Ever a strategic crossroads, ardently pro-Western Georgia on August 25 became the site where the Asian Infrastructure Investment Bank, billed as the Chinese counterweight to the World Bank, chose its first president.
China's former deputy finance minister, Jin Liqun, got the pick at the August 24-25 meeting in Tbilisi, but it’s the longer term implications of the bank’s role that could prove more intriguing.
Initially meant as an Asia-only lending club, the Asian Infrastructure Investment Bank (AIIB) has fast expanded to attract members across Europe and is set to help China build international clout.
The US has tried to discourage allies like the United Kingdom and South Korea from embracing the bank, a financial institution that Washington reportedly fears will lower international banking standards, but did not react publicly when Georgia, its strongest ally in the strategic South Caucasus, also decided to help midwife the AIIB into existence.
Granted, Georgia, which holds a mere .05 percent share in the bank, does not have the banking or economic muscle of the UK or South Korea, but its geo-strategic location means that those with influence here tend to keep a wary eye out for potential rivals.
Some analysts even declared that undertakings like the AIIB herald the “end of the American century, and the arrival of the Asian century.”
Others find such predictions about the AIIB’s impact overly dramatic. Michael Pettis, a Chinese financial markets analyst and expert with the Carnegie Endowment for International Peace's Asia Program, commented that the AIIB will not be the cause, but rather is the consequence of China’s economic rise, and that the bank is more likely to complement rather than rival Western financial institutions.
“There are very confused, abstract discussions about the AIIB,” said Pettis, who teaches finance at the Beijing-based Guanghua School of Management at Peking University. “Discussion about how China is going to transform the global financial architecture . . .is primarily a discussion about when China will open up its capital markets to unrestricted purchases of domestic assets, especially Chinese government bonds.”
Perhaps Washington shares that assessment. Speaking on the sidelines of the AIIB conference, Georgian officials said that they’ve encountered no American opposition to their hosting the AIIB talks or to Tbilisi’s ties with China.
“The US could hardly blame Georgia for participating, given its development needs,” commented Michael Cecire, a Eurasia analyst at the Foreign Policy Research Institute in Philadelphia.
Indeed, Georgian Prime Minister Irakli Gharibashvili, with an eye on the country’s lackluster economy and investment rates, told representatives of the Bank’s 57 member-states that he hopes the AIIB will give Georgia low-cost loans for energy, logistical and transportation projects.
Finance Minister Nodar Khaduri eagerly emphasized to attendees that Georgian businesspeople were on hand with project proposals at the ready.
As EurasiaNet.org reported last month, Georgia’s free-trade deal with the European Union is driving Chinese interest.
To Georgia’s advantage, the country is a small but important leg in the ancient trade route, the Silk Road, which Bejing is pushing to bring back as a major East-West trade corridor and is investing in infrastructure development along the way.
A Chinese company is among the bidders for construction of a port in the Black Sea village of Anaklia; a potentially critical link for any revived Silk Road.
With money in real-estate, banking and mining, China grew to become the country’s third largest foreign investor (after The Netherlands and Azerbaijan) by 2014, and its fourth biggest trade partner, with a growing taste for Georgian wine, the country’s pride and joy.
Against that backdrop, the host of the August 24-25 conference does not seem to be concerned with any potentially game-changing repercussions of the AIIB’s formation.
Fast growing though Georgia’s Chinese ties may be, they elicit little popular enthusiasm compared to the long-nourished aspirations to become one with the West; an ambition which many Georgians see as a way to escape the destiny of being Russia’s backyard. But, at the same time, the country also appears to be hedging its bets.