By Haibin Niu & Nicole White
President Xi Jinping’s recently concluded trip to Latin America signals a new wave of China’s multilateral diplomacy. Building on previous leaders’ regional initiatives such as the Shanghai Cooperation Organization (SCO) and the Forum on China-Africa Cooperation (FOCAC), President Xi made his second trip to Latin America to establish the China-Community of Latin America and Caribbean States (CELAC) Forum and participate in the 6th BRICS summit. Unlike the struggle for membership in the UN and WTO, China has gradually increased its capacity to initiate multilateral institutions in which it has an equal, if not a major role. The new multilateral partnerships are increasingly reflecting China’s vision, identity, capacity, and interests as it rises.
The China-CELAC Forum is an example of how President Xi is employing multilateral fora to strengthen cooperation. The question is: why is China choosing a multilateral and regional approach in addition to established bilateral relationships that work well? Though the jury is still out on whether China’s multilateral approach in Africa has proven to be much more than a vehicle for Chinese investment on the continent, China hopes that FOCAC and China-CELAC can serve as both an institutional mechanism to assuage regional countries’ concerns about China’s power and a way to establish legitimacy through consensus building. For example, on July 17, President Xi and other regional leaders decided to move forward with some of China’s significant proposals including a US$20 billion fund for regional infrastructure and thousands of scholarships for Latin Americans to study in China.
China values BRICS as a multilateral platform to improve the current international system to reflect the increased power and interests of emerging economies. In response to the failure to implement the 2010 IMF reforms, the BRICS announced plans to build its own counterparts of the Bretton Woods institutions: a $100 billion New Development Bank (NDB) and a $100 billion crisis lending fund, called the Contingent Reserve Arrangement (CRA). Both are designed to be complementary to the Bretton Woods institutions, but focus on the experiences and needs of developing countries, prioritizing infrastructure and sustainable development projects. Christine Lagarde, the president of the IMF, sent a message to President Dilma Rousseff of Brazil congratulating her on the creation of the CRA. In addition to collectively promoting reform of the existing international system, China strives to build stronger and closer partnerships with other promising emerging powers via the BRICS agenda.
As a grouping of nations with vastly disparate GDPs, political systems, and national aspirations, it may come as a surprise to many observers that the BRICS is going beyond criticizing Western-dominated institutions and putting its money where its mouths is. The announcement that the NDB will be operational in approximately two years demonstrates the resolve of the member countries to forge a unity of purpose. That said, the political jockeying that took place to decide which nation would hold the key positions is an indication of how difficult it will be for the BRICS to make decisions by consensus going forward.
Moreover, the fact that some of the participating countries are natural economic competitors and geopolitical rivals increases the chances that the NDB’s equal-weighted voting system will lead to paralysis. In fact, some analysts argue that the BRICS’ slowing growth rates could impede the success of the bank and that its relaxed borrowing requirements run the risk of perpetuating bad governance.
Though much is still unknown about the BRICS bank’s predominant currency, legal system, award decisions, and long term prognosis, Washington should take note that Beijing is spearheading alternatives to existing multilateral institutions without U.S. participation. The Chinese-led NDB and Asian Infrastructure Investment Bank (AIIB), and the United States-led Trans-Pacific Partnership (TPP) are examples of both governments setting rules for new multilateral regimes without consulting the other nation. Ideally, the result of being neither explicitly invited nor excluded from a new regional platform will be healthy competition that catalyzes domestic economic reform (in the case of China and the TPP) and promotes greater inclusiveness in the setting of global norms (in the case of the NDB and the IMF).
Although the U.S. foreign policy community has paid little attention to BRICS in the past, examining China’s incipient partnerships is key to understanding President Xi’s emerging foreign policy strategy. Multilateralism is just one of many methods Xi is using to achieve his stated foreign policy goals for China to play a more active role in international relations, improve the international governance system, contribute more public goods, and amplify the voice of developing countries on the world stage. The announcement that Shanghai will be the NDB headquarters, the fact that China will provide the majority of the CRA funding, and CELAC’s positive response to a China-CELAC Forum demonstrate Xi’s tactic of using China’s economic strength to steer boldly through a new wave of multilateral diplomacy.
While the United States and China agree that the best way to deal with the complex challenges of today is through regional and multilateral platforms, increased bilateral consultation about intentions is needed to reduce distrust and suspicion. There is no need for the United States to be threatened by China’s new strategic and economic partnerships because, if successful, they will increase the possibility of burden sharing. In order for the United States to maintain its role as a primary rule shaper, it must be willing to coordinate the integration of new ideas into the existing global order. Specifically, Congress should push through IMF quota reform and the United States should prioritize multilateral initiatives in East Asia and elsewhere including TPP and a stronger leadership role in the ASEAN Regional Forum and East Asia Summit.
Dr. Haibin Niu is a Visiting Fellow with the Freeman Chair in China Studies at CSIS and Senior Fellow at the Shanghai Institute of International Studies (SIIS). Ms. Nicole White is Program Coordinator & Research Assistant with the Freeman Chair in China Studies at CSIS.