Sunday, May 10, 2015

Fung Global Institute Authors: The AIIB and Global Governance

In this new article we have a little different take on the the impact of the Chinese led AIIB. The authors of this article seem to just accept that the IMF is not going to change its governance structure and suggest that China will just move forward with the new AIIB and other initiatives to increase their global influence. Below are some quotes from the article. 

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"Despite official American and Japanese opposition, 57 countries have opted to be among the founding members of the China-led Asian Infrastructure Investment Bank (AIIB). Regardless of what naysayers believe, this remarkable turn of events can only benefit global economic governance.

According to former US Treasury Secretary Larry Summers, the AIIB’s establishment “may be remembered as the moment the United States lost its role as the underwriter of the global economic system.” Asia Development Bank (ADB) President Takehiko Nakao, by contrast, does not believe that there will be a “major change to the world of development finance,” though he conceded that “there can be interpretations as to the symbolic meaning of this.”


Who is right will depend largely on the decisions that the AIIB’s top shareholders make regarding its operating structure. So far, the AIIB has not sought to amend the principle that the largest contributor to a multilateral organization gets the largest say in running it. Just as the US dominates the World Bank and Europe leads the International Monetary Fund, China will head the AIIB.

This implies a larger global leadership role for China – which the world, including its traditional powers, should welcome. After all, global leadership is not just a matter of might; it also reflects the provision of global public goods."     . . . . . 

"In fact, China might have done so within the Bretton Woods institutions, were the distribution of voting rights within them not skewed so heavily toward the incumbents, who still enjoy veto power. For example, China has a 3.8% voting share in the IMF and World Bank, even though it accounts for more than 12% of world GDP. The United Kingdom and France – which are one-third the size of China – each have a 4.3% share. With the incumbents unwilling to bring China’s voting share in line with its economic might, China had little choice but to launch its own institution."

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