China's Strategies Towards Institutional Reform: Creation of the AIIB and Its Development Success

Year 2019, Volume: 4 Issue: 2, 151 - 171, 30.08.2019

Mustafa Tüter

https://doi.org/10.30784/epfad.560715

Abstract

While existing studies largely focus on the
implications of China-led new multilateral institutions to international order,
the question of underlying reasons for the establishment of those institutions
and their future development success have received less attention. China’s strategies towards institutional reform are mainly based on its
dissatiffaction with asymmetrical distributional gains within existing
multilateral institutions such as World Bank and International Monetary Fund (IMF).
By using bargaining theory in international relations, this article contributes
to explain the main conditions and mechanisms of the creation of Asian
Infrasturucture Investment Bank (AIIB). In creating AIIB, China aims to
increase its bargaining leverage which provides itself direct and indirect
benefits vis-a-vis the costs emanating from intensified strategic competition
with the US. Thus, it is argued that China’s expectation of success reinforced by direct
and indirect benefits for the development of AIIB reflects both the significant
motivations underpinning its creation and also the possibility of extended
institutional reform into other multilateral regimes. Within the context of
power transition, the political bargaining process in reforming existing
multilateral regimes is likely to be shaped by the tension between
minilateralist strategies of rising powers and truly multilateral operations
within newly emerging financial regime.

Keywords

China, Asian Infrastructure Investment Bank (AIIB), Distributional Conflict, Institutional Reform, Bargaining

Çin’in Kurumsal Reforma Yönelik Stratejileri: AAYB’nin Kuruluşu ve Gelişimindeki Başarı

Abstract

Mevcut
çalışmaların pek çoğu Çin’in liderlik ettiği yeni çok taraflı kurumların uluslararası düzen üzerinde yaratacağı etkilere odaklanırken, bu kurumların kuruluşunun altında yatan nedenler ve gelişimlerinde gösterdikleri başarı konusu yeterince dikkate alınmamaktadır. Çin’in kurumsal reforma yönelik stratejileri en temelde
Dünya
Bankası
ve İMF
gibi mevcut çok
taraflı
kurumlarda var olan asimetrik dağılımsal kazanımlardan duyduğu hoşnutsuzluğa dayanmaktadır. Bu makale uluslararası ilişkilerde pazarlık teorisinden faydalanarak
Asya Altyapı
ve Yatırım Bankası (AAYB)’nın kurulmasında etkili olan ana koşulların ve mekanizmaların açıklanmasına katkı sunmaktadır. Çin, AAYB’nin kurulmasına öncülük ederek ABD ile yoğunlaşan stratejik rekabetinden
kaynaklanan maliyetler karşısında kendisine doğrudan ve dolaylı faydalar sağlayarak pazarlık gücünü artırmayı amaçlamaktadır. Çin’in edindiği doğrudan ve dolaylı faydalarla pekişen başarı beklentisi, AAYB’nin kuruluşunun altında yatan ana motivasyonları yansıttığı gibi diğer çok taraflı rejimleri de içine alan daha kapsamlı bir kurumsal reform
ihtimalini de gündeme getirmektedir. Ancak, güç geçişi bağlamında mevcut çok taraflı kurumların reforme edilmesinde yaşanan politik pazarlık sürecinin, yükselen güçlerin mini taraflı stratejileri ile hakiki çok taraflı uygulamalar arasında var olan gerilime dayalı olarak şekillenmesi kuvvetle
muhtemeldir.

Keywords

Çin, Altyapı ve Yatırım Bankası (AAYB), Dağılımsal Çatışma, Kurumsal Reform, Pazarlık

