults
Section 8. See Article IV.
Miscellaneous Section 

DOI: 10.1057/9781137593870.0010
operations
Section 9. Conspicuous Article 22. Notice to Conspicuous  Article 16.6 Conspicuous statement . .
Warning to statement that it is be placed on statement that it is not that it is not an
be placed on not an obligation of securities an obligation of any obligation of any
securities any government government government
Section 10. No interference in Article 36.2. No interference in . Article 31.2 No interference in . .
Political activity political affairs political affairs political affairs
prohibited

ARTICLE V Organization and Chapter VI Organization Chapter V Governance

DOI: 10.1057/9781137593870.0010
management and management
Section 1. List of positions Article 26.  Article 21.  
Structure of the Structure Structure
bank
Section 2. (a) One governor Article 27. One governor and one  Article 22. One governor and one  
Board of governorsand one alternate Board of governors: alternate from each Board of governors: alternate from each
from each member composition member state composition member state
state, five-year term Bank may pay expense Bank may pay expense
for attending meetings for attending meetings
(b) Article 28. . Article 23. . 
Board of governors: Board of governors:
powers powers
(c) through (h) Article 29. . Article 24. . 
Board of governors: Board of governors:
procedure procedure
Section 3. . Basic votes: . Article 33. . Basic votes:  of . Article 28. . Basic votes:  of all  .
Voting of all votes Voting all votes distributed Voting votes distributed equally
distributed equally equally . One vote for one
. One vote for one . One vote for one share of authorized
share of authorized share of authorized capital (, a
capital capital share)
.  votes each for
founding members
Appendix
113
114

IBRD ADB AIIB

Similarity Similarity to Similarity to


Articles Content Articles Content to IBRD Articles Content IBRD ADB

Section 4. (b) Article 30. Board of Seven regional . Article 25. Board of Nine regional elected  .
Executive Five from five largest directors: governors and three directors: composition by regional governors
Appendix

directors share holders each, composition nonregional, elected and three nonregional
seven elected by nonregional elected nonregional
governors governors governors
Two-year term Two-year term Not-paid
Two-year term

Responsible for Article 31. Board of Four specific powers  Article 26. Board of Seven specific powers  .
general operation of directors: powers directors: powers
the bank
(e) Resident at Article 32. Board of resident in . Article 27. Board of Nonresidential and . .
principal office, meet directors: procedure headquarters, meet as directors: procedure not paid
as often as required often as required
Section 5. Article 34. Five-year term  Article 29. Five-year term  
President and The president The president
staff
No mention of vice Article 35. One or more vice  Article 30. One or more vice  
president. But vice Vice president(s) presidents appointed Officers and staff of presidents appointed by
presidents operate by by board of directors the bank the board of directors
practice Article .
Article 36. President and staff  Article 31. The President and staff ’s  
Prohibition of own duty entirely to international character own duty entirely to the
political activity: the the bank and no other of the bank bank and to no other
international authority authority
character of the bank
Section 6.   
Advisory council
Section 7.   
Loan committees

DOI: 10.1057/9781137593870.0010
Section 8. Cooperation Article 2 (v) . Article 35.  .
Relationship to Cooperation
other international with members
organizations and international
organizations
Chapter VI General Provisions
Section 9. Principal office in Article 37. Office of Principal office in  Article 32. Principal office in  
Location of offices the country with the the bank Manila Office of the bank Beijing
largest number of Article 37.1. Article 32.1

DOI: 10.1057/9781137593870.0010
shares
Section 10. Bank may establish Article 37.2. Bank may establish . Article 32.2 Bank may establish . 
Regional offices offices elsewhere offices elsewhere offices elsewhere
and councils
Section 11. Each member Article 38. Each member  Article 33. Each member  .
Depositories designates its central Channel of designates its central Channel of designates its central
bank or such other communications, bank or such other communication: bank or such other
entities as depository depositories entities as depository depositories entities as depository
for bank holdings of for bank holdings of for bank holdings of its
its currency. its currency. currency.
The bank may The bank may hold
hold other assets its assets with such
in depositories depositories as board
designated by the five of directors shall
members having the determine
largest number of
shares
Section 12.   
Forms of holdings
of currency
Section 13. Annual report, etc. Article 39. Working language is  Article 34. Reports Working language is  
Publications Working language, English and information English.
of reports and reports Annual report, etc. Annual report, etc.
provision of
Appendix

information
115
116

IBRD ADB AIIB

Similarity Similarity to Similarity to


Articles Content Articles Content to IBRD Articles Content IBRD ADB

Section 14. Article 40.  Article 18.  


Allocation of net Allocation of net Allocation and
Appendix

income income distribution of net


income
 Article 36.  
References

ARTICLE VI Withdrawal and Chapter VII Withdrawal and Chapter VII Withdrawal and
suspension of suspension of suspension of
membership: members, temporary members
suspension of suspension and
operations termination of
operations of the
bank
Section 1. Right Article 41. More detailed . Article 37. More detailed . 
of members to Withdrawal Withdrawal of
withdraw membership
Section 2. Article 42. Suspension More detailed . Article 38. Suspension More detailed . 
Membership of membership of membership
suspension
Section 3.   
Cessation of
membership in
International
Monetary Fund
Section 4. Article 43. Settlement  Article 39. Settlement  
Settlement of of accounts of accounts
accounts with
governments
ceasing to be
members

DOI: 10.1057/9781137593870.0010
Chapter VIII Suspension and
termination of
operations of the bank
Section 5. (a) Article 44. Temporary . Article 40. Temporary . 
Suspension of suspension of suspension of
operation and operations operation
settlement of
obligations
(b) Article 45. . Article 41. . 

