10 April 2015

How Not to Deal With China

APR 7, 2015

China's creation of the Asian Infrastructure Investment Bank and the bungled U.S. response have given Beijing a nice diplomatic win. Nothugely consequential in itself, the episode is a case study in how not to deal with the world's biggest emerging power. Before it happens again, the U.S. and its friends ought to pause and reflect.

China has two goals in building this new international lender. First, it wants an additional conduit for its surplus of savings -- a way to lend abroad that deflects resistance from borrowers worried about being under China's thumb. (Lately, Chinese-led construction projects have prompted protests from Sri Lanka to Zambia.) Second, China's rulers crave the respect of other nations and seek the global standing they believe should come with their growing economic strength.

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