Is China's proposal to start a new "World Bank" a good thing?

The past week has seen strong indications that China, whilst dealing with a lagged economy presently, is still on the right path to economic ascendency as more developments start to materialise showing that US global economic dominance may already be declining.

We heard a week ago that the Chinese Renminbi had been included in the IMF's basket of currencies used in determining SDR (Special Drawing Rights) which has been on the cards for the past few years and grew much attention this year when IMF president Christine Lagarde hinted at the idea of the inclusion. Even if the currency has a small weighting relative to its larger and bigger competitor, the United States, entering the basket at a 10% weighting from nothing does dilute the balance of power held exclusively by the other four  other nations currency of which three lost weighting while the US stayed the same so as to not upset leaders.

It comes as no surprise that China has now started the process to form its own development bank known as the Asian Infrastructure Investment Bank to emulate the well known World Bank but on a much bigger scale. China's quick rise has meant the need to source strategic resources from global partners has become a top agenda for Chinese officials with much dealings happening amongst many of its peers in Asia but also one of the most underdevelopment yet resource abundant continents, Africa.

According to the article, my interpretation would lead me to believe that the US objections with such a development relates to a well documented gentleman's agreement as to the political control over organisations such as the IMF and World Bank, with Europe controlling the former and the US the latter, would mean that this trumps on US ground to influence external economic development. This cosy agreement seems to be fading as the years past and the relevance of both nations economic presents diminish to the mighty economic growth engine called China.

Over US objections, China creates own World Bank » https://t.co/0m77EasFGG pic.twitter.com/14aEmhomnf

— CNBC (@CNBC) December 7, 2015

America's constant "look over your shoulder" attitude to China's own growth path and risks it presents to its own economic power has led the Chinese to forge a separate path next to the world's biggest economy as resistance to their ascension is seen as stifling its position to become the major player in the world order.  In the days when the Egyptians and Roman Empires ruled the world, power was converted from wars, in today's context not so much wars as the history books have written but rather wars over who has the greatest source of monetary power to dictate the direction of humankind.

The US has used the World Bank as it's own tool to fund those nations that agreed with its policy and what it stands for while leaving those who don't out in the cold which is why so many nations remain impoverished and will continue to be until there's a new order that changes this which is why I think the idea of a Chinese development bank is a big plus for the world.

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If we look at the economic spinoffs happening in Africa right now as a result of China's reliance on its resources, I don't think the African economy as a whole has seen such growth in its lifetime that not only liberates millions but also pushes many countries into the global ranks in direct competition for economic hierarchy with old powers who had previously used colonial rule that displaced much of the wealth Africa has always possessed into the hands of those it didn't belong too.

However with good comes bad and in saying this immediately my thoughts turn to the human right atrocities happening in North Korea on an ongoing basis and threats to use nuclear weaponry on Western powers to show its might. We should be reminded that China has for long been a close ally of this dictatorial family rule and protector of what it does whether it's wrong or right.

This does present itself as the real risk of forming such a development bank in that the funds used for necessary infrastructure that allows for an efficient production and an easier flow of trade between nations may be used to prop up regimes that have a questionable past. It will be interesting to see how China deals with such a situation as they wouldn't want to damage the major inroads they've made amongst world powers that would throw such influence off balance and serves to divide those at the top.

According to the article though, nations such as Germany, South Korea, Australia and Britain have signed up to join the bank which could be seen as a sign that the other major nations would rather cooperate accepting fully that nothing stands in the way of China climbing to the top of the world economy but would preferably manage relations from with inside the organisation which does mitigate some of the risk of funding bad regimes.

We've seen Chinese relations with the world begin to take shape which involves sending a positive message about China's present and future participation in the global economy with a much relaxed attitude to doing business with those it previously refused. The only tiffs we've seen thus far is between them and the US which does set a trend in motion.

It's no doubt that the Chinese story will be with us for decades to come but it's great to know that with passing time we as students of economic and political trends have the privilege of seeing it occur firsthand and there is no question in saying that the many case studies taken will certainly form the backbone of the next century of the each subject respectively.