Journal of Contemporary China
ISSN: 1067-0564 (Print) 1469-9400 (Online) Journal homepage: https://www.tandfonline.com/loi/cjcc20
In the Shadow of Strategic Rivalry: China, America,
and the Asian Infrastructure Investment Bank
Tao Xie & Donglin Han
To cite this article: Tao Xie & Donglin Han (2019) In the Shadow of Strategic Rivalry: China,
America, and the Asian Infrastructure Investment Bank, Journal of Contemporary China,
28:120, 916-931, DOI: 10.1080/10670564.2019.1594104
To link to this article: https://doi.org/10.1080/10670564.2019.1594104
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JOURNAL OF CONTEMPORARY CHINA
2019, VOL. 28, NO. 120, 916–931
https://doi.org/10.1080/10670564.2019.1594104
In the Shadow of Strategic Rivalry: China, America, and the Asian
Infrastructure Investment Bank
Tao Xiea and Donglin Hanb
a
Beijing Foreign Studies University, China; bRenmin University of China, China
ABSTRACT
While much has been written about US–China strategic rivalry, no
study to the authors’ knowledge has conducted an empirical analysis
of this rivalry. This article fills this gap by investigating whether and
how this rivalry affects a country’s response to the Asian Infrastructure
Investment Bank (AIIB). The findings of this article indicate that certain
aspects of bilateral strategic ties indeed have strong effects on
a country’s reaction to the Chinese bank. More specifically, shorter
distance to higher a level of partnership with, and more arms purchase from Beijing lead to faster accession to the AIIB, while the
shorter distance to Washington results in slower accession, controlling
for other factors. In addition, economically developed countries
appear to be consistently more eager to join the Beijing-led bank
than economically underdeveloped countries.
The United States is the world’s only superpower, while China is a rapidly rising power whose
economic and military strength may match—or even surpass—that of the United States in a few
decades. Between a rising power and the ruling power, the conventional wisdom holds, strategic
rivalry is inevitable and this rivalry more often than not leads to the so-called Thucydides Trap.1
Indeed, there is an emerging consensus that the US–China relationship is increasingly defined
by competition rather than cooperation.2 Consequently, many US pundits have called for a revised
CONTACT Donglin Han
donglin2006@gmail.com
1
On the Thucydides Trap, see Laurie M. Johnson Bagby, ‘The use and abuse of thucydides in international relations’, International
Organization 48(1), (1994), pp. 131–153; James Fallows, ‘China’s great leap backward’, Atlantic, (December 2016), available at: https://
www.theatlantic.com/magazine/archive/2016/12/chinas-great-leap-backward/505817/ (accessed 7 November 2018); Graham Allison,
Destined for War: Can America and China Escape the Thucydides Trap? (New York: Houghton Mifflin, 2017); Michael Crowlely, ‘Why the
White House is reading Greek history?’ Politico, (21 June 2017), available at: http://www.politico.com/magazine/story/2017/06/21/
why-the-white-house-is-reading-greek-history-215287 (accessed 6 March 2018).
2
Richard N. Rosecrane and Steven E. Miller, ed., The Next Great War? The Roots of World War I and the Risk of U.S.-China Conflict
(Cambridge, MA: MIT Press, 2015); Suisheng Zhao, ‘A new model of big power relations? China–US strategic rivalry and balance of
power in the Asia–Pacific’, Journal of Contemporary China 24(93), (2015), pp. 377–397; Zhengyu Wu, ‘The Crowe memorandum, the
rebalance to Asia, and Sino-US relations’, Journal of Strategic Studies 39(3), (2016), pp. 389–416; David Shambaugh, ‘Dealing with
China: tough engagement and managed competition’, Asia Policy 23, (2017), pp. 4–12; Suisheng Zhao, ‘American reflections on the
engagement with China and responses to President Xi’s new model of major power relations’, Journal of Contemporary China
26(106), (2017), pp. 489–503; Michael Swaine, ‘A counterproductive cold war with China: Washington’s “free and open Indo-Pacific
” strategy will make Asia less open and less free’, Foreign Affairs, (2 March 2018), available at: https://www.foreignaffairs.com/
articles/china/2018-03-02/counterproductive-cold-war-china (accessed 13 March 2018); David M. Lampton, ‘A tipping point in U.S.China relations is upon us’, US-China Perception Monitor, (11 May 2015), available at: https://www.uscnpm.org/blog/2015/05/11/
a-tipping-point-in-u-s-china-relations-is-upon-us-part-i/ (accessed 6 March 2018); Cecilia Kang and Allan Rappeport, ‘The new USChina rivalry: a technology race’, New York Times, (6 March 2018), available at: https://www.nytimes.com/2018/03/06/business/uschina-trade-technology-deals.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&mod%E2%80%A6
(accessed 13 March 2018); Michael Lind, ‘America vs. Russia and China: welcome to cold war II’, National Interest, (accessed
15 April 2018), available at: http://nationalinterest.org/feature/america-vs-russia-china-welcome-cold-war-ii-25382?page=show
(accessed 17 May 2018).
© 2019 Informa UK Limited, trading as Taylor & Francis Group
JOURNAL OF CONTEMPORARY CHINA
917
grand strategy toward China that is premised on escalating rivalry between Washington and
Beijing.3 When the Trump administration’s National Security Strategy and National Defense
Strategy portray China as a ‘revisionist power’ and a ‘strategic competitor’, respectively, it seems
certain that strategic rivalry will be the defining feature of US–China relations, at least in the short
term.4
While much has been written about US–China strategic rivalry, no scholar to the authors’
knowledge has conducted an empirical analysis of this strategic rivalry thesis. This article fills
this gap by investigating whether and how US–China strategic rivalry affects a country’s
response to the Asian Infrastructure Investment Bank (AIIB). The case of the AIIB was chosen
for two major reasons. First, since the Beijing-led multilateral development bank (MDB) is
widely perceived as a serious—though implicit—Chinese attempt to challenge US dominance
in the global financial order, an empirical test is expected to shed important light on the
dynamics of strategic rivalry between these two countries. Second, with more than 60 member
states the AIIB offers sufficient cases for statistical analysis. This article’s findings indeed provide
rather strong support for this strategic rivalry thesis: countries with closer strategic ties to
Beijing tend to be more eager to join the AIIB, while those with closer geopolitical ties to
Washington are less eager to do so, controlling for other factors.
Origins of the AIIB
The idea of an AIIB was first proposed by Chinese President Xi Jinping in his address to the
Indonesian Parliament on 3 October 2013.5 Originally conceived as a regional MDB (hence
‘Asian’ in its name), the AIIB has quickly evolved to be a global financial institution with 64
member states (as of 8 April 2018) across five continents and at different development
levels (see Table 1). Some of these countries are emerging economies such as Russia and
India, while others are advanced economies (e.g. five members of the G7 and 16 members of
the G20).
To understand why Beijing launched a new development bank that focuses on infrastructure financing, one needs to first appreciate the critical role of modern infrastructure in
China’s miraculous economic growth over the past four decades.6 One the one hand,
reliable, efficient, and interconnected highways, railroads, ports, and airports facilitate the
flow of goods and services. On the other hand, power plants, electrical grids, water projects,
oil, and natural gas pipelines are the foundation for industrial production and urban development. At the same time, infrastructure investment also boosts demand for constructionrelated materials and services, which in turn creates jobs and revenues.
Robert D. Blackwill and Ashley J. Tellis, ‘Revising U.S. grand strategy toward China’, Council on Foreign Relations, Special Report
No.72, (March 2015), available at: https://carnegieendowment.org/files/Tellis_Blackwill.pdf (accessed 6 November 2018); Michael
Pillsbury, The Hundred Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower (New York: Henry Holt,
2015); Kurt M. Campbell and Ely Ratner, ‘The China reckoning: how Beijing defied American expectations’, Foreign Affairs, (March/
April 2018), pp. 60–70; Hal Brands, ‘The Chinese century?’ National Interest, (19 February 2018), available at: https://nationalinterest.
org/feature/the-chinese-century-24557 (accessed 7 November 2018); but also see James Steinberg and Michael E. O’Hanlon,
Strategic Reassurance and Resolve: U.S.-China Relations in the Twenty-First Century (Princeton, NJ: Princeton University Press, 2014);
Hugh White, The China Choice: Why We Should Share Power (New York: Oxford University Press, 2012); Kevin Rudd, ‘The future of
U.S.-China relations under Xi Jinping: toward a new framework of constructive realism for a common purpose’, Belfer Center for
Science and International Affairs, Harvard University, (April 2015), available at: https://www.belfercenter.org/sites/default/files/
legacy/files/Summary%20Report%20US-China%2021.pdf (accessed 7 November 2018); Orville Schell and Susan L. Shirk, ‘US policy
toward China: recommendations for a new administration’, Asia Society and UC Sand Diego, Task Force Report, (February 2017),
available at: https://china.ucsd.edu/_files/02072017_US_China_task-force_report.pdf (accessed 7 November 2018).