References

• Abbott, Kenneth W., & Snidal, D. (1998). Why states act through formal ınternational organizations. Journal of Conflict Resolution, 42(1), 3-32. Retrieved from www.jstor.org
• Allison, G. (2015, 24 September). The thucydides trap: Are the US and China headed for war?. The Atlantic. Retrieved from https://www.theatlantic.com/international/archive/2015/09/united-states-china-war-thucydides-trap/406756/
• Asian Development Bank. (2016, 2 March). ADB, AIIB sign MOU to strenghten cooperation for sustainable growth. Retrieved from: https://www.adb.org/news/adb-aiib-sign-mou-strengthen-cooperation-sustainable-growth
• Asian Development Bank. (2017, 31 December). Shareholders. Retrieved from https://www.adb.org/site/investors/credit-fundamentals/shareholders
• Asian Infrastructure Investment Bank. (2019, 24 April). Members and prospective members of the bank. Retrieved from https://www.aiib.org/en/about-aiib/governance/members-of-bank/index.html
• Bhattacharyay, B. (2010). Estimating demand for infrastructure in energy, transport, telecommunications, water and sanitation in Asia and the Pacific: 2010-2020 (ADBI Working Paper Series No. 248). Retrieved from https://www.adb.org/sites/default/files/publication/156103/adbi-wp248.pdf
• Brummer, C. (2014). Minilateralism: How trade alliances, soft law and financial engineering are redefining economic statecraft. Cambridge: Cambridge University Press.
• Bueno deMesquita, B., Smith, A., Siverson, Randolph M., & Morrow James D. (2003). The logic of political survival. Cambridge: MIT Press.
• Busch, Marc L. (2007). Overlapping institutions, forum shopping, and dispute settlement in international trade. International Organization, 61(4), 735-761. https://doi.org/10.1017/ S0020818307070257
• Callaghan, M., & Hubbard P. (2016). The Asian infrastructure investment bank: Multilateralism on the Silk Road. China Economic Journal, 9(2), 116-139. https://doi.org/10.1080/ 17538963.2016.1162970
• Chen, Z., & Liu, Y. (2018). Strategic reassurance in institutional contests: Explaining China’s creation of the Asian Infrastructure Investment Bank. Journal of Contemporary China, 27(114), 1-16. https://doi.org/10.1080/10670564.2018.1488098
• China’s Financial Diplomacy: Rich but Rash. (2015, 29 January). The Economist. Retrieved from https://www.economist.com/finance-and-economics/2015/01/29/rich-but-rash
• China Urges IMF Reform Implementation. (2013, 14 March). Xinhua News Net. Retrieved from http://tr.china-embassy.org/eng/xwdt/t1021494.htm
• Christensen, Thomas J. (2015). The China challenge: Shaping the choices of a rising power. New York: WW Norton&Company.
• Cottrell, M. P. (2009). Legitimacy and institutional replacement: The convention on certain conventional weapons and the emergence of the mine ban treaty. International Organization, 63(2), 217-248. https://doi.org/10.1017/S0020818309090079
• Drezner, Daniel W. (2009). The power and peril of ınternational regime complexity. Perspectives on Politics, 7(1), 65-70. doi: 10.1017/S1537592709090100
• Etzioni, A. (2016). The Asian infrastructure investment bank: A case study of multifaceted containment. Asian Perspective, 40(2), 173-196. doi: 10.1353/apr.2016.0008
• Fearon, James D. (1995). Rationalist explanations for war. International Organization, 49(3), 379-414. Retrieved from www.jstor.org
• Frankel J. (2014, 29 January). IMF reform and isolationism in the US Congress. East Asia Forum. Retrieved from https://www.eastasiaforum.org/2014/01/29/imf-reform-and-isolationism-in-the-us-congress/
• Gehlbach, S. (2006). A formal model of exit and voice. Rationality and Society, 18(4), 395-418. https://doi.org/10.1177/1043463106070280
• Hamanaka, S. (2016). Insights to great powers’ desire to establish institutions: Comparison of ADB, AMF, AMRO and AIIB. Global Policy, 7(2), 288-292. https://doi.org/10.1111/1758-5899.12304
• He, K. (2015). Contested regional orders and institutional balancing in the Asia Pacific. International Politics, 52(2), 208-222. https://doi.org/10.1057/ip.2014.46
• Heilmann S., Rudolf, M., Huotari, M., & Buckow, J. (2014). China’s shadow foreign policy: Parallel structure challenge the established international order. MERICS China Monitor, 18. Retrieved from https://www.merics.org/sites/default/files/2018-01/China_Monitor_18_Shadow_Foreign_ Policy_ EN.pdf
• Hirschman, Albert O. (1970). Exit, voice and loyalty: Responses to decline in firms, organizations, and states. Harvard: Harvard University Press.
• Hu, X. (2008). A competitive edge. China Security, 4(3), 26-27.
• Huotari, M., & Hanemann, T. (2014). Emerging powers and change in the global financial order. Global Policy, 5(3), 298-310. https://doi.org/10.1111/1758-5899.12133
