The Chinese government is planning to create a new Asian Infrastructure Investment Bank; and the Australian government this week agreed to become a part of it.

The plan is to have the bank rival all-encompassing financial institutions like the World Bank and the International Monetary Fund.

Core priorities of the bank are to address the $8 trillion infrastructure gap within Asia and provide hundreds of billions for bridges and roads to connect Asian economies.

Global financial experts see the idea as a milestone in the shifting of power from west to east.

“China is trying to use economic muscle,” said Fariborz Moshirian, Global Finance Director of UNSW’s Institute of Global finance, “and also in a sense it’s a reaction to the Bretton Woods institutions like the IMF and World Bank. They are seen as US and European children and China wants to make their own mark.

“It’s sort of a by-product of the rise of the financial strength of China … We’re going to see more of this kind of influence because China can afford now to take part of this kind of activity.”

Japan, Taiwan and Egypt were quick to express their interest in joining, bringing the total number of countries willing to belong to the new super-bank to 40. These include some traditional US allies like Britain, New Zealand, Germany, France, Switzerland and South Korea.

The US has, so far, withheld its involvement.

The move is seen as a dangerous one. “They don’t want to be isolating themselves,” said Professor Moshirian. “They’ve got very close links with China in terms of trade and investment and why shouldn’t you? If money is being thrown about by China why shouldn’t they grab it? China is becoming strong so why should you isolate yourself?”

According to the Australian Institute of International affairs’ Ashley Rogge, the stampede to sign onto the new Asian bank has left the US ‘embarrassed’. Stalled IMF reforms snubbed China, leaving it without any larger say in the existing global financial institutions.

“They (the US) had the opportunity to encourage China in a cooperative manner,” said Ms Rogge, “(but) they kind of forfeited that as these reforms have stalled.

“The new institutions are now being created because they have dropped the ball. Now they’ve created this opposition which is the total opposite of what they wanted.”

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