4
White House, ‘National security strategy of the United States of America’, December 2017; Department of defense, ‘Summary
of the 2018 National Defense Strategy of the United States of America’.
5
Wu Jiao, ‘President Xi gives speech to Indonesia’s parliament’, China Daily, (3 October 2013), available at: http://www.
chinadaily.com.cn/china/2013xiapec/2013-10/02/content_17007915_2.htm (accessed 21 September 2017).
6
See, for example, KPMG, ‘Infrastructure in China: foundation for growth’, (2009), available at: https://www.kpmg.de/docs/
Infrastructure_in_China.pdf (accessed 21 September 2017).
3
918
T. XIE AND D. HAN
Table 1. Members and prospective members of the AIIB
Regional members
Afghanistan
Australia
Azerbaijan
Bangladesh
Brunei
Cambodia
China
Fiji
Georgia
Hong Kong India
Indonesia
Iran
Israel
Jordan
Kazakhstan
Korea
Kyrgyzstan
Lao PDR
Malaysia
Maldives
Mongolia
Myanmar
Nepal
New Zealand
Oman
Pakistan
Philippines
Qatar
Russia
Samoa
Saudi Arabia
Singapore
Sri Lanka
Tajikistan
Thailand
Timor-Leste
Turkey
UAE
Uzbekistan
Vanuatu
Vietnam
Non-regional
members
Austria
Canada
Denmark
Egypt
Ethiopia
Finland
France
Germany
Hungary
Iceland
Ireland
Italy
Luxembourg
Malta
Netherlands
Norway
Poland
Portugal
Spain
Sweden
Switzerland
United Kingdom
Prospective members
Regional
Armenia
Bahrain
Cook Islands
Cyprus
Kuwaita
Samoa
Tonga
Non-regional
Argentina
Belarus
Belgium
Bolivia
Brazila
Chile
Ecuador
Greece
Kenya
Madagascar
Peru
Romania
South Africaa
Sudan
Venezuela
Source: https://www.aiib.org/en/about-aiib/governance/members-of-bank/index.html (accessed 18 April 2018).
Note: aCountries are prospective founding members.
Thus it should come as no surprise that Chinese leaders find it attractive to found an MDB
that aims to promote economic growth in less-developed Asian countries by financing infrastructure projects. In fact, the original idea of the AIIB reportedly came from a high-ranking
Chinese official who, during his late 2007 visit to remote villages along the Mekong River in
Laos, saw an opportunity for China to play a new and important role in regional economic
development.7
There is indeed a staggering shortfall in infrastructure financing in Asia. According to the Asian
Development Bank (ADB), the region needs an estimated $8 trillion in infrastructure investment in
2010–2020.8 Yet the ADB and the World Bank together can provide merely about $20 billion
per year. With an authorized initial capital of $100 billion, the AIIB can be a timely and significant
supplement to existing MDBs which are unable—and perhaps also unwilling—to offer desperately
needed infrastructure financing to Asian countries.9
The timing of the AIIB also suggests that it was intended as the leading financier for the Belt
and Road Initiative (BRI), an ambitious Chinese plan that purports to improve interconnectivity
(i.e. transportation infrastructure) and to enhance economic cooperation across the vast
Eurasian continent. In his address to the inaugural meeting of the AIIB’s Board of Governors,
the Chinese Premier Li Keqiang made it clear that a key function of the AIIB is to ‘promote the
docking of the “Belt and Road” initiative and the development strategies of other countries . . .’10
Jan Perlez, ‘China creates a world bank of its own, and the U.S. Balks’, New York Times, (4 December 2015), available at: https://
www.nytimes.com/2015/12/05/business/international/china-creates-an-asian-bank-as-the-us-stands-aloof.html?mcubz=3
(accessed 21 September 2017).
8
Biswa Nath Bhattacharyay, ‘Financing Asia’s infrastructure: modes of development and integration of Asian financial markets’,
Asian Development Bank Institute, (July 2010), available at: https://www.adb.org/sites/default/files/publication/156084/adbiwp229.pdf (accessed 20 September 2017).
9
Zhenbo Hou, ‘New China-led development bank gains support, despite US pressure’, (26 March 2015), available at: http://
www.odi.org/comment/9420-china-aiib-bank-support-global-governance-reform (accessed 21 September 2017).
10
Chinese Ministry of Foreign Affairs, ‘Li Keqiang attends and addresses inaugural meeting of board of governors of Asian infrastructure
investment bank’, (18 January 2016), available at: http://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1333119.shtml (accessed
2 March 2016).
7
JOURNAL OF CONTEMPORARY CHINA
919
Thus the BRI can be viewed as a goal, while the AIIB an important means to achieve that
goal.11
More broadly, financing overseas infrastructure projects can bring a number of important
benefits to the Chinese economy. For starters, improved interconnectivity facilitates Chinese
investment in and trade with foreign countries. Besides, projects financed by the AIIB could help
Chinese companies to expand their global influence.12 These Chinese companies may also receive
preferential treatment in the bidding process due to China’s veto power in the bank.13 Finally, by
funding infrastructure projects abroad the AIIB could be an important vehicle for exporting China’s
excess capacity—iron and steel production, for example.14
On the diplomatic front, by taking the lead in providing a public good (i.e. infrastructure) that is
desperately needed by many underdeveloped countries, Beijing will be in a position to claim that it
is no longer what the US President Barack Obama called a ‘free rider’, but instead is acting as
a ‘responsible stakeholder’.15 Similarly, the AIIB can be touted as another sign of increasing multilateralism in Chinese foreign policy.16 Finally, financing infrastructure projects may help China to
cultivate more favorable perceptions in recipient countries. As one analyst put it, ‘the AIIB is
perhaps China’s largest soft power success so far.’17
Frustrations of a rising power
Yet for many analysts, there is more to the AIIB than the abovementioned considerations. They contend
that the most important motive appears to be Beijing’s growing frustrations with US-dominated global
financial institutions. More specifically, these institutions have failed to allow for a larger role for China—
and its currency renminbi (RMB)—that is commensurate with the country’s rapidly growing economic
power. Hence these analysts view the AIIB as a Chinese tactic to challenge American dominance in
global financial governance.18
For a detailed discussion of the motivations behind the BRI and the AIIB, see Hong Yu, ‘Motivation behind China’s “One Belt, One Road”
initiatives and establishment of the Asian infrastructure investment ban’, Journal of Contemporary China 26(105), (2017), pp. 353–68.
Some analysts view the BRI and the AIIB as critical components of Beijing’s grand strategy to promote its influence in the Eurasian
continent and beyond. See Kevin G. Cai, ‘The one belt one road and the Asian infrastructure investment bank: Beijing’s new strategy of
geoeconomics and geopolitics’, Journal of Contemporary China 27(114), (2018), pp. 831–847.
12
China Daily, ‘Xi’s visit brings “One Belt and One Road” cooperation to new level’, (26 January 2016), available at: http://www.
chinadaily.com.cn/world/2016xivisitmiddleeast/2016-01/22/content_23208910.htm (accessed 4 March 2016).
13
China subscribes to 30.34% of the AIIB’s total shares, which translate into 26.06% of the voting rights. This gives China veto
power over major decision. Cary Huang, ‘Voting rights reflect Beijing’s leading role in AIIB’, South China Morning Post,
(30 June 2015), available at: http://www.scmp.com/news/china/diplomacy-defence/article/1829316/voting-rights-reflectbeijings-leading-role-aiib (accessed 3 March 2017).
14
Some analysts argue, though, that the AIIB will be of little help in reducing China’s excess capacity. See David Dollar, ‘China’s
rise as a regional and global power: The AIIB and the “One Belt, One Road”’, Brooking Institution, (15 July 2015), available at:
https://www.brookings.edu/research/chinas-rise-as-a-regional-and-global-power-the-aiib-and-the-one-belt-one-road/
(accessed 20 September 2017).
