How China was Coopted into Cooperation within the World Bank

In their new article, Doron Ella and Galia Press Barnathan examine the connection between great power rivalries and international institutions, focusing on how great powers use institutional deals to coopt rising powers. Specifically, the article analyzes US-China relations within the context of development finance institutions. The analysis suggests that these relations are anchored in an early cooptation deal, made when the US coopted China into the World Bank, granting it significant benefits and a seat at the table. In return, China supported the US-led liberal international order. This deal set the stage for ongoing Sino-American relations in development finance, alongside other issue-areas, including security.

The article explores the impact of changing power disparities and the evolution of institutional structures on this original deal. It identifies two main pressures threatening the stability of the deal: China’s growing expectations for a better deal reflecting its increased power and the US’s concerns over intensifying rivalry, and changes in the institutional environment, such as the establishment of new multilateral development banks and China’s improved position in these banks. These changes offer China new avenues to influence and renegotiate the original cooptation deal. Overall, the article argues that the increasing complexity of the development finance regime complex provides states with new strategies to advance their goals, likely destabilizing earlier cooptation deals. Understanding these dynamics is crucial for grasping both the historical and future trajectory of US-China relations.

To demonstrate this interplay between the power distribution and the nature of great power rivalry, and the evolving structure of the regime complex, we trace the changing relations between the US and China across three periods.

Phase One: The Cold War

From its inception, throughout the Cold War, the cooptation deal between the US and China remained stable since China had no suitable outside options for alternative development finance other than the World Bank. Additionally, the power asymmetry between China and the US was rather wide, and China perceived its privileges in the World Bank as adequate. During the Cold War, the US and the Soviet Union were in a midst of an intense great power rivalry, and the US benefited from having a former ally of the Soviet Union approaching the West and becoming a potential ally.

Phase Two: The Unipolar Moment through the Financial Crisis of 2008-09

After the fall of the Soviet Union in December 1991, great power rivalries seemed to have receded before a new rivalry would emerge in the following decade between the US and China. During the 1990s and 2000s China had increasingly integrated into the US-led liberal international order and its economic interests slowly converged with those of the liberal West. Yet, by the second decade of the 21st century the cooptation deal between China and the US within the World Bank had started to show signs of destabilization. This had happened due to two main reasons: 1. As China become stronger and richer, it started perceiving its current privileges in the World Bank as inadequate, and especially in relation to the moral and material support it had given the Bank. 2. As China joined other multilateral development banks, its outside options have increased, offering China new opportunities to gain similar or even better privileges in those banks, and also grant its increasingly important support to these institutions, improving its position as a significant actor in development finance. As a result, China started to undercut the influence of the World Bank in an attempt to gain negotiation leverage that will pressure the US into granting it a better deal, which will reflect its growing power and status. In China’s perception, a better deal should mainly include structural reforms within the World Bank. Such reforms will grant China, and other developing countries, more voting power, as well as reflect its own norms and principles, rather than exclusively rely on those of the liberal West. However, in the second phase, China was still not able to gain additional leverage in its negotiations for a better deal since the World Bank remained the most important institution in development finance, and China’s increasing participation in other Banks was not enough to meaningfully undermine the deal.

Phase Three: The Establishment of the Asian Infrastructure Investment Bank (AIIB) in 2015 and onward

The third phase is marked by the establishment of the AIIB in 2015 – a regional multilateral development bank created and dominated by China as its most influential member. Scholars generally agree that China established the AIIB in light of its frustration with American reluctance to grant it with more power over decision-making in the World Bank, among other international institutions. Therefore, China decided to establish its own Bank that could, in the future, compete with the World Bank and other financial institutions. By doing that, China believed it could increase its negotiation leverage in the World Bank, while also offer its own cooptation deals to other states, whether they are developing or developed, via the AIIB, resulting in further destabilization of its original cooptation deal within the World Bank.

Where do we go from here?

The unraveling of this cooptation deal, which is still at the core of China’s engagement with the World Bank and the US, is daunting because it will imply the demise of an important component holding together and constraining this intense great power rivalry. Indeed, we trace the growing Chinese rhetorical expressions of dissatisfaction with the current deal and suggest that these offer worrying signs of destabilization. At the same time, however, one may argue that the fact that the intensifying rivalry between the two states is taking place within a dense institutional environment, while generating instability within the institutional complex, also helps to manage this rivalry and contain it, and reduces the danger of escalation to violence.