DOI: 10.1057/9781137593870.0010
Termination of Termination of
operations operations
(c) (d) Article 46. Liability of . Article 42. Liability of . 
members and payment members and payment
of claims of claims
(e) through (i) Article 47. . Article 43. . 
Distribution of assets Distribution of assets

ARTICLE VII Status, immunities Chapter VIII. Status, immunities, Chapter IX Status, immunities,
and privileges exemptions and privileges and
privileges exemptions
Section 1. Purpose Article 48. Purpose  Article 44. Purposes of  
of the article of chapter chapter
Section 2. Status Article 49. Legal status  Article 45. Status of  
of the bank the bank
Section 3. Position Article 50. Immunity  Article 46. Immunity  
of the bank with from judicial from judicial
regard to judicial proceedings proceedings
process
Section 4. Article 51. Immunity  Article 47. . .
Immunity of assets of assets Immunity of assets
from seizure and archives
Article 47.1
Section 5. Article 52. Immunity  Article 47.2 . .
Appendix

Immunity of of archives
archives
117
118

IBRD ADB AIIB

Similarity Similarity to Similarity to


Articles Content Articles Content to IBRD Articles Content IBRD ADB

Section 6. Article 53. Freedom  Article 48. Freedom of  


Appendix

Freedom of assets of assets from assets from restrictions


from restrictions restrictions
Section 7. Article 54. Privilege  Article 49. Privilege for  
Privilege for for communications communications
communications
Section 8. Article 55.  Article 50. Immunities  
Immunities Immunities and and privileges of officers
and privileges privileges of bank and employees
of officers and personnel
employees
Section 9. Article 56. Exemption  Article 51. Exemption  
Immunities from from taxation from taxation
taxation
Section 10. Article 57.
Application of Implementation
article
Article 58. Waiver  Article 52.  
of immunities, Waivers
exemptions and
privileges

ARTICLE VIII Amendments Chapter IX Amendments, Chapter X Amendments,


interpretation, interpretation and
arbitration arbitration
Amendments Article 59.  Article 53.  
Amendments Amendments

ARTICLE IX Interpretation Article 60. . Article 54. . 


(a) (b) Interpretation of Interpretation

DOI: 10.1057/9781137593870.0010
application
(c) Article 61. Arbitration . Article 55. Arbitration . 

ARTICLE X Approval deemed Article 62. Approval  Article 56. Approval  


given deemed given deemed given

ARTICLE XI Final provisions Chapter X Final provisions Chapter XI Final provisions


Section 1. Entry Above  of Article 65. At least  signatures,  Article 59. Entry into At least  signatures, . 
into force authorized capital Entry into force above  authorized force above  authorized
capital capital

DOI: 10.1057/9781137593870.0010
Section 2. Open to signatures, Article 63. Signature Open at ECAFE.  Article 57. Signature Open to signatures,  
Signature deposited with US and deposit Deposited with UN and deposit deposited with Chinese
government secretary general government
Article 64. Ratification  Article 58. Ratification,  
or acceptance acceptance or approval
Section 3. Article 66. . Article 60. Inaugural Shall elect the president  
Inauguration of Commencement of meeting and Else is the same as ADB
the bank operations commencement of
operations

SCHEDULE A Subscriptions Annex A Initial subscriptions . SCHEDULE A Initial subscriptions  .

SCHEDULE B Election of executive Annex B Election of directors . SCHEDULE B Election of directors  .
directors
.=./ .=/ .=./

Note: *The IBRD AOA does not mention who defines convertibility. But it is safe to assume that the IBRD follows its sister institution IMF.
Appendix
119
Select Bibliography
Acharya, A. (2014) The End of American World Order
(Cambridge: Polity Press).
Adams, R.M. (1981) Heartland of Cities (Chicago, IL:
University of Chicago Press).
Asia Center of the European Council on Foreign
Relations (2015) ‘One Belt, One Road’: China’s Great Leap
Outward.
Axelrod, R. (1984) The Evolution of Cooperation (New York:
Basic Books).
Bailey, M., J. Goldstein and B. Weingast (1997) ‘The
Institutional Roots of American Trade Policy’, World
Politics, 49 (3), 309–338.
Baldwin, D.A. (1979) ‘Power Analysis and World Politics:
New Trends versus Old Tendencies’, World Politics, 31
(2), 161–194.
Baldwin, D.A. (2002) ‘Power and International Relations’,
in W. Carlsnaes, T. Risse and B.A. Simmons (eds.)
Handbook of International Relations (Thousand Oaks,
CA: Sage Publications), 177–191.
Bjornskov, C. and M. Paldam (2012) ‘The Spirits of
Capitalism and Socialism’, Public Choice, 150 (3–4),
469–498.
Bøas, M. (1998) ‘Governance as Multilateral Development
Bank Policy: The Cases of the African Development
Bank and the Asian Development Bank’, European
Journal of Development Research, 10 (2), 117–134.
Bollongino, R. et al. (2013) ‘2000 Years of Parallel
Societies in Stone Age Central Europe’, Science, 342 (25
October), 479–481.