15
Robert Zoellick, ‘Whither China: from membership to responsibility?’ Remarks to National Committee on U.S.-China Relations,
(21 September 2005), available at: https://2001-2009.state.gov/s/d/former/zoellick/rem/53682.htm (accessed 16 March 2018);
Xinhua News Agency, ‘Commentary: Obama’s labeling China as “free rider” no more than excuse for America’s failed policy in
Iraq’, (4 September 2014), available at: http://news.xinhuanet.com/english/indepth/2014-09/04/c_133618689.htm (accessed
30 December 2015).
16
Bin Gu, ‘Chinese multilateralism in the AIIB’, Journal of International Economic Law 20 (2), (2017), pp. 137–158; Mike Callaghan
and Paul Hubbard, ‘The Asian Infrastructure Investment Bank: multilateralism on the Silk Road’, China Economic Journal 9(2),
(2016), pp. 116–139; Thomas Renard, ‘The Asian Infrastructure Investment Bank (AIIB): China’s new multilateralism and the
erosion of the West’, Royal Institute for International Relations, Security Policy Brief No.63, (April 2015), available at: http://
www.egmontinstitute.be/wp-content/uploads/2015/04/SPB63-Renard.pdf (accessed 30 December 2015).
17
Thomas Renard, ‘The Asian Infrastructure Investment Bank (AIIB): China’s new multilateralism and the erosion of the West’.
For more on the AIIB and Chinese soft power, see Rebecca Laforgia, ‘Listening to China’s multilateral voice for the first time:
analyzing the Asian Infrastructure Investment Bank for soft power opportunities and risks in the narrative of “lean, clean and
green”’, Journal of Contemporary China 26(107), (2017), pp. 633–49; Kenneth Rapoza, ‘With new bank, China shows U.S. it’s
got soft power’, Forbes, (23 March 2015), available at: http://www.forbes.com/sites/kenrapoza/2015/03/23/with-new-bankchina-shows-u-s-its-got-soft-power/#5c39cb65d753 (accessed 3 March 2016).
18
Economist, ‘Why China is creating a new “World Bank” for Asia’, (11 November 2014), available at: http://www.economist.
com/blogs/economist-explains/2014/11/economist-explains-6 (accessed 18 October 2017); Robert Kahn, ‘A bank too far?’
11
920
T. XIE AND D. HAN
Table 2. China’s voting shares at major global financial institutions (% of total)
IMF
IBRD
IFC
IDA
MIGA
U.S.
16.52
16.28
20.99
10.30
15.02
Japan
6.15
7.02
6.01
8.42
4.22
Germany
5.32
4.11
4.77
5.44
4.20
UK
4.03
3.85
4.48
6.33
4.03
France
4.03
3.85
4.48
3.80
4.03
China
6.09
4.53
2.30
2.19
2.64
Source: IMF voting shares, http://www.imf.org/external/np/sec/memdir/eds.aspx (accessed 19 October 2017); World Bank voting
shares, http://www.worldbank.org/en/about/leadership/votingpowers (accessed 19 October 2017).
Note: IBRD: International Bank for Reconstruction and Development; IFC: International Finance Corporation; IDA:
International Development Association; MIGA: Multilateral Investment Guarantee Agency.
Chinese frustrations focus on three issues. To begin with, despite its rapidly growing economic
power, Beijing is woefully underrepresented at the US-led Bretton Woods system (see Table 2).
Voting power at four of the five World Bank institutions is, on average, less than one-fourth of
America’s. Similarly, for many years its voting share at the International Monetary Fund (IMF) was
below 4% (compared with nearly 18% for the United States), trailing behind that of Japan,
Germany, France, and the UK.
Given the critical role of the IMF as the regulatory commission of the international monetary
system, Chinese officials had been particularly vocal and persistent in their push for reforming its
decision-making process.19 On 15 December 2010, the IMF’s Board of Governors finally approved
a Resolution on Quota and Reform of the Executive Board, whereby China’s voting power would
increase from 3.80% to 6.07%, making it the third largest stakeholder—behind the United States
(16.47%) and Japan (6.14%).20 But because of strong opposition from the US Congress, the proposed
reform package—the most far-reaching since the founding of the IMF in 1944—did not enter into
force until 26 January 2016.21 Yet by then, the AIIB had already been in operation for 10 days.
Apart from governance reform, China had repeatedly called on the IMF to abolish credit-based
sovereign currency as reserve currency and to adopt a super-sovereign reserve currency instead.22
Using a sovereign currency (e.g. the US dollar) as reserve currency can cause international financial
instabilities, due to either undersupply (as a result of domestic inflationary pressure) or oversupply
Council on foreign relations, (17 March 2015), available at: https://www.cfr.org/interview/bank-too-far (accessed
18 October 2017); Daniel K. Chow, ‘Why China established the Asian Infrastructure Investment Bank’, Vanderbilt Journal of
Transnational Law (49), (2016), pp. 1255–1298; Ely Ratner, ‘Making bank: why China’s new infrastructure bank represents
a challenge to the global order’, Foreign Policy, (23 October 2014), available at: http://foreignpolicy.com/2014/10/23/makingbank/ (accessed 26 December 2015); Robert Wihtol, ‘Beijing’s challenge to the global financial architecture’, Georgetown
Journal of Asian Affairs, (Spring/Summer 2015), pp. 7–15. But some contend that the AIIB was intended instead as a Chinese
signal of self-restraints and reassurances to other powers. See Zheng Chen and Yanchuan Liu, ‘Strategic reassurance in
institutional contests: explaining China’s creation of the Asian Infrastructure Investment Bank’, Journal of Contemporary China,
27(114), pp. 795–810.
19
On Chinese officials’ statements regarding IMF reform, see Zhou Xiaochuan, ‘Statement by Zhou Xiaochuan, governor of the
fund for the People’s Republic of China at the Joint Annual Discussion’, (19–20 September 2006), available at: https://www.
imf.org/external/am/2006/speeches/pr50e.pdf (accessed 29 January 2018); Xie Xuren, ‘Statement by the Hon. Xie Xuren,
governor of the bank for the People’s Republic of China at the Joint Annual Discussion’, (6–7 October 2009), available at:
https://www.imf.org/external/am/2009/speeches/pr08e.pdf (accessed 7 March 2018); Wang Qishan, ‘G20 must look beyond
the needs of the top 20’, The Times, (27 March 2009), available at: https://www.thetimes.co.uk/article/g20-must-look-beyondthe-needs-of-the-top-20-smgldb0rlnt (accessed 19 January 2018).
20
International Monetary Fund, ‘Quota and voting shares before and after implementation of reforms agreed in 2008 and 2010’,
available at: http://www.imf.org/external/np/sec/pr/2011/pdfs/quota_tbl.pdf (accessed 20 January 2018).
21
IMF rules require that three-fifths of its members having 85% of its total voting power approve the resolution before it enters
into effect. Because the United States held more than 15% of IMF’s voting power, it had an effective veto on the proposed
reform package. While the Obama administration had repeatedly expressed its support for the reform package, the U.S.
Congress had been intractably digging its heels. Congress did not ratify the reform package until 18 December 2015. On U.S.
Congress’s opposition to IMF reform, see Rebecca M. Nelson and Martin A. Weiss, ‘IMF reforms: issues for congress’;
Economist, ‘Getting around the Uncle Sam: how to reform the IMF without Congress’s help’, (31 January 2015), available
at: https://www.economist.com/finance-and-economics/2015/01/29/getting-around-uncle-sam (accessed 7 November 2018).
22
See, for example, Zhou Xiaochuan, ‘Reforming the international monetary system’, (23 March 2009), available at: http://www.
pbc.gov.cn/english/130724/2842945/index.html (accessed 13 March 2018).
JOURNAL OF CONTEMPORARY CHINA
921
(for the sake of stimulating domestic demand). Because roughly 60% of Beijing’s colossal foreign
exchange reserve—about $3.14 trillion as of February 2018—is composed of dollar-denominated
assets, the Chinese economy is especially vulnerable to fluctuations in the supply of the US dollar,
the global reserve currency.23 That vulnerability was put into sharp relief in the wake of three
rounds of US quantitative easing shortly after the 2008 global financial crisis.24
Last but not least, as China became the world’s second-largest economy, biggest trading nation,
and a net exporter of capital, it began to seek a more influential role for the Chinese currency in the
international monetary system.25 Yet for the RMB to be considered as a reserve currency by other
countries—especially those with close economic ties with Beijing—it must be included in the IMF’s
Special Drawing Right (SDR) currency basket. The RMB was finally included in the SDR basket on
30 September 2015 (and effective on 1 October 2016), but its weight (10.92%) pales in comparison
with that of the US dollar (41.73%) and the Euro (30.93%).26
In light of abovementioned frustrations, the AIIB can be viewed as a stone with which Beijing
can kill two birds at the same time. First, with broad-based membership, massive capital, and
Chinese veto power, the new MDB substantially compensates Beijing’s underrepresentation at
Bretton Woods institutions, making it a significant player in regional—and potentially global—
economic development and financial governance.
