With New Bank, China Shows U.S. It's Got Soft Power

[Vikrant]

While U.S. was busy in the Middle East, China quietly sneaked up. The sad thing is that the lobbies in D.C. still do not want to pay any attention to China, they still want to keep the focus in the Middle East as if the world revolves around the Middle East.

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The U.S. may have mastered the notion of soft power. But if there is one thing we can say about the world’s No. 2 economy it is this: those guys in China sure know how to imitate.

China’s proposed Asian Infrastructure Investment Bank (AIIB) is soft power at it best. An idea once cast aside by the U.S., today even the International Monetary Fund is getting in on China’s latest big bank.

IMF director Christine Lagarde said there was “massive” room for IMF co-operation with the AIIB on infrastructure financing, the BBC reported this weekend.

The U.S. government won’t want to be left out of this. It will probably lend support too the bank by sending experts and advisors to help inform governance structures and standards, say directors from the Center for Strategic & International Studies in Washington. The U.S. can also work with European countries that have joined the bank in order to use their influence to ensure that the AIIB adheres to best practices, CSIS experts said last week.

AIIB is a multilateral development bank proposed by and majority controlled by China. It has a 36% stake in the governing structure of the bank as it is now. AIIB exists to finance the infrastructure needs in the Asia Pacific region and is different from China’s latest development banking project, the so-called BRICS Bank. The real name for that one is the New Development Bank (NDB), China created with Brazil, Russia, India and South Africa last summer. The BRICS bank is a dollar-denominated lending institution that will invest primarily in those five markets, but also in other countries of interest to its members.

This new bank is different. For those who love a good old fashion power struggle, the New Development Bank everyone thought was designed to replace the World Bank is sort of like a velociraptor. The AIIB is a T-Rex.

“China continues to aggressively position itself for a much more prominent role in the global financial system,” says Jan Dehn, an economist with the Ashmore Group in London. Ashmore loves China. It’s one of the only foreign investment firms that has access to the local Chinese bond market, so it watches the country like a hawk. Or sticking with the dino-metaphors, a pterodactyl.

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With New Bank China Shows U.S. It s Got Soft Power - Forbes

 

[easymoney1972]

This is big news and notice, people have very little to say on the subject. Likely because they either don't understand what this means or refuse to see the writing on the wall.

 

[Vikrant]

This is big news and notice, people have very little to say on the subject. Likely because they either don't understand what this means or refuse to see the writing on the wall.

I think the former is correct. A good number of people on this forum don't seem to understand how the world works.

 

[easymoney1972]

Russia, Iran, China are economic superpowers because they export something other than currency and debt.

 

[Vikrant]

There is heavy duty emphasis on middle east in the U.S. foreign policy. This happens because U.S. has strong lobbies that take heavy interest in the middle east. They bombard average American with simplistic agenda driven news items. This leads to all sorts of confusion among average American with respect to foreign policy. For example: this news is very significant because this demonstrates China's attempt to establish parallel global institutions that are certainly going to undermine established U.S institutions such as World Bank. However, as you noticed, very few people are going to actually understand the significance of it.

 

[EdwardBaiamonte]

There is heavy duty emphasis on middle east in the U.S. foreign policy. This happens because U.S. has strong lobbies that take heavy interest in the middle east. They bombard average American with simplistic agenda driven news items. This leads to all sorts of confusion among average American with respect to foreign policy. For example: this news is very significant because this demonstrates China's attempt to establish parallel global institutions that are certainly going to undermine established U.S institutions such as World Bank. However, as you noticed, very few people are going to actually understand the significance of it.

USA was roundly villifyed for its participation in IMF and WB. They lost money on what amounted to welfare programs for third world countries. Economists, like Easterly, who worked for them wrote books about one IMF/WB disaster after another. Let the Chinese have some of the fun for a while.

 

[Vikrant]

There is heavy duty emphasis on middle east in the U.S. foreign policy. This happens because U.S. has strong lobbies that take heavy interest in the middle east. They bombard average American with simplistic agenda driven news items. This leads to all sorts of confusion among average American with respect to foreign policy. For example: this news is very significant because this demonstrates China's attempt to establish parallel global institutions that are certainly going to undermine established U.S institutions such as World Bank. However, as you noticed, very few people are going to actually understand the significance of it.

USA was roundly villifyed for its participation in IMF and WB. They lost money on what amounted to welfare programs for third world countries. Economists, like Easterly, who worked for them wrote books about one IMF/WB disaster after another. Let the Chinese have some of the fun for a while.

World Bank goes a long way in showing soft power of the U.S. Thus it buys influence without resorting to use military power which in the long run costs more.

 

[Londoner]

Reagan used the WB and IMF intelligently in the 80s. We loaned money to countries for "structural improvement", with the contracts going overwhelmingly to US corporations. The countries predictably defaulted, which meant they were put into technical receivership, giving us greater control over their politics, economy and resources. Essentially, the WB and IMF were used to pull resource rich parts of the 3rd world into the global economy where they would be used to supply powerful nations with cheap exports.

Imposing debt on other nations creates a far more powerful form of servitude than "boots on the ground". And it creates some insane optics, as trucks filled with fruit drove past starving people in Haiti, en route to American breakfast tables.

 

[Vikrant]

...

The reserve fund will help BRICS countries with cash problems. It will get most of its seed funding from China, which will contribute $41 billion. Russia, India and Brazil will put in $18 billion each, and South Africa will give $5 billion. The timing is critical as many emerging market nations and businesses are struggling to pay their debt for various reasons.

China is also moving forward with its own investment bank, the Asian Infrastructure Investment Bank, which America isn't supporting financially.

That bank has quickly become a thorny issue for President Obama. European nations, such as Britain and Germany, defied U.S. requests to withhold membership, and chose to back China's bank.

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Russia and China have had enough of western banking - May. 4 2015