By Zhiqun Zhu
The two ambitious projects have become an integral part of Chinese diplomacy.
The China initiated Asian Infrastructure Investment Bank (AIIB), signed by 51 Prospective Founding Members (PFMs) as of September 2015, is expected to be operational by the end of this year. China has been generally cooperative with and supportive of the Bretton Woods institutions. At the same time, it is frustrated that existing multilateral institutions limit its global ambitions. The slow pace of reforms at the Western-dominated IMF and World Bank prevents China and other emerging economies from playing a greater role in international political economy. The AIIB will help to rectify the situation and boost China’s status as a global power.
China has also proposed the “Silk Road Economic Belt” and “21st Century Maritime Silk Road,” or “One Belt, One Road” (OBOR), an even broader and more ambitious initiative. The AIIB will serve as the financing arm of OBOR. The AIIB will begin with authorized capital of $50 billion, eventually to be raised to $100 billion. The projected investment for OBOR will be $1.4 trillion, about 12 times larger than the Marshall Plan, which was about $120 billion in today’s value. In addition to the economic benefits, the AIIB and OBOR will significantly facilitate the movement of goods, services, and people across national borders. Over the past two decades, China has contributed substantially to infrastructure or “hardware” of many developing nations, but it remains short of “software” or soft power. Beijing hopes that its new initiatives with a non-coercive, non-military approach will help enhance its international image as a responsible global power. The AIIB and OBOR have become an integral part of China’s new diplomacy, reflecting its growing interests and clout. They are also important steps to realizing President Xi Jinping’s “Chinese dream.”
China is transitioning from export-oriented growth to a new model based on consumption and outward investment. This process accelerated after the 2008-9 global financial crisis, which sharply weakened the ability of Western countries to absorb Chinese manufacturing products and to invest in developing countries. China is not just investing in developing countries; it is investing in developed economies as well. According to a recent study by the National Committee on United States-China Relations and Rhodium Group, from 2000 to 2014, Chinese firms spent nearly $46 billion on new establishments and acquisitions in the U.S., most of it in the past five years. Chinese-affiliated companies now directly employ more than 80,000 Americans. If the U.S. continues to be a major recipient of China’s booming outward investment, it could receive between $100-200 billion of investment by 2020. This would increase the number of full-time U.S. jobs provided by Chinese U.S. affiliates to somewhere between 200,000 and 400,000.
Read the full story at The Diplomat