Second, the AIIB promises to be the most effective platform for promoting the RMB as a global
currency. On the one hand, by providing RMB-dominated loans the AIIB expedites the internationalization of the RMB.27 On the other hand, even if the AIIB provides loans in US dollar only, it can
indirectly create huge demand for the RMB. Improved infrastructure enhances economic cooperation between China and recipient countries, which in turn increases offshore demand for the
Chinese currency. Thus without having a head-on clash with Washington over the use of a supernational currency as reserve currency, Beijing could accomplish its twin goals of internationalizing
its own currency while undermining the hegemony of the American dollar, the cornerstone of
American economic power since 1945.
Reactions of the ruling power
At least from Beijing’s point of view, Washington’s reactions to the AIIB are rather puzzling. For
many years, Washington has been urging Beijing to act as a ‘responsible stakeholder’. On the face
of it, this term means that the United States expects a rising China to shoulder more responsibilities
For time series data on China’s foreign exchange reserve, see State Administration of Foreign Exchange, ‘The time series data
of China’s foreign exchange reserves’, (7 March 2018), available at: http://www.safe.gov.cn/ (accessed 13 March 2018); On the
currency composition of China’s foreign exchange reserve, see Gabriel Wildau, ‘China denies it intends to reduce US Treasury
purchases’, Financial Times, (11 January 2018), available at https://www.ft.com/content/924e4c88-f692-11e7-88f75465a6ce1a00 (accessed 13 March 2018).
24
On the negative impact of U.S. quantitative easing, see Zhang Liqing, ‘QE2 shocks and China’s policy response’, International
Economic Review 1(1), (2011), pp. 50–56; Nie Jing and Jin Hongfei, ‘The spillover effects of U.S. QE on Chinese exports’, Studies
of International Finance 1(3), (2015), pp. 3–11.
25
On the internationalization of the RMB, see Barry Eichengreen and Domenico Lombardi, ‘RMBI or RMBR? Is the Renminbi
destined to become a global or regional currency?’, Asian Economic Papers 16(1), (2017), pp. 35–59; Li Wei, ‘Partners, systems
and international currencies: an international political foundation for the rise of RMB’, China Social Sciences, (5), (2016), pp.
79–100; Hyo-Sung Park, ‘China’s RMB internationalization strategy: its rationales, state of play, prospects and implications’,
Harvard Kennedy School, M-RCBG Associate Working Papers, No.63, (August 2016), available at: https://www.hks.harvard.edu/
sites/default/files/centers/mrcbg/files/park_final.pdf (accessed 16 March 2018).
26
International Monetary Fund, ‘IMF launches new SDR basket including Chinese Renminbi, determines new currency amounts’,
(30 September 2015), available at: https://www.imf.org/en/News/Articles/2016/09/30/AM16-PR16440-IMF-Launches-New-SDR
-Basket-Including-Chinese-Renminbi (accessed 15 March 2018).
27
Though many analysts expected the AIIB to issue loans in RMB, the president of the AIIB ruled out lending in the Chinese
currency the day after its official opening. Cary Huang, ‘China seeks role for yuan in AIIB to extend currency’s global reach’,
South China Morning Post, (27 April 2015), available at: http://www.scmp.com/news/china/economy/article/1766627/chinaseeks-role-yuan-aiib-extend-currencys-global-reach (accessed 7 March 2018); Gabriel Wildau and Tom Mitchell, ‘China’s new
Asia development bank will lend in dollars’, Financial Times, (17 January 2016), available at: https://www.ft.com/content/
762ce968-bcee-11e5-a8c6-deeeb63d6d4b (accessed 13 March 2018).
23
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T. XIE AND D. HAN
in global governance. Thus Washington should have warmly welcomed a bigger role for China at
major international institutions. Yet in reality Washington has had a long record of consistently and
adamantly opposing Beijing’s becoming a responsible stakeholder in these institutions, be it the
World Trade Organization, the IMF, or the World Bank.28 US reactions to the AIIB only add to that
long record.
Various media reports indicate that Washington was strongly opposed to the Chinese initiative.
‘American officials have lobbied against the development bank with unexpected determination and
engaged in a vigorous campaign to persuade important allies to shun the project,’ wrote a New York
Times reporter.29 One Australian newspaper reported that John Kerry, then US Secretary of State,
personally asked the Australian Prime Minister to keep his country out of the Chinese bank.30 In response
to Britain’s decision to join the AIIB, a senior US official was quoted as saying: ‘We are wary about a trend
toward constant accommodation of China, which is not the best way to engage a rising power.’31
At an April 2015 news conference, President Barack Obama subtly explained why his administration was opposed to the AIIB:
If we’re going to have a multilateral lending institution, then you have to have some guidelines by which it’s
going to operate . . . you’ve got to have some transparency in terms of how the thing is going to operate—
because if not, a number of things can happen. Number one, money could end up flowing that is misused, or
it doesn’t have high accounting standards, and we don’t know what happens to money that is going into
projects . . . And so our simple point to everybody in these conversations around the Asia Infrastructure Bank is
let’s just make sure that we’re running it based on best practices . . .32
Admittedly, President Obama’s concerns about standards of governance and transparency at the
AIIB are legitimate. Nevertheless two factors make his remarks sound hypocritical. First, neither the
IMF nor the World Bank has had a shinning record of following the highest standards of governance and transparency.33 More importantly, if Washington had been truly concerned about
whether the AIIB would follow the best practices, its best choice should have been to join the
new bank rather than stay outside of it. As an analyst at the European Chamber of Commerce in
China put it, ‘If you partake, you have a stake, and will likely be involved in decisions that shape the
overall organization.’34
In the final analysis, the only justification for US opposition seems to be the widespread
perception that the Chinese bank is a serious threat to US leadership in global finance.35 ‘China’s
Amitai Etzioni, ‘The Asian infrastructure investment bank: a case study of multifaceted containment’, Asian Perspectives (40),
(2016), pp. 173–196.
Jane Perlez, ‘U.S. opposing China’s answer to world bank’, New York Times, (9 October 2014), available at: https://www.
nytimes.com/2014/10/10/world/asia/chinas-plan-for-regional-development-bank-runs-into-us-opposition.html?mcubz=3
(accessed 30 September 2017).
30
Reuters, ‘Three major nations absent as China launches World bank rival in Asia’, (5 November 2014), available at: http://
www.reuters.com/article/us-china-aiib/three-major-nations-absent-as-china-launches-world-bank-rival-in-asia-idUSKCN
0ID08U20141105 (accessed 18 October 2017).
31
Geoff Dyer and George Parker, ‘US attacks UK’s “constant accommodation” with China’, Financial Times, (13 March 2015),
available at: https://www.ft.com/content/31c4880a-c8d2-11e4-bc64-00144feab7de (accessed 18 October 2017).
32
White House, ‘Remarks by President Obama and Prime Minister Abe of Japan in Joint Press Conference’, (28 April 2015),
available at: https://obamawhitehouse.archives.gov/the-press-office/2015/04/28/remarks-president-obama-and-primeminister-abe-japan-joint-press-confere (accessed 18 October 2017).
33
Bahram Nowzad, ‘The IMF and its critics’, available at: https://www.princeton.edu/~ies/IES_Essays/E146.pdf (accessed
7 November 2018); Claire Provost and Matt Kennard, ‘The world bank is supposed to help the poor. So why is it bankrolling
oligarchs?’ Mother Jones, available at: https://www.motherjones.com/politics/2016/03/world-bank-ifc-fund-luxury-hotels/
(accessed 9 November 2018); Larry Elliott, ‘The world bank and the IMF won’t admit their policies are the problem’,
Guardian, (9 October 2016), available at: https://www.theguardian.com/business/2016/oct/09/the-world-bank-and-the-imfwont-admit-their-policies-are-the-problem (accessed 19 March 2018).
34
Gabriel Domínguez, ‘Why Europe defies the US to join a China-led bank’, (18 March 2015), available at: http://www.dw.com/
en/why-europe-defies-the-us-to-join-a-china-led-bank/a-18322773 (accessed 18 October 2017).
