Rise of Complementarity between Global and Regional Financial Institutions: Perspectives from Asia

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.