The US is bitterly watching its ally join the AIIB!

(Baonghean) - Only one day remains until the deadline for countries to submit applications to become founding members of the Asian Infrastructure Investment Bank (AIIB) - a financial institution founded by China. To date, 30 countries have announced their membership in the AIIB, most recently Russia and Australia. Significantly, this list includes many of the United States' closest allies, from Europe such as the UK, France, and Italy, to Asia such as South Korea and Australia... Thus, despite its best efforts to retain them, the US has been unable to prevent its allies from "following the call of self-interest."

Representatives from participating countries signed the memorandum of understanding on joining the AIIB on October 24, 2014, in Beijing, China.

Ignoring the US, allies are joining AIIB in droves.

According to an announcement from China, after the deadline of March 31st for submitting applications to become founding members of the AIIB, the founding countries will hold several rounds of discussions so that they can jointly sign the AIIB Charter in June 2015. After completing these procedures, the AIIB could be officially established and begin operations by the end of 2015. As early as the end of 2014, when China and 20 other countries established the AIIB, the US tried to advise its allies to be cautious in deciding on the AIIB, arguing that countries needed time to assess its governance standards and environmental impact. Of course, behind this reason, one can see a greater concern from the US regarding this financial institution, considered the "World Bank of China." This includes the potential increase in China's "soft power" in the Asia-Pacific region, where the US is implementing its pivot strategy, and the competition between the AIIB and two other institutions in which the US plays a crucial role: the International Monetary Fund (IMF) and the Asian Development Bank (ADB). However, the US's appeals proved largely ineffective as, as the deadline approached, a number of allied countries overcame US "admonition" to become founding members of the AIIB. After the UK, Germany, France, Italy, Luxembourg, Switzerland, and South Korea, another important US ally in the Asia-Pacific, Australia, finally decided to "join the game." Thus, after identifying the top contenders, most of the world's most prominent economic players have lined up to join the AIIB. In the G7 group, only the US and Japan remain missing. However, even Japan is considering joining the AIIB if China guarantees the sustainability of the borrowing, anticipating the AIIB's environmental and social impacts.

The irresistible appeal of the new financial institution.

The fact that allies and friends "ignored" the US to join the AIIB demonstrates the irresistible appeal of this bank. Since its inception, China has persuaded participating countries that the AIIB would boost the development of the Asian region, not only lifting many people out of poverty but also potentially increasing the middle class in the region, creating a huge consumer market for economies outside the continent. The necessity of the AIIB is argued based on the region's enormous need for infrastructure development, including the development of roads, railways, and fiber optic cables, with investment capital amounting to tens of trillions of USD. Some forecasts suggest that infrastructure spending between 2014 and 2025 will be around $78 trillion, with 60% of the capital demand coming from the Asia-Pacific region. Meanwhile, the ADB is generally more focused on poverty reduction projects. For Asian countries, there is no reason to remain outside a financial institution involved in infrastructure projects – which are considered fundamental to such development. As for Europe, many leaders of the Old Continent, including US allies, have frankly stated that, without becoming a member of this new institution, European countries risk missing out on one of the fastest-growing regions in the world in terms of economic growth, infrastructure development, and geopolitical influence.

Of course, the founding member countries of the AIIB were not so naive as to completely ignore the US warnings about the AIIB's decision-making mechanism, or in other words, the possibility of China taking over the institution. These countries argued that, having determined not to miss future investment opportunities, participating from the outset would be even more beneficial in limiting China's dominance in the bank. Furthermore, China also wanted to "take one step back to take two steps forward" by proactively relinquishing its veto power in the AIIB, although it still wanted to contribute 49% of the capital. Mr. Jin Liqun, the AIIB's Secretary-General, recently declared that China would not "bully" other members, and that "China's position as the largest shareholder in the AIIB is not a privilege, but a responsibility and an undertaking." Perhaps, countries also feel quite enthusiastic about working within an institution like the AIIB, where no single nation can dominate decision-making – a far cry from the traditional practices at the IMF and World Bank, where the US still retains control.

The US is "biting the bullet."

Until the founding member countries signed the AIIB Charter, it was unclear to what extent China would fulfill its commitment to "openness, comprehensiveness, transparency, and accountability." However, one thing was quite certain: the US had failed to retain its allies. Therefore, the US had no choice but to soften its stance towards the new institution, as evidenced by the statement of US Deputy Treasury Secretary Nathan Sheets that "the US welcomes the establishment of multilateral financial institutions that contribute to strengthening the global financial system." When China began the process of establishing the AIIB, analysts anticipated three possible courses of action from the US. First, to pressure its allies not to join the AIIB until the bank's regulatory procedures were secured; second, to join the AIIB; and third, to turn its back on the issue. Thus, at this point, the first option has been completely ruled out, and the US now only has two paths ahead. Although joining the AIIB might be an embarrassing idea for the US, it would offer several benefits, such as an official position to monitor the activities of both China and its allies, and fair access for American companies to AIIB projects. However, the US has yet to show any signs of choosing the second or third path, or even exploring a new path beyond analysts' predictions. Currently, the score is 1-0 in favor of China with its AIIB move, and the public is waiting to see if the US can equalize the score.

Thuy Ngoc