35
Paola Subacchi, ‘The AIIB is a threat to global economic governance’, Foreign Policy, (31 March 2015), available at: http://foreignpolicy.
com/2015/03/31/the-aiib-is-a-threat-to-global-economic-governance-china/ (accessed 19 March 2018); Cary Huang, ‘China-led Asian
bank challenges US dominance of global economy’, South China Morning Post, (27 April 2015), available at: http://www.scmp.com/
news/china/economy/article/1763525/china-led-asian-bank-challenges-us-dominance-global-economy (accessed 19 March 2018).
28
29
JOURNAL OF CONTEMPORARY CHINA
923
effort to establish a major new institution [AIIB] and the failure of the United States to persuade
dozens of its traditional allies, starting with Britain, to stay out’, wrote Lawrence Summers, former
US Secretary of Treasury under Bill Clinton, ‘[represent] the moment the United States lost its role
as the underwriter of the global economic system’.36 A Nobel laureate in economics similarly
pointed out that ‘America’s opposition to the AIIB . . . seems to be another case of America’s
insecurity about its global influence trumping its idealistic rhetoric.’37 One observer concluded that
the US attempts to persuade its allies from joining the AIIB amount to an aggressive strategy of
‘multifaceted containment’.38
In the end, in spite of intense US pressure, a number of its close allies joined the Chinese-led
bank. Washington’s failed campaign against the AIIB attracted a chorus of criticism from analysts
and scholars. An Australian strategist called it ‘a massive diplomatic defeat’, while a Brookings
analyst characterized US stance as ‘confused and contradictory’.39 It is not much of exaggeration to
say that Beijing scored a perfect win in its first round of strategic competition vis-à-vis Washington.
Which countries joined and why?
Having single-handedly founded a multilateral financial institution, Beijing’s next task was to attract
membership. As it turns out, merely a year and a half after President Xi Jinping’s announcement of
the AIIB, 57 countries had signed up to be its prospective founding members (PFMs), notwithstanding intense US campaign against it.40 What motivated so many countries to join the bank?
Why did many other countries choose to stay out of it?
Against the backdrop of apparently intensifying US–China strategic rivalry—particularly explicit US
opposition to the Chinese bank—one would expect countries with close strategic ties with Washington
to be less likely to join the AIIB, while those having similar ties with Beijing more likely to do so, other
things being equal. Narrowly defined—particularly from the realist perspective—strategic ties usually
refer to formal security alliances. But not every country is willing to enter into a bilateral or multilateral
security alliance. Nevertheless, in the absence of a formal security alliance, countries still can forge
a strong strategic relationship as a result of shared political institutions and values, frequent exchanges
of high-level visits, arms sales, and geographic proximity. This article adopts this broad conceptualization of strategic ties to capture the various components of strategic relations.
More specifically, the authors expect a country to be more (less) likely to join the AIIB if it has
a formal security alliance with Beijing (Washington), frequently exchanges high-level visits with
China (America), or purchases a significant amount of its weapons from Beijing (Washington).
Meanwhile, because China and America are separated by the vast Pacific Ocean and because the
gap between their political institutions and values is probably as wide as the Pacific Ocean,
a country cannot be geographically close or politically similar to both China and America at the
Lawrence Summers, ‘A global wake-up call for the U.S?’ Washington Post, (5 April 2015), available at: https://www.washington
post.com/opinions/a-global-wake-up-call-for-the-us/2015/04/05/6f847ca4-da34-11e4-b3f2-607bd612aeac_story.html?utm_
term=.fb0164d50ce3 (accessed 20 September 2017).
37
Joseph E. Stiglitz, ‘Why America doesn’t welcome China’s new infrastructure bank’, Huffington post, (15 June 2015), available at:
https://www.huffingtonpost.com/joseph-e-stiglitz/america-china-investment-bank_b_7055222.html (accessed 18 October 2017).
38
Amitai Etzioni, ‘The Asian Infrastructure Investment Bank: a case study of multifaceted containment’.
39
Hugh White, ‘AIIB: China outsmarts US diplomacy on Asia bank’, Sydney Morning Herald, (30 March 2015), available at: https://
www.smh.com.au/opinion/aiib-china-outsmarts-us-diplomacy-on-asia-bank-20150330-1maoq7.html
(accessed
19 March 2018); Thomas Wright, ‘A special argument: the U.S., U.K., and the AIIB’, Brookings Institution, (13 March 2015),
available at: https://www.brookings.edu/blog/order-from-chaos/2015/03/13/a-special-argument-the-u-s-u-k-and-the-aiib/
(accessed 19 March 2018). See also Stephen S. Roach et al., ‘Washington’s Big China screw-up’, Foreign Policy,
(26 March 2015), available at: http://foreignpolicy.com/2015/03/26/washingtons-big-china-screw-up-aiib-asia-infrastructureinvestment-bank-china-containment-chinafile/ (accessed 19 March 2018).
40
On 24 October 2014, representatives from 21 countries (including China) met in Beijing and signed the Memorandum of
Understanding on Establishing the AIIB. These 21 countries are designated prospective founding members. Other countries
could become prospective founding members if they had filed a formal application by 31 March 2015, pending approval by
existing prospective founding members. In the end, the AIIB has 57 prospective founding members. Out of these 57
members, only three (South Africa, Kuwait, and Brazil) have not become formal members as of 8 April 2018.
36
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T. XIE AND D. HAN
same time. Thus a country should be more (less) likely to accede to the AIIB if its political
institutions and values are similar to those of Beijing (Washington), or if it is geographically
proximate to China (America).41
Countries have not only strategic interests but also economic interests. Admittedly, economic
interests (e.g. industrial production and high technology) and strategic interests (e.g. national
security and military capabilities) are often inseparable. That the Trump administration views
Made in China 2025—an ambitious industrial plan that seeks to make China dominant in advanced
manufacturing—as a threat to US national security amply illustrate the close linkage between
economic and strategic interests. Besides, the two sets of interests are frequently mutually reinforcing in international relations, as in the case of US relations with its European and Asian allies.
Nevertheless, these two sets of interests are conceptually different and can be independent of each
other in reality. For example, the United States has had close strategic cooperation with Pakistan
for decades, but their economic interactions are largely negligible. Conversely, China has had close
economic ties with America, Japan, and the European Union, but its strategic relations with these
countries are anything but close.
Even if a country’s decision about its membership in the Chinese bank is significantly affected by
its respective strategic ties with Washington and Beijing, this does not preclude any significant
impact of economic factors on that decision. On the contrary, since the two leading actors in the
AIIB drama happen to be the world’s largest and second largest economy, a country’s economic
ties with Washington and Beijing could have an impact on its response to the Chinese bank that is
independent of its strategic ties with these two great powers.
More specifically, joining the Chinese initiative could be viewed as ‘a vote of confidence in
China’s contributions to global development and order’, which may be reciprocated by Beijing via
preferential trade deals or market access.42 Conversely, a decision to stay out of the AIIB could be
viewed as a slight to Beijing, leading to a negative impact on bilateral economic relations. Thus
countries that already have extensive economic ties with Beijing should have strong incentives to
join the AIIB, other things being equal. Meanwhile, in the shadow of US–China strategic competition, a country’s a vote of confidence for Beijing could be viewed as a vote against Washington,
and the latter may retaliate by curtailing its economic ties with that country. Thus countries with
close economic ties with Washington should be less likely to participate in the Chinese initiative,
other things being equal.
Finally, a country may seek membership in the new MDB not because of its economic and/or
strategic ties with Washington and Beijing, but because of the imperative of its own economic
development. Beijing’s strategic considerations aside, the AIIB was founded for the express purpose
of financing infrastructure projects in underdeveloped countries. For these countries, AIIB membership
could be a new and significant source of capital for infrastructure projects. Thus economically underdeveloped countries should have stronger incentives to join the AIIB, controlling for other factors.
To sum up, three sets of factors are expected to influence a country’s decision to participate in
the AIIB: its strategic ties with Beijing and Washington, its economic ties with China and America,
and its level of economic development. The next section describes measures for these factors and
presents statistical findings.
