The Quest for Global Leadership: U.S.-China Competition in Multilateral Financial Institutions

Abstract

As China emerges as a global power, it has showed great willingness to remake global development finance by setting up new multilateral financial institutions. The creation of those new institutions represents a marked departure from the existing multilateral development bank (MDB) system. For the first time, the new institutions do not depend on the financial largess of the West. To understand the circumstances that have led China to create these new institutions and the likely consequences, the article first examines the Bretton Woods institutional architecture that was created by the United States when it emerged as the principal global economic superpower in the aftermath of World War II. In the second part, it analyzes the competition between China and the United States in global financial governance given Beijing’s expanding interests and Washington’s declining influence. The article further explores in the third section new opportunities and challenges that the new financial institutions could bring to China, and finally proposes how China could better leverage those new institutions to play a transformative role in promoting its global leadership.