Australian Prime Minister, Tony Abbott, has joined a Western cohort supporting the Asian Infrastructure Investment Bank (AIIB) proposed by China, marking an historical shift in Australian foreign policy. The AIIB is expected to be established by the end of 2015 and is designed to combat the growing infrastructure deficit in the Asia-Pacific region currently valued at an estimated $8tn. By harnessing China’s vast financial resources and expertise in infrastructure development; the AIIB claim they will play a vital role in providing economic assistance to the less developed parts of Vietnam, Laos, Cambodia and Thailand.
Jin Liqun, secretary general of the interim secretariat is establishing the AIIB and has said that they will be structuring the bank on existing international financial institutions, including the International Monetary Fund (IMF) and the World Bank. Beijing will also be providing at least 50% of the capital needed for the bank, estimated at US$50-100bn, with non-Asian countries making up a further 25% of AIIB shareholders. The Chinese President Xi Jinping has said the AIIB will follow international multilateral rules and procedures within developing countries in Asia, financing the bulk of loans for infrastructure projects.
For over sixty years the cornerstone of Australian foreign policy was fostering an alliance with so-called western states, particularly the US. Upon first hearing of the proposed AIIB, Washington warned its allies of China’s growing diplomatic clout and suggested that states should think twice before signing up to the AIIB, raising concerns about its governance and multilateralism. Despite Christine Lagarde, head of the IMF, and members of the World Bank supporting the AIIB and offering to cooperate, the US has warned of the potential for a new investment bank to weaken the existing international financial institutions. This opinion is not surprising given the US’s leading role in both the World Bank and IMF that has served its strategic interests since World War 2.
Under US primacy Asia has experienced more stability and higher economic growth than ever before but this era is coming to an end. States such as China, South Korea and Japan have grown in power, making US domination in this region nonsensical. As these Asian states continue to grow economically, Washington will have to bow out of Asia gracefully so as to avoid conflict and allow for continued order and development.
China is well aware that leading an operation like the AIIB will serve its strategic interests, as it tries to further cement its position as the major player in Asia. A lack of nuanced foreign policy from the US could lead to Chinese dominance over Asia and conflict in the region, instead, what the US must do is encourage powerful Asian states to work together in developing a new order of Asia. Australian foreign policy academic, Hugh White argues that it “defies the laws of strategic gravity” to assume US primacy will last forever and that pursuing this will lead to a diplomatic defeat for Washington.
Australia will continue to do what it has always done in foreign policy, and that is to continue to pursue Australia’s best interest. These recent power shifts in Asia is what’s causing the government to change its tact, but our self-interested values hold true. What is interesting about Australia’s decision to be a founding member of the AIIB is its value of economic links over our historical pursuit of security via our US buddy system. The rise of China continues to be seen as a threat to US hegemony as well as US security, with both nations upping their military power with each subsequent governmental budget.
US acquiescence to China will be one of the first times American exceptionalism has taken such a blow. It will take a lot for Washington to release their grip of Asia and move towards a new balance of power, but for the sake of rationalism they must. The AIIB and the consequential rise of China provides Australia with an opportunity to really make its mark as a key player in Asian foreign policy, proving itself to be an independent tactical power on the global stage.
What’s best for Australia is a peaceful US and an orderly, economically vibrant Asia. To pursue this ideal, Australian leaders should pressure the US to ease its control over Asia and international financial institutions. The US must concede primacy of Asia to not only China but Japan, South Korea and India so as to ensure cooperation rather than another hegemonic power struggle.
By recognising power shifts in Asia, Australia can play a pivotal role in shaping the region in the next 100 years. This new order should encourage cooperation amongst Asian powers without a dominant state. The AIIB and its orientation within Asia should be an economic and diplomatic goal for Australia. By contributing to the development of the AIIB, Australia can ensure the bank encourages development in Asia, whilst protecting our own geo-political interests.