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First mover advantage: the United Kingdom and the Asian Infrastructure Investment Bank

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Abstract

In March 2015, the UK applied to become a founder member of the Chinese-led Asian Infrastructure Investment Bank (AIIB) despite objections from the Foreign Office and Washington, DC, and ahead of other major western countries although they were to follow quickly. What explains the British decision? The paper argues that the underlying long-run reasons included shifting perceptions of American and Chinese power, economic imperatives, the institutional opportunities offered to pursue “venue-shopping” strategies within the British state, and widespread ambivalence about UK policy towards China. Furthermore, although analyses often eschew “snapshot” perspectives, short-run perceptions that the UK could, by joining the AIIB at that point, gain a first mover advantage that would provide greater access to Chinese markets, secure contracts across Asia for British firms, and enable the City of London to win an even greater share of the offshore renminbi trade proved decisive.

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Notes

  1. New Zealand had applied to join in January 2015 (Anderlini 2015). Membership of the AIIB was only opened up to non-emerging countries in February 2015 (Ito 2015). Luxembourg signed up on March 11 and was ahead of the UK by a day but the application remained confidential for 2 weeks. There were some suggestions that China played the European countries off against each other in the negotiations. Furthermore, decisions about the location of the AIIB’s European office and the limit placed upon the number of seats assigned to “non-regional” member states (three out of 15–20) laid the basis for further tensions and fissures between the different European countries (Anderlini 2015).

  2. China’s goal, in opening up the AIIB to western countries, may indeed have been the winning of greater legitimacy. The participation of other nations and the shift towards multilateralism lessened fears that the Bank was simply “a Trojan horse for Chinese ambition” (DW 2015). There are however debates about the extent to which the AIIB can be regarded as a multilateral institution.

  3. Critics observed that the USA had itself tied the provision of loans to its foreign policy goals during the Cold War and beyond (Aiyar and Anklesaria 2015).

  4. These accounts have found that less democratic countries or those where neighbouring countries had already become AIIB members were more likely to join than others, particularly if they were already members of Chinese-led international organisations (Wang 2018: 105).

  5. By the second quarter of 2018, London had a 43.9 per cent share of renminbi transactions carried out in offshore markets (Szalay 2019).

  6. During the first phase of the Conservative-led coalition which took office in 2010, there had initially been strains with China. Prime Minister Cameron had, in May 2012, angered Beijing by meeting with the Dalai Lama.

  7. The UK’s willingness to engage in cooperation around its ageing nuclear power sector illustrates the extent to which there was indeed a “golden era”. In 2013, the UK and China signed a memorandum of understanding that included a role for British firms in China’s nuclear industry and envisaged a substantial place for Chinese investment in the UK. The Treasury noted: “While any initial Chinese stake in a nuclear power project is likely to be a minority stake, over time stakes in subsequent new power stations could be majority stakes” (Standing 2013). Then in 2015, France’s EDF and the China General Nuclear Power Corporation concluded a Strategic Investment agreement for the construction and operation of the Hinkley Point C nuclear power station in Somerset and Osborne announced that the UK would provide guarantees (EDF 2015; Watt 2017).

  8. The National Security Council in the USA also has a membership that goes beyond those with responsibility for military and diplomatic policy and now includes, for example, the Secretary of the Treasury. Nonetheless, although its mandate includes economic, environmental and technology security, there is a gap between these and the NSC’s competences (Auger 2011).

  9. The National Security Strategy was however, and this was a reflection of UK thinking more broadly, marked by ideational tensions. Policy towards China was pulled between a commitment to liberal values and efforts to secure trade and investment (Devanny 2015: 20).

  10. It was reported that although his civil servants had deep reservations, Philip Hammond, the Foreign Secretary, “… had been persuaded by the safeguards offered by the Chinese government over governance and political interference” (Anderlini and Stacey 2015).

  11. In contrast with the rivalries that have sometimes marked the relationship between those living in Numbers 10 and 11 Downing Street, Cameron and Osborne had a close and largely cooperative relationship.

  12. The Treasury however announced that: “The decision to become a prospective founding member of the AIIB was a collective government decision, agreed across all the relevant departments” (Anderlini and Stacey 2015).

  13. It should be noted that public attitudes towards the USA were also a factor. While they became more positive after the Bush years, there had been significant long-term fraying since the end of the Cold War thereby providing a basis for more independent UK initiatives (Pew Research Center 2014; Summers 2019: 179).

  14. Indeed, Danny Alexander, a senior Liberal Democrat who served as Chief Secretary to the Treasury between 2010 and 2015, went on to become vice president and corporate secretary at the AIIB after he lost his seat in the 2015 general election (Gov.uk 2016). In 2017, David Cameron took a leadership position in a $1 billion UK investment fund aimed at supporting the Belt and Road Initiative (Maçães 2017).

  15. While there was not of course generalised or deep political uncertainty in 2015 when the UK applied to join the AIIB, policy towards China was characterised by a degree of uncertainty and flux.

  16. Rigid depictions of path dependence have been heavily qualified in recent accounts as increasing emphasis has been placed on incremental and gradualist change (Streeck and Thelen 2005; Mahoney and Thelen 2019).

  17. There was an apparent change of tone just before Boris Johnson became Prime Minister in 2019. In an interview, he celebrated the UK’s decision to move first in joining the AIIB, talked in positive terms about the Belt and Road Initiative, welcomed Chinese students to British universities, and called for increased Chinese investment in the UK (OBOReurope 2019).

  18. Britain’s often strained relationship with the European Union and the growing hold of Conservative Euro-scepticism which culminated in the 2016 Brexit referendum vote may have compounded these sentiments. If a long-run perspective is adopted, it might be noted that although the UK was instrumental in the creation of the International Bank for Reconstruction and Development (or World Bank) at the conclusion of the Second World War, it had, where there were policy options, stood aside from European initiatives such as the Council of Europe Development Bank (Council of Europe 2013: 44; Markwell 2006: 247).

  19. There was some further pressure, although it applied to all countries considering AIIB membership, because China imposed a deadline of mid-March if they wished to participate in a meeting of prospective members that was to be held in Kazakhstan (Anderlini 2015).

  20. In the event, Luxembourg signed up on March 11 and was ahead of the UK by one day but the application remained confidential for 2 weeks. There were some suggestions that China played the European countries off against each other in the negotiations. Furthermore, decisions about the location of the AIIB’s European office and the limit placed upon the number of seats assigned to “non-regional” member states (three out of 15–20) laid the basis for further tensions and fissures between the different European countries (Anderlini 2015).

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  1. Department of International Economics, Government and Business, Copenhagen Business School, Porcelænshaven 24, 2000, Frederiksberg, Denmark

    Edward Ashbee

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Correspondence to Edward Ashbee.

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Ashbee, E. First mover advantage: the United Kingdom and the Asian Infrastructure Investment Bank. Asia Eur J 19, 411–425 (2021). https://doi.org/10.1007/s10308-021-00595-6

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