LONDON – The board of the European Bank for Reconstruction and Development recently approved China’s application to join – an application a decade in the making – and sent it on to member governments for final approval. But EBRD membership is only one expression of China’s rapidly growing role in the world’s international financial institutions. The question now is whether China will spur change within them, or vice versa.
The global financial crisis shook up the international financial architecture, catching many institutions off guard. The International Monetary Fund, for example, had actually pursued sharp downsizing in the preceding years. But it also allowed them to prove their mettle. Many of them – not least the IMF, but also the EBRD and the European Investment Bank – eventually showed that they could respond flexibly and, as a result, have gained expanded mandates and more capital.
The crisis also undermined the legitimacy of the G-7 – the countries at the root of the problem – while invigorating the G-20. Amid these transformations, China gained an opening to boost its global influence – one that it is determined to exploit, despite resistance from some corners. It plans to use its presidency of the G-20 in 2016, for example, to advance an ambitious agenda.
In fact, Chinese international engagement is now occurring on a scale and at a rate never seen before. China is a member of many multilateral institutions – including several regional players like the African Development Bank (AfDB) and the Inter-American Development Bank (IDB) – with which it is deepening its relationships, especially through co-investment in projects around the world. For example, China significantly ratcheted up its commitment to the AfDB last year through the $2 billion Africa Growing Together Fund.