120 DOI: 10.1057/9781137593870.0011


Select Bibliography 121

Bull, H. (1966) ‘International Theory: The Case for a Classical


Approach’, World Politics 18 (3), 361–377.
Bull, H. (1977) The Anarchical Society: A Study of Order in World Politics
(New York: Columbia University Press).
Bull, H. and A. Watson (eds.) (1985) The Expansion of International
Society (Oxford: Oxford University Press).
Buzan, B. (2014) An Introduction to the English School of International
Relations: The Societal Approach (Cambridge: Polity Press).
Byrnes, A. (2011) ‘The Asian Development Bank and the Role of Human
Rights in the Pursuit of Just and Sustainable Development in the
Asia-Pacific Region: An Advocacy Role for Australia?’ Australian
International Law Journal, 18, 1–21.
Chatters, J.C. et al. (2014) ‘Late Pleistocene Human Skeleton and
mtDNA Link Paleoamericans and Modern Native Americans’,
Science, 344 (16 May), 750–754.
Chin, G. (2012) ‘Two-Way Socialization: China, the World Bank and
Hegemonic Weakening’, Brown Journal of World Affairs, 19 (1), 211–230.
Christensen, T.J. (2015) The China Challenge: Shaping the Choices of a
Rising Power (New York: W.W. Norton).
Cohen, B.J. (2008) International Political Economy: An Intellectual History
(Princeton: Princeton University Press).
Cohen, B.J. (2010) ‘The Triad and the Unholy Trinity: Problems of
International Monetary Cooperation’, in J.A. Frieden, D.A. Lake and
J.L. Broz (eds.) International Political Economy: Perspectives on Global
Power and Wealth, 5th ed. (New York: W.W. Norton), pp. 273–285.
Cornia, G.A., R. Jolly and F. Stewart (eds.) (1987) Adjustment with a
Human Face: Protecting the Vulnerable and Promoting Growth (New
York: Oxford University Press).
Cox, C. and P. D. Moore (2010) Biogeography: An Ecological and
Evolutionary Approach, 8th ed. (Hoboken, NJ: John Wiley & Sons).
Coyne, J.A. (2009) Why Evolution Is True (New York: Viking).
Dahl, R.A. (1998) On Democracy (New Haven, CN: Yale University
Press).
Dent, C.M. (2008) ‘The Asian Development Bank and Developmental
Regionalism’, Third World Quarterly, 29 (4), 767–786.
Diamond, J. (2011) Collapse: How Societies Choose to Fail or Succeed (New
York: Penguin Books).
Diamond, L. (2008) The Spirit of Democracy: The Struggle to Build Free
Societies throughout the World (New York: Times Books).

DOI: 10.1057/9781137593870.0011
122 Select Bibliography

Duan, C-Q. et al. (1998) ‘Relocation of Civilization Centers in Ancient


China: Environmental Factors’, Ambio, 27 (7), 572–575.
Durand, J.D. (1974) Historical Estimates of World Population: An
Evaluation (Philadelphia, PA: Population Studies Center, University
of Pennsylvania).
Easterly, W. (2014) The Tyranny of Experts: Economists, Dictators, and the
Forgotten Rights of the Poor (New York: Basic).
Ensign, M. (1992) Doing Good or Doing Well? (New York: Columbia
University Press).
Farneti, P. (1978) ‘Social Conflict, Parliamentary Fragmentation,
Institutional Shift, and the Rise of Fascism: Italy’, in J.J. Linz and A.
Stepan (eds.) The Breakdown of Democratic Regimes (Baltimore: Johns
Hopkins University Press), pp. 3–33.
Fearon, J. and A. Wendt (2002) ‘Rationalism v. Constructivism: A
Skeptical View’, in W. Carlsnaes, T. Risse and B.A. Simmons (eds.)
Handbook of International Relations (Thousand Oaks, CA: Sage
Publications), pp. 52–72.
Frankel, J.A. (2010) ‘Globalization of the Economy’, in J.A. Frieden, D.A.
Lake and J.L. Broz (eds.) International Political Economy: Perspectives
on Global Power and Wealth, 5th ed. (New York: W.W. Norton), pp.
63–81.
Freedom House (2014a) ‘Freedom in the World 2014’, available at
http://freedomhouse.org/report/freedom-world/freedom-world-
2014?gclid=CPivs_XOn74CFYw7Ogod7zsA0Q#.U20x68_D9LN.
Date accessed 5 June 2014.
Freedom House (2014b) ‘Freedom in the World 2014 Methodology’,
available at http://www.freedomhouse.org/report/freedom-world-
aggregate-and-subcategory-scores#.U2JjKc_D9LN. Date accessed 3
June 2014.
Fukuyama, F. (2011) The Origins of Political Order: From Prehuman Times
to the French Revolution (New York: Farrar, Straus and Giroux).
Gartner, D. (2013) ‘Uncovering Bretton Woods System: Conditional
Transparency, the World Bank and the International Monetary Fund’,
The George Washington International Law Review, 45 (1), 121–145.
Ghose, T. (2013) ‘Mysterious Minoans Were European, DNA Finds’,
Live Science, 25 May, available at http://www.livescience.com/31983-
minoans-were-genetically-european.html. Date accessed 4 June 2014.
Gilpin, R. (1996) ‘Economic Evolution of National Systems’, International
Studies Quarterly, 40 (3), 411–431.

