China has a problem. It has money with nowhere to invest it. Increasingly, it sees the United States as an enemy.
China officially launched the Asian Infrastructure Investment Bank this weekend.
The AIIB is roughly similar to the World Bank based in Washington DC. The World Bank is not a bank at all – it is an aid agency created in 1944 that is used to influence developing countries by funding projects like hydroelectric dams, road building, building schools and factories. The developing countries may pay the money back, but the World Bank doesn’t much care. It is a way for the United States to give “foreign aid” without asking Congress by using loan guarantees backing loans from global banks rather than expenditures from the Treasury (until the loans default).
We already know China is very active funding development projects in Africa. AIIB is focused on Asia, with 57 countries in the initial membership. Somewhat alarming to the United States, our European allies and a South Korea are supportive of what China is doing. China will be supplying most of the initial $50 billion in capital, but welcomes other countries. The United States and Japan are not participating.
China plans for the future, not just the next quarter. Once AIIB starts funding projects, they will get political allies, even if debt is the motive. China just launched its biggest rocket ever with a plan to build its own space station and space missions to the moon and Mars. A new era has begun.