41
The authors are fully aware that shared political institutions and values do not necessarily produce close bilateral relations, as
amply illustrated by tensions and conflicts between China on the one hand and the USSR, Vietnam, and DPRK on the other
hand. For an incisive analysis of the complex and problematic relations between China and these three countries, see Thomas
J. Christensen, Worse Than a Monolith: Alliance Politics and Problems of Coercive Diplomacy (Princeton, NJ: Princeton University
Press, 2011). The other side of the coin is that countries with fundamentally different political institutions and values could
forge close strategic cooperation, as in the case of U.S. relations with Pakistan and many Middle East countries. Nevertheless,
countries with shared political institutions and values are generally more likely to have close strategic relations than those
that are significantly different in their political institutions and values. Support for this generalization can be found in
America’s close strategic ties with western European countries, Canada, Australia, Japan, and South Korea on the one hand,
and China’s current close strategic ties with Russia, Myanmar, the Laos, Cambodia on the other.
42
Gabriel Domínguez, ‘Why Europe defies the US to join a China-led bank’.
JOURNAL OF CONTEMPORARY CHINA
925
Measurement and statistical findings
The dependent variable of this article’s statistical analysis is accession, which is the number of days
it takes a country to become a formal member of the AIIB, counting from 2 October 2013, when
President Xi proposed the establishment of the new development bank. Since AIIB membership is
open to all countries and since there is no deadline for membership application, this analysis
simply chose the day of this analysis (8 April 2018) as the cutoff date, by which 63 countries had
acceded to the AIIB.43 Alternatively, one could use a dichotomous variable that simply indicates
whether a country is a member of the AIIB or not, but such a variable cannot capture the usually
lengthy process of joining an international organization (IO), including application, domestic
ratification, and formal accession. For example, Brazil, Kuwait, and South Africa are AIIB’s PFMs,
but they had not attained formal membership by the date of this analysis.
Strategic ties have five components. The first is security alliance, arguably the most explicit and
important form of a strategic relationship. For the United States, this analysis uses formal defense
agreements—whether multilateral or bilateral—it has signed with other countries since 1945.44 If
a country has a defense pact with Washington, it is coded 1 and 0 if otherwise.45
No such measure is available for China, however, because it has had security alliance with two
countries only, the former Soviet Union and North Korea. Instead, this analysis uses the various
partnerships that the Chinese government has adopted—up until 2016—to characterize its relations with other countries. More specifically, Beijing’s partnership with other countries comes in six
types (coded in descending order of importance from 6 to 1). They are comprehensive strategic
cooperative partnership, strategic cooperative partnership, comprehensive strategic partnership,
strategic partnership, comprehensive cooperative partnership, and cooperative partnership.
Countries that have not been explicitly assigned by Beijing to any of the six types serve as the
baseline (coded 0).
The second component of strategic ties is bilateral high-level visits. The authors’ assumption is
that the larger the number of such visits, the stronger the bilateral strategic ties. Admittedly,
frequent high-level visits from the sending country could signify its efforts to cultivate good
relations with the receiving country. That is, more of such visits actually mean a more problematic
relationship. Besides, two countries could have a strong strategic relationship with few exchanges
of high-level visits, as in the case of China–DPRK relations. Nevertheless, more high-level visits
generally should be associated with strong strategic ties, just as close friends generally should be
more likely to get together than mere acquaintances.46 High-level visits include both the number
of outgoing visits (by senior Chinese and American officials to a country) and the number of
incoming visits (by that country’s senior officials to China and America) in 2013–2014.
The third component of strategic ties is regime similarity, that is, shared political institutions and
values. The measure of this similarity is polity scores from Polity IV project. These scores track each
43
Hong Kong is excluded from this analysis because it is a special administrative region of China.
Multilateral agreements include not only the North Atlantic Treaty Organization, but also the Organization of American States
and the Australia, New Zealand, United States Security Treaty. See Michael Beckley, ‘The myth of entangling alliances:
reassessing the security risks of U.S. defense pacts’, International Security 39(4), (2015), pp. 7–48.
45
It should be pointed out that all U.S. allies are not the same. U.S.–Japan alliance is often called the cornerstone of regional
peace and stability and hence is probably more important U.S. alliance with other Asian countries like South Korea, Thailand,
or the Philippines. Nevertheless, it is extremely difficult to assign different values to U.S. alliances. Is U.S. alliance with Japan
more or less important than NATO? Besides, NATO is a collective defense organization, whereas U.S.–Japan alliance is
a bilateral pact. Even if one assumes that NATO is more important than Japan, the level of importance is still unknown. In
a word, it is rather difficult to measure the importance of the U.S. alliance by a continuous variable. In the end, this analysis
decided to stick with a dichotomous measure (1 or 0) for U.S. alliances and ordinal measure for Chinese partnership. The
authors did rescale the Chinese alliance measure into a dichotomous variable (1 for countries that have been designated with
a partnership in official Chinese statements and 0 for countries that do not get such designation), and the results remain
unchanged: partnership with China has significant impact but defense pact with U.S. does not.
46
Arguably, a better measure of a country’s strategic ties with China (or America) would be the number of visits to China (or
America) as a proportion of total foreign visits made by that country’s top leaders, but collecting such data is beyond the
scope of the present study.
44
926
T. XIE AND D. HAN
country’s regime type annually, ranging from −10 (hereditary monarchy) to +10 (consolidated
democracy). Regime similarity is the absolute value of the difference between a country’s score and
that of China’s (America’s).
The fourth component of strategic ties is the total value of arms sales from China and the US to
a country in 2010–2014, as reported by the Stockholm International Peace Research Institute. This
5-year period was selected to avoid annual variations. The final component of strategic ties is
geographic proximity, measured as the natural logarithm of the distance between Beijing
(Washington) and the capital of another country.
This analysis operationalizes a country’s economic ties with China and America with two
indicators, trade dependence and investment dependence. Trade dependence has two dimensions,
import dependence and export dependence, measured as the natural logarithm of the value of
commodity imports from and exports to China (America) as a percentage of that country’s total
international imports and exports. Investment dependence is the natural logarithm of the value of
inbound foreign direct investment (FDI) from China (America) as a percentage of a country’s total
FDI inflow. As for a country’s level of economic development, the widely used per capita GDP was
adopted. Descriptive statistics for all the variables are presented in Table 3.
Since joining the AIIB is a unidirectional event that occurs only once per country, a Cox
proportional hazards model was used to analyze how various factors influence a country’s
response. The advantage of the Cox proportional hazards model is that it allows us to examine
the probability of a country becoming a formal member of the AIIB as time elapses.47
The authors first ran regressions for China and the United States separately. Table 4 presents
results on how relations with China affect a country’s reaction to the AIIB. Model 1 includes the
three bilateral economic variables only. Neither imports nor investment dependence from China
has any significant impact, but exports to China do: the more dependent a country is on China as
an export market, the faster it accedes to the AIIB. After controlling for a country’s level of
economic development (Model 2), export dependence on China remains significant, though its
level of significance drops substantially (from p < 0.01 to p < 0.05). Economic development is highly
Table 3. Descriptive statistics
Accession (number of days)
In GDP per capita
China factors
Inbound foreign visits
Outbound Chinese visits
Distance to Beijing
Regime similarity
Import dependence
Export dependence
Investment dependence
Partnership
Arms sale from China (billion)
U.S. factors
Inbound foreign visits
Outbound U.S. visits
Distance to Washington
Regime similarity
Import dependence
Export dependence
Investment dependence
Defense pact
Arms sale from U.S. (billion)
47
Mean
1001.667
8.601
Minimum
814
5.469
Maximum
1644
11.614
1.233
.974
8.52
13.092
−2.55
−4.128
−15.593
1.469
.0383
0
0
.515
0
−11.513
−11.513
−22.1226
0
0
11
13
6.224
19
−1.012
−.143
−8.145
6
3.041
.549
.953
8.503
5.956
−3.153
−3.452
−13.0245
.326
.214
0
0
7.27
0
−11.512
−11.512
2.424
0
0
4
17
9.154
20
−.113
−.139
−19.713
1
4.143
S.D.
252.242
1.456
1.765
1.579
9.3917
6.167
1.019
2.161
3.229
1.99
0.239
.728
2.394
.432
6.272
1.598
1.961
−10.322
.470
.651
The authors also ran logit model to check the robustness of Cox model, and the results are similar. Hence only the Cox
regression results are reported here.
