Rise of Complementarity between Global and Regional Financial Institutions: Perspectives from Asia
| Published date | 01 May 2018 |
| DOI | http://doi.org/10.1111/1758-5899.12548 |
| Date | 01 May 2018 |
| Author | Pradumna B. Rana,Ramon Pacheco Pardo |
Rise of Complementarity between Global and
Regional Financial Institutions: Perspectives
from Asia
Pradumna B. Rana
S. Rajaratnam School of International Studies, Singapore
Ramon Pacheco Pardo
King’s College London
Abstract
Global economic governance is in flux. The institutions and norms set up by the US and other Western powers decades ago
are being eroded. Regional organisations and emerging powers are challenging them. This is especially the case in East Asia
and China. Or are they? In this article we argue that East Asian countries in general and China in particular are not challenging
existing global institutions and norms. Instead, they are setting up and developing institutions that complement –rather than
compete against –existing institutions. Even though there is a degree of ‘healthy’competition between regional institutions
and their global counterparts, the former are essentially complementary to the latter. Global institutions can offer knowledge
and capacity building to regional institutions, which in turn can provide access to a larger pool of resources. To prove our
argument, we analyse the cases of liquidity provision –in the form of the IMF and the Chiang Mai Initiative Multilateralisation
–and development financing –with the World Bank on the one hand and the Asian Infrastructure Investment Bank and the
New Development Bank on the other. Our findings suggest that the multi-layering of international governance need not lead
to competition between layers.
Policy Implications
•Regional financial and development financing institutions complement their global counterparts.
•Global institutions can offer knowledge and capacity-building to regional institutions, which in turn provide access to a lar-
ger pool of resources.
•A degree of ‘healthy’competition is beneficial by promoting reform and increasing the supply of public goods.
•Global and regional institutions should not engage in a race to the bottom.
•East Asia and China are not challenging existing global institutions.
•The IMF and ASEAN+3 should develop more structured and systematic cooperation.
•The World Bank and the ADB should strengthen cooperation with new, China-led development banks.
Global economic governance is in flux. The institutions and
norms set up by the US and other Western powers (such as
the IMF, WTO, and the World Bank) are being eroded. The
economic rise of emerging countries, their newfound diplo-
matic assertiveness, and contestation of supposedly univer-
sal norms are driving a process whereby the organisations
launched during the post-World War II period are being
challenged by regional organisations and emerging power-
led initiatives –especially in East Asia and from China. Or
are they?
This article will argue that there is clear potential for and
evidence of cooperation and ‘healthy’competition between
East Asian regional organisations and China-led governance
initiatives on the one hand and existing global institutions
on the other. There is less evidence of ‘unhealthy’
competition such as the race to the bottom and forum
shopping. The article will underpin its normative case for
cooperation and ‘healthy’competition by applying existing
theoretical research on the fragmentation of global gover-
nance, as well as by presenting empirical evidence of exist-
ing cooperative efforts. N9onetheless, the article will argue
that there are limits for potential cooperation and ‘healthy’
competition between regional and global institutions. These
are the history of the establishment of regional institutions,
the gap between rhetoric and reality, and the evolving
geopolitical forces.
The question of whether East Asian regional institutions
in general and China in particular will seek to cooperate
with or compete against international institutions is crucial
for the future of global economic governance. As Chin and
Global Policy (2018) 9:2 doi: 10.1111/1758-5899.12548 ©2018 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 9 . Issue 2 . May 2018 231
Research Article
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