DOI: 10.1057/9781137593870.0011
Select Bibliography 123

Gilpin, R. (2001) Global Political Economy: Understanding the International


Economic Order (Princeton: Princeton University Press).
Goldman, M. (2005) Imperial Nature: The World Bank and Struggle for
Social Justice in the Age of Globalization (New Haven: Yale University
Press).
Gong, G.W. (1984) The Standard of ‘Civilization’ in International Society
(Oxford: Oxford University Press).
Greaves, J. and W. Grant (2010) ‘Crossing the Interdisciplinary Divide:
Political Science and Biological Science’, Political Studies, 58 (2),
320–339.
Gruber, L. (2000) Ruling the World: Power Politics and the Rise of
Supranational Institutions (Princeton: Princeton University Press).
Gundlach, E. and M. Paldam (2009) ‘A Farewell to Critical Junctures:
Sorting Out Long-Run Causality of Income and Democracy’,
European Journal of Political Economy, 25 (3), 340–354.
Haas, J., W. Creamer and A. Ruiz (2004) ‘Dating the Late Archaic
Occupation of the Norte Chico Region in Peru’, Nature, 432 (23
December), 1020–1023.
Hariri, J.G. (2012), ‘The Autocratic Legacy of Early Statehood’, American
Political Science Review, 106 (3), 471–494.
Huang, P.-W., Jr. (1975) The Asian Development Bank: Diplomacy and
Development in Asia (New York: Vantage Press).
Huggett, R.J. (2004) Fundamentals of Biogeography, 2nd ed. (London:
Routledge).
Hughey, J. et al. (2013) ‘A European Population in Minoan Bronze Age
Crete’, Nature Communications, 4 (1861), 14 May, available at http://
www.nature.com/ncomms/journal/v4/n5/full/ncomms2871.html.
Date accessed 4 June 2014.
Huntington, S.P. (1991) The Third Wave: Democratization in the Late
Twentieth Century (Norman, OK: University of Oklahoma Press).
Ikenberry, G.J. (2012) Liberal Leviathan: The Origins, Crisis, and
Transformation of the American World Order (Princeton: Princeton
University Press).
International Monetary Fund (2009) World Economic Outlook
Database, October, http://www.imf.org/external/pubs/ft/
weo/2009/02/weodata/weoselgr.aspx. Date accessed 17 April 2014.
Katzenstein, P.J. (2005) A World of Regions (Ithaca: Cornell University
Press).

DOI: 10.1057/9781137593870.0011
124 Select Bibliography

Keohane, R.O. (1982) ‘The Demand for International Regimes’,


International Organization, 36 (2), 325–355.
Keohane, R.O. (1984) After Hegemony: Cooperation and Discord in the
World Political Economy (Princeton: Princeton University Press).
Keohane, R.O. (1986) ‘Theory of World Politics: Structural Realism and
Beyond’, in R.O. Keohane (ed.) Neorealism and Its Critics (New York:
Columbia University Press), 158–203.
Kindleberger, C.P. (1986) The World in Depression, 1929–1939, revised and
enlarged ed. (Berkeley: University of California Press).
Kissinger, H. (2011) On China (New York: Penguin Press).
Kopinski, D. and Q. Sun (2014) ‘New Friends, Old Friends? The World
Bank and Africa when the Chinese Are Coming’, Global Governance,
20 (4), 601–623.
Koremenos, B., C. Lipson and D. Snidal (2001) ‘The Rational Design of
International Institutions’, International Organization, 55 (4), 761–799.
Krasner, S.D. (1976) ‘State Power and the Structure of International
Trade’, World Politics, 28 (3), 317–347.
Krasner, S.D. (1981) ‘Power Structures and Regional Development
Banks’, International Organization, 35 (2), 303–329.
Krasner, S.D. (ed.) (1983a) International Regimes (Ithaca: Cornell
University Press).
Krasner, S.D. (1983b) ‘Structural Causes and Regime Consequences:
Regimes as Intervening Variables’, in S.D. Krasner (ed.) International
Regimes (Ithaca: Cornell University Press), pp. 1–21.
Krishnamurti, R. (1977) ADB: The Seeding Days (Manila: ADB).
Krugman, P. (1995) ‘Cycles of Conventional Wisdom on Economic
Development’, International Affairs, 71 (4), 717–732.
Lardy, N.R. (1999) ‘China and the International Financial System’, in
E. Economy and M. Oksenberg (eds.) China Joins the World: Progress
and Prospect (New York: Council on Foreign Relations Press), pp.
206–230.
Lawler, A. (2007) ‘Middle Asia Takes Center Stage’, Science, 317 (3
August), 586–590.
Lebow, R.N. (2009) ‘Constitutive Causality: Imagined Spaces and
Political Practices, Millennium-Journal of International Studies, 38 (2),
211–239.
Lepsius, M.R. (1978) ‘From Fragmented Party Democracy to
Government by Emergency Decree and National Socialist Takeover:
Germany’, in J.J. Linz and A. Stepan (eds.) The Breakdown of