JOURNAL OF CONTEMPORARY CHINA
927
Table 4. Effects of relations with China on AIIB accession
Import
dependence
Export
dependence
Investment
dependence
Inbound
foreign visits
Outbound
Chinese visits
Partnership
(1)
0.233
(0.224)
0.200**
(0.069)
0.060
(0.037)
(2)
0.308
(0.243)
0.197*
(0.079)
0.046
(0.040)
(3)
(5)
(6)
0.430***
(0.070)
−1.143***
(0.189)
0.035+
(0.020)
0.229+
(0.129)
0.089
(0.063)
0.011
(0.063)
0.374***
(0.079)
−1.120***
(0.191)
0.031
(0.021)
0.164
(0.159)
−0.003
(0.070)
0.083
(0.068)
0.344***
(0.086)
−1.340***
(0.249)
−0.008
(0.019)
0.696***
(0.205)
0.470***
(0.113)
159
461.018
482.500
113.821
0.156+
(0.089)
0.154+
(0.080)
Distance to Beijing
Regime
similarity
Arms sale
from China
In GDP per capita
N
AIC
BIC
Chi-squared
(4)
149
532.155
541.167
13.680
0.430***
(0.106)
149
514.932
526.948
28.044
193
616.777
623.302
31.251
162
477.047
489.398
104.771
162
479.753
498.278
100.994
(7)
−0.171
(0.196)
0.009
(0.104)
0.048
(0.046)
−0.017
(0.067)
0.122+
(0.073)
0.329***
(0.091)
−1.260***
(0.285)
−0.013
(0.020)
0.711***
(0.203)
0.433***
(0.107)
133
414.174
443.078
96.997
Notes: Standard errors in parentheses; +p < 0.10, *p < 0.05, **p < 0.01, ***p < 0.001.
significant, but contrary to the authors’ expectation, the more economically developed a country is,
the faster it joins the AIIB. The authors will say more about this finding shortly.
Models 3–6 examine the effects of strategic ties on accession. Contrary to the authors’ expectations, regime similarity does not seem to have any significant impact, while bilateral visits seem to
have rather weak effects (p < 0.10). Arms sale are highly significant in Model 6, suggesting that
more purchase of arms from Beijing leads to faster accession to the Beijing-led bank. Across three
models, partnership and distance to Beijing not only have the expected sign, but also are highly
significant. Statistical findings thus provide strong support for two of the authors’ expectations:
that higher level of partnership with Beijing is associated with faster accession and that longer
distance between Beijing and a foreign capital is associated with slower accession. Model 7
includes all ten variables. Partnership, geographic proximity, arms sales, and economic development remain statistically highly significant.
A key puzzle in the finding is that a country’s development level is consistently and positively with
AIIB membership. Yet the authors’ expectation is that economically underdeveloped countries should
have stronger incentives to join the AIIB than economically developed countries, because the former
should have more urgent demands for infrastructure financing than the latter. Two factors possibly
explain this puzzle. First, while underdeveloped countries certainly have more urgent need for
infrastructure financing from the AIIB, many of them may not be able to pay their shares of the
capital stock of the AIIB.48 Second, past research on what motivates states to join IOs has adduced
strong evidence that economically developed countries demonstrate a higher propensity to join IOs.49
48
On payment of subscriptions of shares, see the Articles of Agreement of the Asian Infrastructure Investment Bank, available
at: https://www.aiib.org/en/about-aiib/basic-documents/_download/articles-of-agreement/basic_document_english-bank
_articles_of_agreement.pdf (accessed 6 November 2018).
49
Harold K. Jacobson et.al, ‘National entanglements in international governmental organizations’, American Political Science
Review 80(1), (1986), pp. 141–59; Cheryl Shanks, et al., ‘Inertia and change in the constellation of international governmental
organizations, 1981–1992’, International Organization 50(4), (1996), pp. 593–627; Edward D. Mansfield and John
C. Pevehouse, ‘Democratization and international organizations’, International Organization 60(1), (2006), pp. 137–167; See
also Edward D. Mansfield, et al., ‘Free to trade: democracies, autocracies, and international trade’, American Political Science
Review 94(2), (2000), pp. 305–21.
928
T. XIE AND D. HAN
Table 5. Effects of relations with America on AIIB accession
Import
dependence
Export
dependence
Investment
dependence
Inbound
foreign visits
Outbound
U.S. visits
Defense pact
(1)
−0.120
(0.089)
0.129
(0.087)
0.018
(0.050)
Distance to
Washington
Regime
similarity
Arms sale
from U.S.
In GDP per capita
N
AIC
BIC
Chi-squared
131
470.974
479.599
2.602
(2)
−0.239*
(0.093)
0.100
(0.095)
0.056
(0.052)
0.549***
(0.118)
131
449.745
461.246
25.851
(3)
(4)
(5)
(6)
0.608
(0.511)
1.434**
(0.547)
−0.003
(0.029)
0.667***
(0.113)
−0.426+
(0.233)
0.187***
(0.033)
0.370
(0.550)
1.783**
(0.612)
−0.019
(0.029)
0.527***
(0.130)
−0.336
(0.219)
0.155***
(0.036)
0.023
(0.488)
1.974***
(0.534)
−0.019
(0.026)
0.386**
(0.134)
0.349**
(0.123)
150
469.039
490.114
111.458
−0.288
(0.194)
0.194***
(0.037)
193
620.219
626.744
27.007
153
490.684
502.806
77.446
153
477.508
495.691
95.894
(7)
−0.094
(0.126)
0.140
(0.167)
0.072
(0.064)
−0.242
(0.207)
0.133***
(0.039)
−0.158
(0.482)
1.599**
(0.498)
−0.013
(0.035)
0.491***
(0.140)
0.392**
(0.129)
112
375.456
402.641
90.921
Notes: Standard errors in parentheses; +p < 0.10, *p < 0.05, **p < 0.01, ***p < 0.001.
The AIIB is also an IO: a permanent headquarter, full-time staff, and a charter that codifies its mission
and governance structure. As such, foreign governments might have viewed the Beijing-led MDB as
another new IO dedicated to promoting economic development.
Table 5 presents results on how relations with America affect a country’s response to the AIIB. As
in Table 4, bilateral economic factors appear to have no impact at all, though a country’s economic
development level is again consistently significant and has a positive sign. Like regime similarity
with China in Table 4, shared political institutions and values with the United States have no
significant impact. Geographic proximity to Washington is highly significant in all four models and
has the expected sign, suggesting that longer distance to Washington (i.e. shorter distance to
Beijing for many countries) leads to faster accession. Unlike partnership with Beijing, however,
defense pact with Washington does not have any impact in any model.
While bilateral visits mostly have no impact at all in Table 4, outbound visits by Washington are
consistently and highly significant, that is, more of such visits seem to have made a country more
eager to seek membership in the Chinese bank. This puzzling finding might be attributed to
selection bias in outgoing visits by top US officials: they frequently visited a country in 2013–2014
precisely because they had a hard time persuading that country not to join the Chinese initiative.
Contrary to the authors’ expectation, arms sales from Washington are consistently and positively
associated with accession to the AIIB. Existing study finds that a country’s arms imports depend on
its military budget, which in turn depends on the size of its economy.50 As a result, a country’s arms
purchase from China and the US not only indicates its strategic ties but also its level of economic
development. Finally, a high level of economic development is again positively associated with
faster accession.
Table 6 reports results for the full model, which allows one to find out the relative effects of
a country’s respective relations with Beijing and Washington on its decision regarding the AIIB. As in
Table 4, longer distance between Beijing and a foreign capital means longer time needed for the
Oliver Pamp and Paul W. Thurner, ‘Trading arms and the demand for military expenditures: empirical explorations using new
SIPRI-data’, Defense and Peace Economics 28(4), (2017), pp. 457–72.
50
JOURNAL OF CONTEMPORARY CHINA
929
Table 6. Relative effects of relations with China and America on AIIB membership
(1)
China factors
Import dependence
Export dependence
Investment dependence
−0.231
(0.286)
0.165
(0.132)
−0.109*
(0.052)
Inbound foreign visits
Outbound Chinese visits
Partnership
Distance to Beijing
−1.151***
(0.294)
Arms sale form China
Regime similarity
U.S. factors
Import dependence
Export dependence
Investment dependence
−0.652
(0.509)
−0.174
(0.173)
0.174
(0.126)
0.079
(0.062)
Inbound foreign visits
Outbound U.S. visits
Defense pact
Distance to Washington
1.382**
(0.487)
Arms sale from U.S.
