After decades of sustained high growth, as China's economy overtakes the United States, it marks the first time in three centuries that a non-English speaking, non-Western, non-liberal democratic country is the world's biggest economy. Beijing holds the world's largest reserve assets and China is also now the biggest trading partner for about twice as many countries as the U.S. In keeping with the historical norm, political power will shift to realign with the changed economic center of gravity.
Meeting in Beijing on Oct. 24, 21 Asian countries decided to establish a new Asian Infrastructure Investment Bank based in Beijing with an initial capitalization of $50 billion. The U.S. raised concerns about the bank's governance, environmental standards and debt sustainability, and lobbied security allies and economic partners to stay aloof.
Despite U.S. and Japanese opposition, the number of AIIB member countries has climbed to 57, prompting China to double its initial investment to $100 billion. At 25-30 percent, this will be the single largest share (India will likely have the second largest) and give Beijing a de facto veto over the bank's decisions. Eschewing the costly and cumbersome World Bank model, the AIIB will have a non-resident board that meets occasionally in Beijing and can convene in videoconference.
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