DOI: 10.1057/9781137593870.0011
Select Bibliography 125

Democratic Regimes (Baltimore, MD: Johns Hopkins University


Press), pp. 34–79.
Linz, J.J. (2000) Totalitarian and Authoritarian Regimes (Boulder, CO:
Lynne Rienner).
Lomolino, M.V., B.R. Riddle and J.H. Brown (2006) Biogeography, 3rd
ed. (Sunderland, MA: Sinauer Associates).
Lomolino, M.V., D.F. Sax and J.H. Brown (eds.) (2004) Foundations
of Biogeography: Classic Papers with Commentaries (Chicago, IL:
University of Chicago Press).
Maddison, A. (2008) ‘Historical Statistics of the World Economy:
1-2008 AD’, 3 September, available at http://www.ggdc.net/
MADDISON/oriindex.htm. Date accessed 4 June 2014.
Mahbubani, K. (2015) ‘Why Britain Joining China-Led Bank Is a Sign
of American Decline’, Huffington Post, 16 March 2015, http://www.
huffingtonpost.com/kishore-mahbubani/britain-china-bank-
america-decline_b_6877942.html?ir=World&ncid=newsltushpmg00
000003. Date accessed 24 June 2015.
Mann M. (2012) The Sources of Social Power, Vol. 1, A History of Power
from the Beginning to AD 1760 (Cambridge: Cambridge University
Press).
Mao, D.W. and J.R. Vreeland (2013) ‘Regional Organizations
and International Politics: Japanese Influence over the Asian
Development Bank and the UN Security Council’, World Politics, 65
(1), 34–72.
Marshall, M., T.R. Gurr, and K. Jaggers (2013) ‘PolityTM IV Project:
Political Regime Characteristics and Transitions, 1800–2012’, 21 April,
available athttp://www.systemicpeace.org/inscr/p4manualv2012.pdf.
Date accessed 3 June 2014.
Martin, L.L. (1993) ‘Credibility, Costs, and Institutions: Cooperation on
Economic Sanctions’, World Politics, 45 (3), 406–432.
Mason, E.S. and Robert E. Asher (1973) The World Bank since Bretton
Woods (Washington, DC: Brookings Institution).
Masters, R.D. (1990) ‘Evolutionary Biology and Political Theory’,
American Political Science Review, 84 (1), 195–210.
Masters, R.D. (1991) The Nature of Power (New Haven, CN: Yale
University Press).
Masters, R.D. (1996) Machiavelli, Leonardo, and the Science of Power
(Notre Dame, IN: University of Notre Dame Press).

DOI: 10.1057/9781137593870.0011
126 Select Bibliography

McCarthy, D. (2009) Here Be Dragons: How the Study of Animal and Plant
Distributions Revolutionized Our Views of Life and Earth (New York:
Oxford University Press).
Mearsheimer, J.J. (2001) The Tragedy of Great Power Politics (New York:
W.W. Norton).
Morgenthau, H.J. (1973) Politics among Nations: The Struggle for Power and
Peace, 5th ed. (New York: Alfred A. Knopf).
Morrone, J.J. (2009) Evolutionary Biogeography: An Integrative Approach
with Case Studies (New York: Columbia University Press).
Mosley, P., J. Harrigan and J. Toye (1995) Aid and Power: The World Bank
and the Policy Based Lending, Vol. 1, Analysis and Policy Proposals, 2nd
ed. (London: Routledge).
Nye, J.S., Jr. (2011) The Future of Power (New York: PublicAffairs).
Olsson, O. and D.A. Hibbs, Jr. (2005) ‘Biogeography and Long-Run
Economic Development’, European Economic Review, 49 (May),
909–938.
Park, S. (2014) ‘Institutional Isomorphism and the Asian Development
Bank’s Accountability Mechanism: Something Old, Something
New, Something Borrowed, Something Blue?’ Pacific Review, 27 (2),
217–239.
Peet, R. (2009) Unholy Trinity: The IMF, World Bank and WTO, 2nd ed.
(New York: Zed Books).
Petersen, M.B. and S-E. Skaaning (2010) ‘Ultimate Causes of State
Formation: The Significance of Biogeography, Diffusion, and
Neolithic Revolutions’, Historical Social Research, 35 (3), 200–226.
Petri, P.A., M.G. Plummer and F. Zhai (2014) ‘The TPP, China and the
FTAAP: The Case for Convergence’, East-West Center, 19 May.
Pogge, T.W. (2002) World Poverty and Human Rights: Cosmopolitan
Responsibilities and Reforms (Cambridge: Polity Press).
Rathus, J. (2008), ‘China, Japan and Regional Organisation: The Case of
the Asian Development Bank’, Japanese Studies, 28 (1), 87–99.
Renfrew, C. (1972) The Emergence of Civilisation: The Cyclades and the
Aegean in the Third Millennium B.C. (London: Methuen).
Root, H. (2015) ‘China’s $100 Billion Infrastructure Bank: Bumpy Road
Ahead’, The Fiscal Times, 3 May, http://www.thefiscaltimes.com/
Columns/2015/05/03/China-s-100-Billion-Infrastructure-Bank-
Bumpy-Road-Ahead. Date accessed 8 May 2015.
Rosenberg, A. (2000) Darwinism in Philosophy: Social Science and Policy
(New York: Cambridge University Press).