Regime similarity
In GDP per capita
N
AIC
BIC
Chi-squared
−0.648
(0.502)
0.592***
(0.154)
112
369.438
399.342
66.494
(2)
(3)
−0.100
(0.093)
0.064
(0.143)
0.367**
(0.113)
−1.219***
(0.313)
0.932***
(0.258)
−0.353
(0.249)
−0.246
(0.364)
0.015
(0.138)
−0.086
(0.072)
−0.104
(0.082)
0.129
(0.152)
0.375**
(0.131)
−0.977*
(0.385)
0.632*
(0.273)
−0.386
(0.370)
−0.038
(0.214)
0.148**
(0.051)
−0.611
(0.428)
0.802
(0.647)
0.065
(0.163)
−0.365
(0.238)
0.549***
(0.136)
150
432.876
472.015
126.938
−0.091
(0.195)
0.045
(0.130)
0.189*
(0.074)
−0.022
(0.227)
0.116*
(0.053)
−0.602
(0.460)
1.564*
(0.635)
0.167
(0.187)
−0.425
(0.355)
0.681***
(0.199)
112
359.707
411.359
138.008
Notes: Standard errors in parentheses; *p < 0.05, **p < 0.01, ***p < 0.001.
latter to gain formal membership, while a higher level of partnership and more arms sales from
Beijing are associated with shorter time for membership. Meanwhile, as in Table 5, more high-level
visits by and longer distance to Washington are associated with faster accession to the AIIB. Neither
regime similarity—whether with China or America—nor weapons purchased from Washington
have a significant impact.
As for economic factors, a country’s development level is consistently and highly significant and
has a positive sign, as in Tables 4 and 5. Similarly, trade and investment ties with China have no
significant effects on AIIB membership, nor do trade relations with the United States. Yet dependence on US direct investment, which has no significant impact in Table 5, is now positively
associated with AIIB membership. This might be due to high correlation (r = 0.235, p < 0.001)
between dependence on US investment and dependence on China investment, which leads to
unstable effects.
930
T. XIE AND D. HAN
Discussion and conclusion
This article contributes to the ongoing debate about US–China relations by conducting an empirical analysis of whether and how a country’s decision to join the AIIB is affected by strategic rivalry
between these two great powers. Its findings indicate that certain aspects of strategic ties between
a foreign country and the two great powers indeed have strong effects on membership in the
Chinese bank.
On the one hand, a higher level of partnership with and more purchase of weapons from Beijing
seem to make a country more eager to join the Chinese initiative, while a longer distance between
Beijing and a foreign capital appears to have the opposite effects. On the other hand, the longer
distance between Washington and a foreign capital (i.e. shorter distance to Beijing for many countries)
and more visits by top US officials seem to increase a country’s eagerness to participate in the AIIB.
Contrary to the authors’ expectation, neither regime similarity nor trade with the world’s two largest
economies appears to have any impact at all on a country’s membership in the AIIB.
The authors consider the key finding of this article to be that a country’s response to the AIIB
seems to have been heavily influenced by its strategic ties with China (and to a much lesser extent
those with America), as opposed to its economic relations with these two countries. Though the
AIIB was conceived and promoted as an economic IO whose mission is to provide underdeveloped
countries with infrastructure financing, foreign governments apparently have based their responses
primarily on strategic considerations.
In so far as China is concerned, an important implication of the above finding is that it will probably
have a difficult time translating its growing economic influence into strategic leverage. More economic
dependence does not necessarily make a foreign government strategically closer to Beijing.
Consequently, the ambitious BRI, which purports to improve economic cooperation between China
and countries in the vast Eurasian continent and beyond, may not bring about a Beijing-centered sphere
of strategic influence.
Two more findings of this research are worthy of mentioning. First, though previous studies
have adduced evidence that democracies are more likely to join the AIIB in particular and IOs in
general, this article found no such evidence.51 Second, consistent with existing research on what
motivates states to join IOs, this analysis also found economically developed countries to be
consistently more eager to join the AIIB, controlling for other factors. This could be good news
for Beijing if it intends to play a bigger role in global governance by launching more IOs.
Acknowledgments
Xie Tao thanks Xu Linchuan, Zhu Mailun, Zhang Shishuai, and Zou Hongjin for research assistance, and Zhang Guoxi
for comments on earlier drafts.
Disclosure statement
No potential conflict of interest was reported by the authors.
Funding
This work was supported by the Young Faculty Research Fund of Beijing Foreign Studies University [2015JT003].
51
On the effects of democracy and democratization on IO membership, see Edward D. Mansfield and John C. Pevehouse,
‘Democratization and international organizations’; on regime type and AIIB membership, see Yu Wang, ‘Rational participation:
the political economy of joining the Asian Infrastructure Investment Bank’, available at: http://wp.peio.me/wp-content
/uploads/2016/12/PEIO10_paper_101.pdf (accessed 17 May 2018).
JOURNAL OF CONTEMPORARY CHINA
931
Notes on contributors
Tao Xie is a professor of political science at the School of English and International Studies, Beijing Foreign Studies
University.
Donglin Han is an associate professor of political science at the School of International Studies, Renmin University.
Appendix: data source
Variable
Accession
Defense pact
Partnership
Trade (2013)
Investment (2013)
Polity scores
Bilateral visitsa
(2013 and 2014)
Arms sale (2010–2014)
Distance
Per capita GDP
(2013)
a
Source
The exact date on which a country becomes a formal member was obtained from the AIIB’s
official website, https://www.aiib.org/en/about-aiib/governance/members-of-bank/index.
html (accessed 8 April 2018).
Douglas M. Gibler, International Military Alliances, 1648–2008 (Washington, D.C.:
Congressional Quarterly Press, 2009). Updated data were obtained from: http://www.
correlatesofwar.org/data-sets/formal-alliances (accessed 2 March 2018).
Chen Xiaochen, ‘Zhongguo Duiwai “Huoban Guanxi” Dapandian (2016 nian Chunjiban)’
[‘Taking Stock of “Partnership” in Chinese Foreign Relations, 2016 Spring Version’], https://
finance.qq.com/a/20160415/021956.htm (accessed 2 March 2018).
https://comtrade.un.org/data/ (accessed 13 August 2017)
A country’s FDI inflow and U.S. outbound FDI were obtained from www.unctad.org/fdista
tistics (accessed 7 November 2017).
Chinese outbound FDI was obtained from 2013 Statistical Bulletin of China’s Outward Foreign
Direct Investment, http://hzs.mofcom.gov.cn/article/date/201409/20140900724426.shtml
(accessed 28 November 2017).
Monty G. Marshal and Ted Robert Gurr, ‘Political Regime Characteristics and Transitions,
1800–2015’, http://www.systemicpeace.org/polity/polity4x.htm (accessed 23 March 2018).
1. Visits by foreign leaders to the United States were obtained from https://history.state.gov/
departmenthistory/visits (accessed 23 March 2018).
2. President Barack Obama’s outbound visits were obtained from https://history.state.gov/
departmenthistory/travels/president/obama-barack (accessed 23 March 2018).
3. Secretary of State John Kerry’s outbound visits were obtained from https://history.state.
gov/departmenthistory/travels/secretary/kerry-john-forbes (accessed 23 March 2018).
4. Inbound foreign visits and outbound Chinese visits were obtained from Policy Planning
Department, Chinese Ministry of Foreign Affairs, Zhongguo Waijiao [China’s Foreign Affairs]
(Beijing: Shijie Zhishi Chubanshe, 2014, 2015).
Stockholm International Peace Research Institute, SIPRI Arms Transfers Database, https://
www.sipri.org/databases/armstransfers (accessed 30 September 2018).
D. Scott Bennett and Allan Stam, ‘EUGene: A Conceptual Manual’, International Interactions
26(2), pp. 179–204, website: http://eugenesoftware.org (accessed 5 December 2017).
World Bank, ‘World Development Indicators’, https://data.worldbank.org/indicator (accessed
3 December 2017).
On the U.S. side, the State Department keeps track of outgoing visits by U.S. Presidents and Secretaries of State as well as
incoming visits by foreign leaders (heads of state and government). On the Chinese side, the Ministry of Foreign Affairs
publishes an almanac of Chinese foreign affairs, which has an appendix entitled ‘Zhongguo Waijiao Zhongyao Huodong’
(‘important events in Chinese foreign policy’). These events range from summits, outgoing visits by senior Chinese officials
and incoming visits by senior foreign officials, visits to China by leaders of international organization, international forums
held in China, and the unveiling of overseas Chinese consulate offices, etc. Since the Chinese structure of political leadership
(e.g. parallel party and state leadership, the Central Committee, and the Politburo) is fundamentally different from its
American counterpart, it is nearly impossible to distinguish among these events what is high-level and what is not high-level.
In the end, the authors decided to include all bilateral visits listed in the Appendix as high-level visits.