• Huotari, M., & Heep S. (2016). Learning geoeconomics: China’s experimental financial and monetary initiatives. Asia Europe Journal, 14(2), 153-171. doi: 10.1007/s10308-015-0444-8
• Ikenberry, J. (2001). After victory: Institutions, strategic restrain, and the rebuilding of order after major wars. Princeton: Princeton University Press.
• International Monetary Fund. (2010, 31 October). IMF quota and governance reform elements of an agreement. Retrieved from https://www.imf.org/external/np/pp/eng/2010/103110.pdf
• International Monetary Fund. (2017, 24 April). Acceptances of the proposed amendment of the articles of agreement on reform of the executive board and consents to 2010 quota increase. Retrieved from https://www.imf.org/external/np/sec/misc/consents.htm
• Jiang, Y. (2010). Response and responsibility: China in East Asian financial cooperation. The Pacific Review, 23(5), 603-623. https://doi.org/10.1080/09512748.2010.521850
• Jisi, W. (2015, 2 February). China in the middle. The American Interest, 10(4). Retrieved from https://www.the-american-interest.com/2015/02/02/china-in-the-middle/
• Jupille, J., & Snidal, D. (2006). The choice of international institutions: Cooperation, alternatives and strategies (Working Paper). Washington: University of Chicago.
• Kamal, R., & Gallagher K. (2016, 5 April). China goes global with development banks. Bretton Woods Project. Retrieved from https://www.brettonwoodsproject.org/wp-content/uploads/2016/04/At-Issue-China-goes-global-with-development-banks.pdf
• Kastner, Scott L., Pearson, Margaret M., & Rector, C. (2016). Invest, hold up, or accept? China in multilateral governance. Security Studies, 25(1), 142-179. https://doi.org/10.1080/096364 12.2016.1134193
• Koh, G. (2015, 1 Sptember). Exclusive: China’s AIIB to offer with fewer strings attached-sources. Reuters. Retrieved from https://www.reuters.com/article/us-aiib-china-loans/exclusive-chinas-aiib-to-offer-loans-with-fewer-strings-attached-sources-idUSKCN0R14UB20150901
• Koremenos, B. (2005). Contracting around international uncertainty. The American Political Science Review, 99(4), 549-565. Retrieved from www.jstor.org
• Krasner Stephen D. (1991). Global communications and national power: Life on the pareto frontier. World Politics, 43(3), 336-366. doi: 10.2307/2010398
• Liao, R. (2015, 27 July). Out of the Bretton Woods: How the AIIB is different. Foreign Affairs. Retrieved from https://www.foreignaffairs.com/articles/asia/2015-07-27/out-bretton-woods
• Liberthal, Kenneth G., & Jisi W. (2012, 30 March). Addressing US-China strategic distrust. Brooking Institute. Retrieved from https://www.brookings.edu/wp-content/uploads/2016/06/03 30_china_lieberthal.pdf
• Lim, Daniel Yew M., & Vreeland, James R. (2013). Regional organizations and international politics: Japanese influence over the Asian Development Bank and the UN Security Council. World Politics, 65(1), 34-72. https://doi.org/10.1017/S004388711200024X
• Mainland Welcomes Taiwan Joining AIIB with Proper Identity. (2015, 13 April). Chinadaily. Retrieved from http://www.chinadaily.com.cn/business/2015-04/13/content_20421371.htm
• Mansfield, E.D. (1995). International institutions and economic sanctions. World Politics, 47(4), 575-605. https://doi.org/10.1017/S0043887100015227
• Matsuda, Y. (2014, April). How to understand China’s assertiveness since 2009: Hypotheses and policy implicatons. Washington: Center for Strategic and International Studies.
• Morse, Julia C., & Keohane, Robert O. (2014). Contested multilateralism. The Review of International Organizations, 9(4), 385-412. doi: 10.1007/s11558-014-9188-2
• Muthoo, A. (1999). Bargaining theory with applications. Cambridge: Cambridge University Press.
• Naim, M. (2009, 21 June). Minilateralism: The magic number to get real international action. Foreign Policy, 173, 135-136. Retrieved from https://foreignpolicy.com/2009/06/21/minilateralism/
• Obama, B. (2015, 20 January). Remarks by the president in state of the union adress. Retrieved from https://obamawhitehouse.archives.gov/the-press-office/2015/01/20/remarks-president-state-union-address-January-20-2015
• Odell, J. (1988). From London to Bretton Woods: Sources of change in bargaining strategies and outcomes. Journal of Public Policy, 8(3/4), 287-315. https://doi.org/10.1017/S0143814X00008631
• Powell, R. (2002). Bargaining theory and international conflict. Annual Review of Political Science, 5(1), 1-30. https://doi.org/10.1146/annurev.polisci.5.092601.141138
• Powell, R. (2004). Bargaining and learning while fighting. American Journal of Political Science, 48(2), 344-361. doi: 10.2307/1519887
• Powell, R. (2012). Commitment problems and shifting power as a cause of conflict. In M. R. Garfinkel & S. Skaperdas. (Eds.), The Oxford Handbook of the Economics of Peace and Conflict (pp. 43-58). Oxford: Oxford University Press.
