AIIB Gaining Momentum Into 2016

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AIIB Gaining Momentum Into 2016

China’s latest economic weapon

Entering 2016, the Asian Infrastructure Investment Bank (aiib) is preparing to take leaps and bounds. The rise of this bank should have the world, and particularly the United States, on high alert. The success of the aiib heralds the dawn of a new era in Asia—one increasingly influenced by China.

Unlikely Participants

It was announced on Dec. 30, 2015, that Philippine President Benigno Aquino supported the recommendation that the Philippines join the aiib.

The move comes as somewhat of a surprise because the Philippines is in the midst of a heated island dispute with China. Many consider the aiib to be an opportunity for China to extend its influence deeper into Southeast Asia.

Beyond its frosty relations with China, Manila is already home to the Japanese-run Asian Development Bank.

But the Philippines has decided to jump onboard the aiib train. It will find a seat alongside other unlikely members, such as Britain, Germany, Australia and South Korea. What makes these nations a peculiar choice for the aiib is the fact that one of their key allies, the United States, is morally opposed to the bank—even though it now publicly endorses it.

Washington led a campaign through 2015 to try and stifle the creation of the aiib. It was unsuccessful. The U.S. strongly urged its allies to avoid joining. President Barack Obama thought allies like Australia would fall in line. He was wrong.

President Obama is so opposed because the World Bank is a U.S.-run institution that provides international loans to countries for capital programs. It has served to promote U.S. interests in Southeast Asia and around the world since World War ii. The aiib is a direct threat to the influence of the World Bank—and subsequently U.S. primacy—in Southeast Asia.

What Is the AIIB?

aiib’s website decribes itself as:

[A] modern knowledge-based institution, [which] will focus on the development of infrastructure and other productive sectors in Asia, including energy and power, transportation and telecommunications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection, urban development and logistics, etc.

In more tangible terms, it will finance seaports, airports, roads, railroads and other infrastructure projects.

But what is the aiib? To many nations in Southeast Asia, it is an opportunity for short-term economic growth funded by someone other than Western-dominated institutions. For Washington, it’s a threat to U.S. influence in the region. For China, it represents a boost in prestige and, potentially, a major strategic victory.

Although many nations are partners in the bank, it is clear that China will control it. China currently owns 30.3 percent of the shares, equating to 26.1 percent of votes within the bank. India is next with just under 8 percent of the vote. aiib’s first chairman will also be appointed by China.

Wielding a Bank

Chinese control of the aiib means it can use the promise of funding as an incentive for “good behavior.”

For instance, if you were Australia, and you wanted the aiib to finance the upgrade of a major port, like Sydney or Melbourne perhaps, do you go and upset the decision-maker? Of course not! Instead, you ensure that you are counted as a founding member of the bank issuing the loan even if it’s against the will of your closest ally. Then you pay a little gift to China—like 100 years control of the Port of Darwin.

What if you were the Philippines? You need money to enhance supply lines and increase trade flow. You may be more willing to forget about China’s intrusive man-made islands in exchange for a favor from the aiib.

With the bank still very much in its formative years, how projects will be selected or refused is still murky. Regardless, it is a Chinese project from its inception and will undoubtedly be a tool for Beijing to entrench itself as the regional leader economically and politically.

What we are seeing from other members of the aiib is a compromise.

In essence, countries are accommodating China’s ambitions in return for economic favors. The U.S. hoped that a fear of China’s ambitions might outweigh the potential economic gains for the nations of Southeast Asia. Apparently America miscalculated.

China is a regional bully, and everybody knows it. But right now, evidence suggests that the allure of cheap investments and trade increase outweigh fears of Chinese empowerment.

Debt to China

But nations run a huge risk by riding China’s economic initiative. China lends billions to its neighbors. Financial diplomacy is a key part of its strategy to create a stable trade web throughout Southeast Asia. Port projects are one of China’s favorite strategies.

However, as nations fall into arrears with Chinese loans, the reality sets in. One leader who made reference to this was Sri Lankan President Maithripala Sirisena.

In a manifesto, he stated, “This robbery is taking place before everybody and in broad daylight … if this trend continues for another six years, our country would become a colony, and we would become slaves.” His words made little headway in the Western world but resonated with many nations in Southeast Asia, Africa and even Latin America.

When a nation can’t repay in cash, China will take payment in other forms. Look at Venezuela. China loaned the country $56.3 billion according to Inter-American Dialogue data. When Venezuela couldn’t make repayments and China refused a bailout, President Nicolás Maduro paid in oil. Now that the commodity boom in China is ending, it has no reason to bail out such indebted nations.

China uses economic resources as a weapon. It is hard to resist Chinese belligerence when you owe them something. The economically weak and vulnerable nations of Southeast Asia acquiesce to the Chinese. Even Australia isn’t immune. Perhaps it wouldn’t have sold use of the Port of Darwin for 100 years at a price of just over $500 million had it not been so indebted to China.

Who Carries Out AIIB Plans?

Another fear that some have is the question of who will actually work on the aiib projects? With the aiib being Chinese-owned, there is a real danger that Chinese companies will be the ones that win the most lucrative building contracts.

It is not dissimilar to the way China buys property in Australia. Companies buy, then replace the workforce with Chinese labor. The goods are transported by Chinese drivers. From farm to port, the goods travel by Chinese hands. This obviously isn’t the case across the board, but it highlights a point. If your bank decides on projects, it can also decide who carries them out.

For years, the Trumpet has foretold the rise of China as it relates to Bible prophecy. Today, we see how China is dominating Southeast Asia economically. It even has the means to challenge the U.S.-dominated World Bank, an institution that has financed global projects for decades. China is a force to be reckoned with. That is a warning that doesn’t just go out to the poor nations of Southeast Asia, but to everyone—the United States included.

The idea of nations working together on collective projects is wonderful. It fuels trade and enhances cooperation. But the aiib is far from an investment project for all nations, despite how it may appear. The nations involved may see some immediate positive repercussions for joining, but Beijing’s agenda will come to light.

The aiib is one of China’s greatest economic victories in modern history: It will be used to shackle the region to China’s agenda.