DOI: 10.1057/9781137593870.0011
Select Bibliography 127

Ruggie, J.G. (1982) ‘International Regimes, Transactions, and Change:


Embedded Liberalism in the Postwar Economic Order’, International
Organization, 36 (2), 379–415.
Sartori, G. (1993) ‘Totalitarianism, Model Mania and Learning from
Error’, Journal of Theoretical Politics, 5 (1), 5–22.
Schmitter, P.C. (2010) ‘Micro-Foundations for the Sciences of Politics’,
Scandinavian Political Studies, 33 (3), 316–330.
Searle, J.R. (1995) The Construction of Social Reality (New York: Free
Press).
Sewell, W/H., Jr. (2005) The Logics of History: Social Theory and Social
Transformation (Chicago: University of Chicago Press).
Sims, K. (2015) ‘The Asian Development Bank and the Production
of Poverty: Neoliberalism, Technocratic Modernization and Land
Dispossession in the Greater Mekong Subregion’, Singapore Journal of
Tropical Geography, 36 (1), 112–126.
Smith, J.M. (1990) ‘Explanation in Biology’, in Dudley Knowles (ed.)
Explanation and Its Limits (Cambridge: Cambridge University Press),
pp. 65–72.
Solis, R.S., J. Haas and W. Creamer (2001) ‘Dating Caral, a Preceramic
Site in the Supe Valley on the Central Coast of Peru’, Science, 292 (27
April), 723–726.
Spruyt, H. (1994) The Sovereign State and Its Competitors (Princeton:
Princeton University Press).
Strange, S. (1971) Sterling and British Policy: A Political Study of an
International Currency in Decline (London: Oxford University Press).
Summers, L. (2015), ‘A Global Wake-Up Call for the US?’ The
Washington Post, 6 April, A17.
Suzuki, S. (2013) Civilization and Empire: China and Japan’s Encounter with
European International Society (London: Routledge).
Uhlin, A. (2011) ‘National Democratization Theory and Global
Governance: Civil Society and the Liberalization of the Asian
Development Bank’, Democratization, 18 (3), 847–871.
von Cranach, M. (1976a) ‘Introduction: The Order of Topics in This
Book’, in Mario von Cranach (ed.) Methods of Inference from Animal to
Human Behaviour (Chicago, IL: Aldine).
von Cranach, M. (ed.) (1976b) Methods of Inference from Animal to
Human Behaviour (Chicago, IL: Aldine).
Waltz, K.N. (1979) Theory of International Politics (Reading, MA:
Addison-Wesley).

DOI: 10.1057/9781137593870.0011
128 Select Bibliography

Wan, M. (1995/1996) ‘Japan and the Asian Development Bank’, Pacific


Affairs, 69 (4), 509–528.
Wan, M. (2001) Japan between Asia and the West: Economic and Strategic
Balance (Armonk: M.E. Sharpe).
Wan, M. (2008) The Political Economy of East Asia: Striving for Wealth and
Power (Washington, DC: CQ Press).
Wan, M. (2012) ‘Introduction: Chinese Traditions in International
Relations’, Journal of Chinese Political Science, 17 (2), 105–109.
Wan, M. (2013) ‘Back to Nature: An Achievement-Based Structural
Assessment of the Modern International System’, The Chinese Journal
of International Politics, 6 (4), 401–428.
Wan, M. (2014) The China Model and Global Political Economy:
Comparison, Impact, and Interaction (New York: Routledge).
Wan, M. (2015a) ‘China and International Cooperation on the
Environment: Historical and Intellectual Roots of Chinese Thinking
about the Environment’, in G. John Ikenberry, Wang Jisi and Zhu
Feng (eds.) The United States, China, and the Struggle for World Order:
Ideas, Traditions, Historical Legacies, and Global Visions (New York:
Palgrave Macmillan), pp. 275–296.
Wan, M. (2015b) Understanding Japan-China Relations: Theories and Issues
(Singapore: World Scientific).
Watanabe, T. (1977) Toward a New Asia (Manila: ADB).
Wendt, A. (1999) Social Theory of International Politics (New York:
Cambridge University Press).
Wihtol, R. (1988) The Asian Development Bank and Rural Development:
Policy and Practice (New York: St. Martin’s Press).
Wilson, D. (1987) A Bank for Half the World: The Story of the Asian
Development Bank 1966–1986 (Manila: ADB).
Woods, N. (2006) The Globalizers: The IMF, the World Bank, and Their
Borrowers (Ithaca, NY: Cornell University Press).
Yasutomo, D.T. (1983) Japan and the Asian Development Bank (New York:
Praeger).
Zhang, Y. (1988) China in International Society (New York: Palgrave).
Zhivotovsky, L.A., N.A. Rosenberg and M.W. Feldman (2003) ‘Features
of Evolution and Expansion of Modern Humans, Inferred from
Genomewide Micraosatellite Markers’, American Journal of Human
Genetics, 72 (5), 1171–1186.

