Strategic Reassurance in Institutional Contests: Explaining China’s Creation of the Asian Infrastructure Investment Bank

Abstract

The AIIB has been widely conceived as a Chinese effort to promote reforms of global financial governance. While the existing literature of contested multilateralism tends to focus on the problem of threat credibility, this article highlights the necessity of strategic reassurance in institutional contests. To facilitate incremental reforms of the existing order, rising powers like China need not only to pose credible challenge towards established institutions, but also to demonstrate their benign intentions and commitment to future cooperation. Besides revealing strength and resolve, the creation of a new multilateral regime helps rising powers to signal their self-restraints and reassure other powers. Consequently, the institutional configuration of new multilateral organizations involves a trade-off between the dual needs for threats and reassurance. Chinese behaviours in creating the AIIB can be explained through this framework.

China's New Multilateral Institutions: A Framework and Research Agenda

“…Zheng Chen and Yanchuan Liu similarly develop rationalist bargaining theory, but ultimately offer an alternative account of parallel institution building (Chen and Liu 2017). For Chen and Liu, problems of credibly committing to using exit options are only partly relevant to explaining parallel institution building.…”

“…Here, there are two logics at work. The first is the logic of self-binding, whereby China can reassure other states of its benign intentions by committing to rules and pooling influence over its policies via multilateral institutions (Chen and Liu 2017;Ikenberry 2001;Wolf 2014).…”

“…At the same time, the pursuit of a parallel institutionalist strategy by China may improve its exit options and convey it greater bargaining power to reform established institutions (Chen and Liu 2017;Zangl et al 2016). This may operate as a spur to established powers to concede institutional reform in order to co-opt China into existing institutions.…”

“…Rather, the Chinese government continues to pursue its interests in established institutions even while building parallel ones. Parallel institutions strengthen China's hand by legitimating its preferences and improving its bargaining power in established institutions (Chen and Liu 2017). This challenges the view that institutional creation is a 'last resort' strategy that is pursued only when the use of existing ones and forum shopping are exhausted as options (Jupille, Mattli, and Snidal 2013:28).…”

Çin’in Kurumsal Reforma Yönelik Stratejileri: AAYB’nin Kuruluşu ve Gelişimindeki Başarı

“…It signals Beijing's dissatisfaction with the existing regime and also warns that China has both capacity and resolve to bypass the system if necessary (Reisen, 2015). By contrast, there is another view that the AIIB is mostly used as an instrument of strategic reassurance by China to ease the commitment problems associated with power transition process (Chen and Liu, 2018).…”