The transatlantic spat about China’s new Asian investment bank tells a cautionary tale. This latest collision between geoeconomics and geopolitics is a harbinger of battles to come. The toughest question facing the post-post-cold war world is whether a globally integrated economic and financial system can survive rising competition between the great powers, most notably the US and China. On present trends, the answer is probably not.
The divisions within advanced nations on how to handle China’s bid to increase its international economic influence were revealed when Britain announced unilaterally that it would become a founding member of Beijing’s proposed Asian Infrastructure Investment Bank. The move provoked an unusually sharp response from the White House, which accused its ally of kowtowing to China in pursuit of commercial benefit — something for which the government in London has a record.
It would be nice to think that the falling-out followed a spirited discussion about the strategic merits or otherwise of western participation in international financial institutions sponsored by Beijing. There is no doubt China wants to bolster its weight in global affairs. Do such initiatives subvert or complement the existing rules of global finance? Can the west veto such enterprises? Is it more sensible to join than to boycott? Where should the old powers draw the balance between engaging with, and hedging against, Chinese power?