 

China’s nuclear expansion and the increasing risk of an arms race

Why is China expanding its nuclear arsenal? In his new article, Henrik Stålhane Hiim argues that concerns about the vulnerability of its nuclear forces is the main driver – and that there is little evidence of a change in China’s nuclear strategy.

In the summer and autumn of 2021, researchers revealed that China had started building more than 300 silos for intercontinental ballistic missiles in three different fields. The silo exposure made international headlines, and demonstrated that China had started a significant nuclear expansion. The US Department of Defense now assesses that China will possess over 1000 warheads by 2030, a fourfold increase in a decade. Even though the United States and Russia will continue to possess significantly larger arsenals, there is no doubt that China’s buildup represents a turn away from its traditional approach of maintaining a small nuclear force.

There is less agreement about why China is expanding its arsenal. In my article, I argue that there is still little evidence to suggest to that the expansion represents a change in China’s nuclear strategy. Chinese leaders have traditionally thought of nuclear weapons as having two functions: Deterring nuclear attacks from others, and countering nuclear blackmail or coercion. The buildup could enable later shifts in strategy, but there are still few signs of Chinese leaders fundamentally rethinking the purposes nuclear weapons serve in their defense policy.

I further find that the main driver of China’s expansion is concerns about US capabilities such as missile defense and highly precise nuclear and conventional weapons. Chinese sources indicate that worries about US nuclear policy have increased in recent years. Many in China fear the combination of weapons that can target its nuclear forces, and defenses that can intercept any surviving Chinese missiles. In tandem, they argue, such capabilities pose a major threat to China’s nuclear deterrent.

To be clear, other factors may also have influenced China’s buildup. Some analysts point to prestige and status concerns as a possible explanation. Others have indicated that the purpose of the expansion is to create a stronger “shield” to enable conventional aggression against Taiwan, which is possible, but not directly discussed in Chinese sources. Nevertheless, my findings indicate that concern about the vulnerability of its arsenal is likely to be the main driver. In particular, the Donald Trump administration’s Nuclear Posture Review was seen as alarming in China and contributed to increasing worries about the future strategic stability.

Towards an arms race?

My findings have implications for the debates about US nuclear policy. There is increasing discussion in the United States about whether to respond to China’s buildup through a similar expansion and by deploying new weapons systems. In October, the bipartisan Congressional Commission on the Strategic Posture of the United States published its final report. The commission recommended to prepare to upload some or all of the warheads currently held in reserve. It further stated that the United States should deploy additional theater nuclear weapons with variable yield (or so-called tactical nuclear weapons) to the Indo-Pacific region. Similarly, a study group convened by Lawrence Livermore National Laboratory (LLNL) recently argued that “The United States should plan and prepare to deploy additional warheads and bombs from the reserve.”

Unfortunately, my article indicates that such responses are very likely to lead to major arms race pressures. For example, influential US experts have argued that the United States should attempt to maintain a so-called damage limitation capability – that is, the ability to destroy or intercept as many Chinese nuclear weapons as possible in the event of an all-out war. The problem of this approach, however, is that Chinese leaders are no longer willing to live with a vulnerable arsenal. China is very likely to respond if its leaders and experts believe the United States is attempting to maintain a damage limitation capability.

Similarly, if the United States deploys new tactical nuclear weapons in Asia, the likelihood of China developing such weapons may increase. As experts from the Federation of American Scientists highlight, there is still no evidence that China plans to field a new low-yield warhead. However, my article highlights that Chinese experts are debating whether there is a need for such weapons as a response option vis-à-vis the United States.

Different nuclear schools of thought

As other scholars have also highlighted, the competing readings of China’s nuclear intentions, and of how the United States should respond, is in no small part informed by different assumptions and theories about nuclear strategy. Scholars who believe the balance of terror is delicate – and that states have incentives to pursue superiority – are likely to see China’s expansion as alarming. These scholars, whose views also appears to be at least partly shared by U.S. officials, fear China might be opting for a first-strike capability. Moreover, they argue that the United States should attempt to maintain its superior position.

My research demonstrates, however, that fears of China opting for nuclear superiority and a first-strike capability are overblown. Instead, China’s expansion aligns with the so-called nuclear revolution theory. A key tenet of this school of thought it that states should strive for a secure second-strike capability, but that pursuit of superiority is meaningless. So far, China appears to be acting like a good nuclear revolutionary. If it continues to do so, an arms race may still be at hand, albeit one less intense than the Cold War race.

Read the article “The last atomic Waltz: China’s nuclear expansion and the persisting relevance of the theory of the nuclear revolution” here