With China’s accession to the European Bank for Reconstruction and Development, Europe and China are becoming closer than ever, writes Elodie Sellier.
Elodie Sellier is a European Public Affairs graduate of Maastricht University.
China formally became the 66th shareholder of the European Bank for Reconstruction and Development (EBRD), a largely unreported yet important development, in what seems to be a return of favour for Beijing’s decision to approve fourteen EU member states as founding members of the Asian Infrastructure Investment Bank (AIIB).
China’s initiatives have been welcome with much enthusiasm by the crisis-ridden European countries, irresistibly attracted by hypothetical economic windfalls. But for outsiders, it begs the question of how can Europe and Beijing find common grounds on economic governance, despite widely diverging views on the much sensitive questions of norms, values and principles.
Is Europe ready to bend to Beijing’s rules of the game, and recklessly sacrifice existing standards that took decades to develop? Or, should Europe continue on the soft path of increased cooperative practices, in the hope it may “socialise” China into becoming a Western-style, values-based donor?
The AIIB’s basic documents make clear that political affairs have no place in the bank’s activities, reflecting China’s aversion for conditionality and stubborn adherence to the principle of non-interference. Nowhere in the bank’s legal basis is reference made to “multi-party democracy, the rule of law, respect for human rights”, a set of principles that figures quite prominently in the first lines of the EBRD’s charter. Nor does China adhere to the OECD’s code of conduct in development assistance and aid delivery. After all, Jin Liqun, president-designate of the AIIB, explicitly stressed last November that “the so-called best international standards are not Western ones”.
To the credit of China, it is true that the governance of the major Multilateral Development Banks (MDBs) has failed to keep pace with the rise of non-Western powers on the global economic landscape, and the progressive shift of the world’s economic and financial centre of gravity to the Asian continent. The fact that the BRICS all together only control a ridiculous 13.1% of voting rights at the World Bank, in spite of their 22% share of the global economy, is a striking case in point of the serious mismatch between the current functioning of MDBs and the realities of the 21st Century.
This is where the AIIB comes in. With its whole “new set of guidelines” and its Asian-style underpinning of equality inter pares regardless of the size of its members’ economy, the new bank buttresses the “South-South cooperation” model promoted by China, and seems, at first glance, a praiseworthy endeavour to “strike back”, and to re-balance the asymmetrical paradigm imposed by the West. Yet, can Beijing’s attempts at multilateralism heal the cracks of the current system?
The answer is likely to be no.
Not only 70% of the AIIB’s capital must be originated from Asia, but with slightly more than 26% of the voting shares, there is little doubt that Beijing will retain veto power over major proposals, thereby limiting the capacity of the 14 EU countries to apply a brake on China’s decisions.
Against this, hopes that the participation of EU countries in the bank may contribute to socialising China into the adoption of international standards are likely to be swiftly swept away. If the West is more than welcome to participate in the new bank as long as its contribution generates substantial returns on investment for China, it has yet no other option than to play on Beijing’s terms.
By inviting China to the EBRD’s donors’ table, not by the means of a cooperation agreement but by granting it the status of shareholder, European lenders slammed the door on an outdated multilateral system that failed to accommodate the interests of emerging economies in its power structure.
In turn, one should expect more pressure from Europe on the fundamentals of economic governance. The EU, as a values-based organisation and the world’s largest provider of Overseas Development Assistance (ODA), has a moral responsibility to lead by example on this matter, and to set a precedent for principled cooperation with China.
The Union’s supportive response to the Chinese initiatives has put the EU on good terms with Beijing, conferring the former a diplomatic advantage it should build upon to bring China closer to international standards.
That being said, the EU so far has not done a convincing job of achieving inner cohesion among its member states, nor has it articulated a commonly agreed “grand narrative” vis-à-vis China, one that would balance normative priorities, such as fundamental rights and the rule of law, and material and economic considerations. The somewhat patchy, uncoordinated strides of member states following the launch of the AIIB, jostling in what resembled a seamless race for membership, offered the desolating sight of competing and disunited powers in front of Beijing’s initiatives.
At a crucial time when the Commission is seeking ways to stimulate China’s investments in the Juncker Plan, the Union must grasp the nettle, and clarify once and for all who represents and speaks for Europe. It is only by joining hands and coordinating forces that the EU will successfully strike the right balance in effectively engaging with China on development and aid assistance, without having to accommodate a race to the bottom in economic governance principles, an unfortunate scenario that would prove disastrous for the whole international community, donors and recipients alike.