AIIB a no-brainer
The dream of a leader often becomes the dream of the nation. We can read China’s dream from the footsteps of President Xi Jinping. Last July 15, Xi was in Fortaleza, Brazil. There, his picture was taken with the leaders of the other four members of BRICS - Russia, India, South Africa and Brazil. All were smiling, but Xi was especially enthusiastic. It was the day they had agreed to establish the New Development Bank (NDB), initiated by China.
While the goal of the NDB is supporting construction of infrastructure in developing countries, it means more than that. The NDB is Xi’s challenge to America’s financial hegemony. In 1944, the Bretton Woods system recognized the United States as a key currency state and the World Bank and International Monetary Fund were established. The World Bank and the IMF regulate the international monetary system, a symbol of America’s financial hegemony. And Xi Jinping confronted America’s symbolic presence directly. No country had done that in the 70 years since World War II. If Xi’s challenge succeeds, the photograph will be membered as a historic moment signaling China’s financial hegemony.
Ten days before the photo was taken, Xi was in Seoul. On July 3, Xi asked Korea to join the Asian Infrastructure Investment Bank (AIIB). Two months earlier, Foreign Minister Wang Yi met with President Park Geun-hye and proposed Korea’s participation in the AIIB in a joint statement with Xi. However, the Korean government removed the topic from the agenda because of U.S. opposition.
If the NDB is meant to be a rival of the World Bank, AIIB is aimed at the Asian Development Bank, which is led by Japan with U.S. support. Since it was founded in 1966, all nine presidents have been Japanese. The ADB has been criticized as being a tool for Japanese companies’ advancement into other Asian regions. Three years ago, Xi proposed funding an infrastructure project in Uzbekistan in exchange for increasing China’s contribution to the ADB, but the United States and Japan did not allow it. While they mentioned human rights issues, they were more likely trying to check China’s growing influence.
It must have been around this time that Xi decided to establish a whole new international organization. If the NDB began on the other side of the globe, the AIIB is on China’s home turf. It is more specific and symbolic, and Xi is redoubling his efforts. A Blue House source said Xi officially announced the plan for the AIIB in October 2013, but he first notified the Lee Myung-bak Administration in 2012.
“The AIIB shares the context of the Eurasia and Dresden proposals of the Park Geun-hye administration. Seoul’s strategy was to demand that China participate in the Northeast Asia Development Bank in return for Korea’s participation in the AIIB,” said the source. “However, the United States fiercely opposed it before Xi’s visit. President Park was in an awkward position, and we were sensitive about the reaction of the United States.”
Xi knows Korea’s situation and true intention. Beijing was aiming at different things when Assistant Foreign Minister Liu Jianchao recently exerted pressure on Korea to become a founding member of the AIIB.
Strategically and economically, Korea’s participation in the AIIB is an obvious move. Only political considerations remain, and we can learn from history. Let’s look back not so long ago, when Korea was hit by the foreign currency crisis. How did the IMF and the United States respond? They demanded strict retrenchment and severe restructuring. IMF Managing Director Michel Camdessus called it a “blessing in disguise,” but his word play left a lasting trauma on the Korean economy. We had no other choice. America’s financial monopoly limited the options of consumers. It is better to have rivals, Washington vs. Beijing, the NDB and the AIIB against the IMF and ADB. France, Germany, Italy and even the United Kingdom, the staunch ally of the United States, will participate in the AIIB. What we need to consider is not how Barack Obama or Xi Jinping feels. Our concern is the future of global finance, and the future of Korean economy.
JoongAng Ilbo, March 19, Page 30
*The author is an editorial writer of the JoongAng Ilbo.
by Yi Jung-jae