DOI: 10.1057/9781137593870.0011
Index
Abe, Shinzō, 70, 72–3, 99 intergovernmental financial
ADB (Asian Development institution, 10–12
Bank) international order, 9–10, 12
AIIB nested to World Bank membership, 45–7, 76, 77, 78
and, 78–85 nested to World Bank and
Articles of Agreement, ADB, 78–85
107–19 ‘One Belt, One Road’
comparing AIIB to World initiative, 51–3, 54–5, 93
Bank and, 74–8 organization vs. IBRD and
Japan and, 64–74 ADB, 81–2
membership, 45–7, 76, 77, 78 origin of, 44, 47–8
organization vs. AIIB and political power, 2
IBRD, 81–2 snowballing effect, 48–9
AfDB (African Development US-China rivalry, 28, 39
Bank), 66, 79 amensalism, 4
Afghanistan, 38, 45, 75 American hegemony, 7, 22, 26,
AIIB (Asian Infrastructure 59, 75
Investment Bank), 2, 6–9, AMF (Asian Monetary Fund),
16 67, 86
Articles of Agreement, Articles of Agreement
107–19 ADB, 73, 76
‘bad money’ and ‘good AIIB, 44, 49–50, 54, 77, 80, 83
money’, 89n49 Bretton Woods conference,
China model, 11, 16, 53–5 60–1
comparing AIIB to World comparing IBRD, ADB and
Bank and ADB, 74–8 AIIB, 107–19
constructing, 44–51 IBRD, 83
East Asian international Asher, R. E., 60
orders, 96–9, 101–2 Asian Financial Crisis, 62, 67
future of, 102–4 Asō, Tarō, 69–70, 72
getting down to business, Australia, 25, 36, 45, 48, 69–70,
49–51 75, 77, 82, 94, 99
hybrid system, 14, 16, 54, 59, authoritarianism, 28, 29, 31, 32,
86, 97, 102 38, 54

DOI: 10.1057/9781137593870.0012 129


130 Index

Bernanke, Ben, 63 East Asian international orders


biogeography, 2, 11, 12–16 AIIB and, 96–9, 101–2
principles of, 13 stages of, 22–5
vicariance, 38 East Asian international relations,
BRICS Development Bank, 95 22–3, 38, 97, 101–2, 104
Brodjonegoro, Bambang, 71 ECAFE (Economic Commission for
Bull, Hedley, 9 Asia and the Far East), 65, 66, 79,
81
Castro, Fidel, 32 ecological biogeography, 12
CCIEE (China Center for International economic development, freedom vs.,
Economic Exchanges), 52, 57n23 in world, 36–7
Chin, Curtis, 66–7 English School of International
China Relations, 6, 9–10
achievement gaps, 23 Eurasia, 26, 28, 34, 36, 38–9, 76–7, 97
AIIB initiative, 11, 16, 48–9, 53–5
democracy, 30–1 Fearon, James, 17n7
establishing AIIB, 62–4 freedom
financial power and AIIB, 93–6 distribution in world, 35
future of AIIB, 102–4 vs. economic development in world,
IMF and World Bank, 62 36–7
military expenditure, 101 Freedom House, 33–5, 37, 42n29
political economy, 44, 53–5 FTAAP (Free Trade Area of Asia
power distribution, 100 Pacific), 53, 98
veto power in AIIB, 49–50 Fujioka Masao, 67, 68
world order, 22–3 Fukuyama, Francis, 30, 36
China Development Bank, 52
civilization centers, 26, 28 GDP (gross domestic product), 24, 37,
Clinton, Hillary, 98, 99 47, 83, 91n75, 99, 100
commensalism, 4 Gilpin, Robert, 11
competition, 4, 5, 13, 24, 70, 72–3, 74, global finance, sovereign states, 10–12
84–5 global financial market, 2, 10, 49, 65–6,
constructivism, 6 84, 93–4
Coyne, Jerry, 6, 79 governance, 73–4
CPEC (China-Pakistan Economic Governance of China, The (Xi Jinping),
Corridor), 53 51
Greece, 8, 28, 29, 30, 32
Darwin, Charles, 5, 6, 12
democracy historical biogeography, 12
expansion of, 33–8 Hockey, Joe, 94
liberal, 22, 30, 102 Hu, Jintao, 55
political institution, 30–2 Huntington, Samuel, 33, 35, 42n28
democratization, 28, 35–6, 42n28, 74 hybrid system, AIIB, 14, 16, 54, 59, 86,
Deng, Xiaoping, 53, 59 97, 102
Diamond, Jared M., 12, 27
Diamond, Larry, 35 IADB (Inter-American Development
Dollar, David, 54 Bank), 65, 66

