It was the fault of the U.S. Congress why China had resorted to launching the Asian Infrastructure Investment Bank (AIIB), former US Federal Reserve chairman Ben Bernanke said on Tuesday. He said it was U.S. policies that pushed China to create its own global banking instrument.
China, as well as other emerging economies, had long clamored that the governance system of the International Monetary Fund (IMF) be changed to “reflect the changing global economic weights.” If this was heard and actions were made, China and other developing countries would have more voting power at the financial institution.
But Bernanke said American congress turned a blind eye, even ear, to the request. In 2010, the members of U.S. parliament deterred an IMF agreement that would have shifted 6 percent of quota, along with voting rights, to the emerging economies.
They didn’t approve it when in fact they should have, Bernanke said. “So I understand why other countries say, ‘well, let’s take our marbles and go home.'”
Ultimately, China and other countries decided to set up their own system, an instrument that threatens to topple Washington’s hold of the world economic order.
“The US Congress is largely at fault for all that’s happening,” the former US Federal Reserve chairman told investors during the World Business Forum in Hong Kong.
He noted it’s not a good global development to have competing institutions. “It would have been still better to have a global unified system playing to standardized rules.”
In the same conference, Bernanke said China still needs to do a lot of work to push its currency yuan into the global stage. Although he described the yuan as “much better aligned” these days, the currency still isn’t ready.
“To move in that direction, China will have to continue to liberalize its capital account, current trading regimes, and strengthen and deepen its bond markets and other asset markets.”
He assured though that it’s just a matter of time. It “is certainly moving in the direction of being fairly valued.”