March 17, 2015    3 minute read

China’s Rising Challenge

   March 17, 2015    3 minute read

China’s Rising Challenge

The UK has always strived to be the first to action in the commercial world, especially when whispers of a global bank that can threaten even the great US based World Bank are circulating.

The Asia infrastructure Investment Bank – AIIB – is a $50bn Chinese scheme revealed in October of last year to bolster much needed infrastructure development within Asia; specifically East Asia as one of AIIB’s rivals – the Asian Development Bank – has estimated an $8tn injection into infrastructure is crucial within the next decade to maintain healthy economic growth. The AIIB plan to use a range of measures to improve Asian infrastructure, involving loans, equity investments and guarantees so as to empower investment into areas varying from energy to urban development. However, if AIIB cannot find enough initial investors, the prospective plans may remain a pipedream. Fortunately, China has a new-found adamant interest from Britain.

As of the 12th of March, the Chancellor of the Exchequer George Osborne expressed the UK’s prospect of becoming a founding investor in China’s new bank, quoting:

“Joining AIIB at the founding stage will create an unrivalled opportunity for the UK and Asia to invest and grow together”

Being the first Western, G7 economy to express interest in joining AIIB, Britain is not only offering financial help to a struggling initiative, but also granting it credibility as a possible investment opportunity for the world to grasp. However, this new investment scheme has caused controversy and tension within Britain’s most influential partner: The US, and they have not kept silent about it.

Ever since 2013, when Britain and China opened investment opportunities between one another, the UK-US relationship has become somewhat strained; however with Britain’s interest in AIIB, America can’t help but feel undermined. America – in short- feels threatened from the rise of a new body in economic and political power, with Ely Ratner, the senior fellow at the Centre for a New American Security, expressing America’s worry saying:

“At the heart of this dispute is the long-term contest over the rules, norms and institutions that will govern economics and politics in Asia.”

Moreover, America already had interests in restructuring the Asian economy with the currently discussed 12-nation trade agreement, the Trans-Pacific Partnership, aimed at setting new global trading standards; standards differing from China’s. This possible economic power, backed by the United States’ strongest relation, threatens America’s weight in Asia. China’s possibility of establishing strong economic institutions and alliances with America’s allies weakens both political and economic influence from the US.

The Obama administration frowns upon Britain’s increasing interest in China, worried the UK may aid in creating an influential superpower capable of going face-to-face with America. Time will tell if this hesitancy will develop into anything more substantial.

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