DOI: 10.1057/9781137593870.0012
Index 131

IBRD (International Bank Katzenstein, Peter, 11, 12


for Reconstruction and Keohane, Robert, 5
Development), 66 Kim, Jim Young, 64
AIIB nested to, 83–4 Kindleberger, Charles, 59
Articles of Agreement, 107–19 Kishi, Nobusuke, 65
China and United States, 62 Krasner, Stephen, 10
members, 61, 80
organization vs. AIIB and ADB, liberal democracy, 22, 30, 102
81–2 liberal institutionalism, 94–5
IDA (International Development Lin, Justin, 62
Association), 61 Linz, Juan, 32
IMF (International Monetary Fund), Lou, Jiwei, 44, 47, 95
60–3, 67, 80, 87n11–12
imperialism, 22 McNamara, Robert, 61
impossible trinity, 10 Maddison, Angus, 24, 42n28
India, 45, 47 Magnier, Mark, 68
achievement gaps, 23 Mann, Michael, 4–5, 8
ADB, 68, 71, 75–7 Marshall Plan, 51, 61
AIIB, 50, 82–3 Mason, E. S., 60
democracy, 28, 36–7, 103 Mearsheimer, John, 97
IMF votes, 63 membership, ADB vs. AIIB, 45–7
military expenditure, 101 Merkel, Angela, 70
power, 99, 100 Morgenthau, Hans, 3
international order, 79
AIIB and East Asian, 96–9, 101–2 Nakao, Takehiko, 71
liberal, 59–60, 84, 101, 102 Neolithic Revolution, 5
power and, 9–10
stages in East Asia, 22–5 ODA (official development assistance)
US-led, 65, 79, 86 policy, 64, 72, 90n58
IPE (International Political Economy), Ohashi, Kaoru, 65
2, 7–8, 9, 11 ‘One Belt, One Road’ initiative, 51–3,
IR (international relations), 2, 4–6, 9, 54–5, 93
12 OPEC (Organization of Petroleum
East Asian, 22–3, 38, 97, 101–2, 104 Exporting Countries), 85
ISIL, 97, 99
Pakistan, 36, 45, 47, 53, 66, 75
Japan Petri, Peter, 98
achievement gaps, 23 Philippines, 45, 47, 50, 75, 82, 98
ADB (Asian Development Bank), Plummer, Michael, 98
64–74 pluralism, 29, 32
IMF and World Bank, 61–2 political economy, Chinese system, 44,
military expenditure, 101 53–5
position against AIIB, 89n51 political institutions
power distribution, 100 branching of, 25–33
Jiang, Zemin, 55 civilization centers, 26, 28
Jin, Liqun, 49, 51, 54, 77, 79 democracy, 30–2

DOI: 10.1057/9781137593870.0012
132 Index

political institutions – continued Thailand, 46, 47, 50, 72, 75, 98


democracy’s expansion, 33–8 totalitarianism, 29, 31, 32
evolving, 26 TPP (Trans-Pacific Partnership), 44,
lineages of, 28–30 53, 64, 73, 98–9
social barriers, 27 Truman, Harry, 60
understanding differences, 14–16
United States and China, 28 United States, 82
political lineages, 25, 28, 29, 30–3, 39, achievement gaps, 23
102–3 AIIB, 11–12, 28, 39, 44, 54, 94, 99
political power, dual nature of, 2–9 China and, 28, 39, 96–9, 101, 103
power democracy, 29, 33–6
calculation of, 8–9 Japan and ADB, 64–70, 73–4, 94
competition, 84–5 military expenditure, 101
distribution of Big Five, 100 power, 75, 99, 100
dual nature of political, 2–9 World Bank and, 59–64
goal in strategic thinking, 24
international order, 9–10 vicariance, 38
predation, 4, 13 Vietnam, 46, 47, 72, 75–6, 103
protocooperation, 4 von Cranach, Mario, 14
provincialism, 37–8
PS (political science), 2, 3, 31 Wallace, Alfred R., 12, 13
Waltz, Kenneth, 5, 97
Rathus, Joel, 68 Watanabe, Takeshi, 65–7, 79
Rosenberg, Alexander, 13 Wegener, Alfred, 12
RTAA (Reciprocal Trade Agreements Wendt, Alexander, 17n7
Act), 59 Wilson, Edward O., 12
Ruggie, John, 60 world
Russia, 29, 38, 46, 97, 99 achievement gaps, 23
AIIB, 48–50, 76, 82 freedom distribution, 35
military expenditure, 101 freedom vs. economic development,
power distribution, 100 36–7
World Bank, 16, 48, 50–1, 54, 56n12
Schmitter, Philippe, 2 AIIB nested to, and ADB, 78–85
Searle, John, 5–7, 9 comparing AIIB to, and ADB,
‘Silk Road economic belt’, 44, 51 74–8
social construction, 6–7, 38 Japan, 61–2
South China Sea, 11, 50, 55, 96, 97 Japan and ADB (Asian Development
South Korea, 48–50, 70, 75, 82, 94, 98, 103 Bank), 65–8, 71, 74
sovereign state system, global finance United States and, 59–64
and, 10–12 World War II, 10, 22, 59–60, 72, 75, 86
spatial competition, 4
Spirit of Democracy (Diamond), 35 Xi, Jinping, 44, 48, 51, 55, 93
Strange, Susan, 9, 10
Summers, Lawrence, 63 Zhai, Fan, 98

DOI: 10.1057/9781137593870.0012

You might also like