On October 24, 2014 an agreement to establish the Asian Infrastructure Investment Bank (AIIB) was signed by 21 countries in Beijing. The US allies — Australia, South Korea, Japan —were absent. The AIIB proposed by China is expected to play a major role to narrow a massive infrastructure funding gap in Asia, which the Asian Development Bank (ADB) estimates to be about $8 trillion between 2010 and 2020. In 2012 the amount the ADB lent for infrastructure was merely $7.5 billion. Just 4 months earlier on July 15, 2014, the New Development Bank (NDB) was established by the BRICS economies (Brazil, Russia, India, China and South Africa).

Will the creation of the two institutions mark a turning point in the history of governance of finance and investment in Asia, which has been dominated by the Bretton Woods institutions of World Bank and the International Monetary Fund (IMF) as well as the Asian Development Bank (ADB) since World War II? Currently the countries with a higher voting power at the World Bank are the US (15.85%), Japan (6.84%), China (4.42%) who are also the top 3 with the share of US (12.8%), Japan (12.8%) and China (5.5%) at the ADB.

Since the end of World War II, the US has not just been the key strategic ally of Japan, South Korea and the Philippines, but has also provided security and freedom of navigation and masterminded the financial and trade architecture in Asia Pacific. Such provision of global public goods was incentivised by the US’s economic involvement in the region as the US has been the major trade partner for most of the countries in Asia Pacific. In the last decade, however, this position has been undermined by the economic rise of China.