Out of the Bretton Woods

When China proposed the Asian Infrastructure Investment Bank (AIIB) in late 2013, it hoped to offer a regional alternative to the multilateral institutions of the Bretton Woods system that left Asia underrepresented. When 58 member nations bucked Washington’s warnings and joined the bank this year, including allies of the United States and G–7 stalwarts such as France, Germany, South Korea, and the United Kingdom, China realized that it had a potential vanguard for an alternative economic world order.

Developmental revolution or Bretton Woods revisited?

On July 15, 2014, the presidents of Brazil, Russia, India, China and South Africa formally agreed to found the New Development Bank (NDB), a new multilateral development bank. Three months later, in October 2014, China announced the founding of the Asian Infrastructure Investment Bank (AIIB), to be established by the end of 2015. 

The launch of the NDB and AIIB have captured global attention and headlines and are generally considered emblematic of the rising strength of emerging countries and the parallel stagnation if not decline of the traditional western economic powers. The NDB and AIIB are seen by many as a direct challenge to the multilateral institutions of the post-war, Bretton Woods global financial order led by the World Bank, IMF and regional multilateral development banks.

China's New Investment Bank: A Premature Prophecy

Former U.S. Treasury Secretary Lawrence Summers wrote on April 5 that this month may be remembered as the moment the United States lost its role as the underwriter of the global economic system. His comments refer to the circumstances surrounding China's launch of a new venture, the Asian Infrastructure Investment Bank (AIIB). Wary of China's growing ambitions and influence, the United States had advised its allies not to join the institution, but many signed up anyway. The debacle was undoubtedly embarrassing for Washington, but even so, Summers' prophecy is a bit premature at this stage.