Global finance a game of the more the merrier

China's decision to help establish the AIIB is a gentle but sensible attempt at international institutional innovation and is driven by certain factors. For one, China needs to rise to the challenges in the process of rebalancing its domestic economic structure at the macro level, and strengthen property rights protection and corporate governance at the micro level. For another, as a major economic power, China is also keen to play a bigger role on the international stage. In this context, closer political and economic engagements with Western countries such as the UK will help it to achieve both goals.

In the global perspective, the AIIB will provide a platform for many countries to invest and grow together, as well as unlock the potential benefits for the wider global economy and international financial practices. In short, the AIIB will help rebalance international finance.

But it seems the US tries to prevent China from redefining the economic and financial rules in Asia, because it considers China's proposal uncooperative and a challenge to its dominant position in global finance.

There are other risks as well. It is not certain that China has the capability to ensure sustainable development and globally acceptable degree of transparency and accountability in the governance of the AIIB. The challenges remain big for China, and it needs to learn fast to design effective and efficient strategies to overcome them.

In particular, China has to take measures to improve investor protection, and global experience shows that better legal protection of investors is related to the quality of the financial market. Countries that opt for less protective mechanisms end up with less valuable investment projects and may not be able to ensure sustainable investment returns.

Working with countries with better investor protection and corporate governance such as the UK will be a very good start. To win wider support from the international community and to ensure new institutional arrangements, China has to do the right things right.

The author is deputy director of the Centre for Global Finance, Nottingham University Business School China.