• Ramasamy, B., Yeung M., & Laforet S. (2012). China’s outward foreign direct investment: Location choice and firm ownership. Journal of World Business, 47(1), 17-25. https://doi.org/10.1016/j.jwb.2010.10.016
• Reisen, H. (2015). Will the AIIB and the NDB help reform multilateral development banking?. Global Policy, 6(3), 297-304. https://doi.org/10.1111/1758-5899.12250
• Ren, X. (2016). China as an institution-builder: The case of the AIIB. The Pacific Review, 29(3), 435-442. https://doi.org/10.1080/09512748.2016.1154678
• Rodrik, D. (1995, June). Why is there multilateral lending? (NBER Working Paper No. 5160). Cambridge: National Bureau of Economic Research. Retrieved from https://www.nber.org/papers/w5160
• Rosendorff, P., & Milner, Helen V. (2001). The optimal design of international trade institutions: Uncertainty and escape. International Organization, 55(4), 829-857. Retrieved from www.jstor.org
• Ross, Robert S. (2012). Problem with the pivot: Obama’s new Asia policy is unnecessary and counterproductive. Foreign Affairs, 91(6), 70-82. Retrieved from https://www.jstor.org/stable/41720935?seq=1#metadata_info_tab_contents
• Schelling, Thomas C. (1960). The strategy of conflict. Oxford: Oxford University Press.
• Schneider, Christina J. (2011). Weak states and institutionalized bargaining power in international organizations. International Studies Quarterly, 55(2), 331-355. Retrieved from www.jstor.org
• Steil, B. (2013). The battle of Bretton Woods: John Maynard Keynes, Herry Dexter White, and the making of a new world order. Princeton: Princeton University Press.
• Steinbock, D. (2015, 13 April). American exceptionalism and the AIIB debacle. China-US Focus. Retrieved from https://www.chinausfocus.com/finance-economy/american-exceptionalism-and-the-aiib-debacle
• Struver, G. (2014). What friends are made of: bilateral linkages and domestic drivers of foreign policy. Foreign Policy Analysis, 12(2), 1-22. https://doi.org/10.1111/fpa.12050
• Urpelainen, J. (2011). Domestic reform as a rationale for gradualism in international cooperation. Journal of Theoretical Politics, 23(3), 400-427. https://doi.org/10.1177/0951629811411749
• Urpelainen J., & deGraaf T. (2015). Your place or mine? Institutional capture and the creation of overlapping international institutions. British Journal of Political Science, 45(4), 799-827. https://doi.org/10.1017/S0007123413000537
• Vestergaard, J., & Wade Robert H. (2013). Protecting power: How Western states retain the dominant voice in the World Bank’s governance. World Development, 46, 153-164. https://doi.org/10.1016/j.worlddev.2013.01.031
• Wang, Y. (2014). China’s economic challenges: Grappling with a ‘New Normal’. Global Asia, 3(4), 12-17. Retrieved from www.ebscohost.com
• Wang, H. (2014, December). From ‘Taoguang Yanghui’ to ‘Yousuo Zuowei’: China’s engagement in financial minilateralism. CIGI Papers, 52, 1-20. Retrieved from https://www.cigionline.org/sites/default/files/cigi_paper_no52.pdf
• Woods, N. (2008). Whose Aid? Whose influence? China, emerging donors and the silent revolution in development assistance. International Affairs, 84(6), 1205-1221. https://doi.org/10.1111/j.1468-2346.2008.00765.x
• Young, Oran R. (2002). The institutional dimensions of environmental change: Fit, interplay and scale. Cambridge: MIT Press.
• Yu, H. (2017). Motivation behind China’s ‘One Belt, One Road’ initiatives and establishment of the Asian Infrastructure Investment Bank. Journal of Contemporary China, 26(105), 353-368. https://doi.org/10.1080/10670564.2016.1245894
• Zakaria, F. (2014, 13 November). China’s growing clout. The Washington Post. Retrieved from https://www.washingtonpost.com/opinions/fareed-zakaria-chinas-growing-clout/2014/11/13/ fe0481f6-6b74-11e4-a31c-77759fc1eacc_story.html?noredirect=on&utm_term=.b390269e4050
• Zangl, B., Heubner, F., Kruck A., & Lanzendörfer, X. (2016). Imperfect adaptation: How the WTO and the IMF adjust to shifting power distributions among their members. The Review of International Organization, 11(2), 171-196. https://doi.org/10.1007/s11558-016-9246-z
• Zhong, N., & Cai, X. (2016, 8 June). AIIB leads support for Belt and Road ınfrastructure projects. China Daily. Retrieved from http://www.chinadaily.com.cn/business/2016-06/08/content_25645165.htm
• Zhou, X. (2014, 11 October). IMFC statement by the honorable Zhou Xiaochuan, governor, People’s Bank of China. International Monetary Fund. Retrieved from https://www.imf.org/External/AM/2014/imfc/statement/eng/chn.pdf
• Zoellick, Robert B. (2005, 21 September). Whither China: From Membership to Responsibility. US Department of States. Retrieved from https://2001-2009.state.gov/s/d/former/ zoellick/rem/53682.htm