China’s Growing Clout Triggers Economic Arms Race With Old Order

China’s rise is posing a challenge to America’s role as global economic guardian.

The Asian nation’s $12 trillion economy is the world’s second largest and biggest once prices are adjusted for purchasing power parity; it’s the largest trading nation; is investing billions in a ‘new Silk Road’; is now No. 3 in terms of voting rights at the IMF and has created its own multilateral development lender — the Asian Infrastructure Investment Bank.

That’s a tectonic shift since 2015 — when China’s stewardship of global bodies was confined to the International Network for Bamboo and Rattan — that will shape economic governance for decades to come. The big question: will China bend to the values espoused by existing Western-led liberal democratic institutions or end up remolding them.

Take infrastructure investment. Asia alone needs $26 trillion worth of infrastructure by 2030, according to the Asian Development Bank. That gives China the perfect opportunity to win friends, said Curtis S. Chin, former U.S. ambassador to the ADB under presidents George W. Bush and Barack Obama and inaugural Asia Fellow at the Milken Institute.

“China’s promise of financial and other support through institutions and multilateral initiatives of its own making, including the Asian Infrastructure Investment Bank and its ‘One Belt One Road’ plan, can be bewitchingly enticing,” he said.

At the same time, reforms of bodies like the IMF and others to allow a greater role for China have been long over due.

“Multilateral institutions and arrangements will be condemned to increasing irrelevance unless they include China and other large emerging markets,” said David Loevinger, a former China specialist at the U.S. Treasury and now an analyst at fund manager TCW Group Inc. in Los Angeles.

Critics say the likes of the AIIB are merely window dressing for China’s spider’s web of lending channels that lack transparency, are effectively an arm of the Communist Party and leave mostly poorer nation’s saddled with debt.

They especially warn about the Belt and Road Initiative, a project aimed at building hundreds of billions worth of infrastructure around the world and even written into the constitution — a vivid illustration of just how invested President Xi Jinping is to the project.

Take infrastructure investment. Asia alone needs $26 trillion worth of infrastructure by 2030, according to the Asian Development Bank. That gives China the perfect opportunity to win friends, said Curtis S. Chin, former U.S. ambassador to the ADB under presidents George W. Bush and Barack Obama and inaugural Asia Fellow at the Milken Institute.

“China’s promise of financial and other support through institutions and multilateral initiatives of its own making, including the Asian Infrastructure Investment Bank and its ‘One Belt One Road’ plan, can be bewitchingly enticing,” he said.

At the same time, reforms of bodies like the IMF and others to allow a greater role for China have been long over due.

“Multilateral institutions and arrangements will be condemned to increasing irrelevance unless they include China and other large emerging markets,” said David Loevinger, a former China specialist at the U.S. Treasury and now an analyst at fund manager TCW Group Inc. in Los Angeles.

Critics say the likes of the AIIB are merely window dressing for China’s spider’s web of lending channels that lack transparency, are effectively an arm of the Communist Party and leave mostly poorer nation’s saddled with debt.

They especially warn about the Belt and Road Initiative, a project aimed at building hundreds of billions worth of infrastructure around the world and even written into the constitution — a vivid illustration of just how invested President Xi Jinping is to the project.

The article is reported by Bloomberg.