SEOUL – China – already the world’s largest exporter, manufacturer, and international-reserve-asset holder – is poised to overtake the United States as the world’s largest economy (measured according to purchasing power parity) this year. Now, it is using its growing clout to reshape global economic governance. Indeed, the country’s days of following Deng Xiaoping’s injunction to “hide brightness and cherish obscurity” are long gone.
After decades of actively participating in international economic institutions – including the G-20, the International Monetary Fund, the World Bank, and the World Trade Organization – China has begun to resemble a revisionist power seeking to create a new world order. Last month, China and 20 other Asian countries signed a memorandum of understanding to establish a new multilateral development bank, the Asian Infrastructure Investment Bank. Viewed as the first serious institutional challenge to the World Bank and the Asian Development Bank (ADB), the AIIB was proposed by China.
In a sense, this shift should not be surprising, given the widespread debate over the inherent weaknesses of existing international institutions and governance structures – in particular, China’s disproportionately small role in them. China accounts for a 3.8% voting share of the IMF and a 5.5% share of the ADB, compared to 16.8% and 12.8%, respectively, for the United States and 6.2% and 12.8% for Japan.
Moreover, the advanced economies have staked their claim to leadership in these institutions. Europeans have led the IMF and Americans have controlled the World Bank since their establishment after World War II. Likewise, the ADB has had Japanese presidents since its founding in 1966.