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US Officially Loses Battle Over China-Led Investment Bank

Add the IMF to the (now long) list of those who apparently share the UK’s view that joining the China-led Asian Infrastructure Investment Bank is an “unrivaled opportunity,” as Christine Largarde says her institution not only sees a “massive” opportunity for cooperation with the AIIB but is also “delighted” to explore the possibilities. Here’s more from BBC

International Monetary Fund chief Christine Lagarde has said the IMF would be "delighted" to co-operate with the China-led Asian Infrastructure Investment Bank...

 

Mrs Lagarde said there was "massive" room for IMF co-operation with the AIIB on infrastructure financing.

 

Mrs Lagarde, speaking at the opening of the China Development Forum in Beijing, also said she believed that the World Bank would co-operate with the AIIB.

Meanwhile, Switzerland is now on board and India, Indonesia, and New Zealand are reportedly set to follow. As a reminder, the deadline for applications is the end of this month and it appears that the UK’s move to become a founding member has suddenly made the AIIB the coolest club on the block. Australia is expected to tender a “qualified yes” tomorrow. 

From The Australian Financial Review

The Asian Infrastructure Investment Bank is expected to receive, in principle, endorsement from Federal Cabinet on Monday but the government will continue to make Australia's full participation dependent on the adoption of appropriate governance standards.

 

The government is set to maintain a common front with Japan and South Korea on how the bank will be run despite backing away from its previous opposition to joining last October, amid divisions in Cabinet.

 

"There will be a decision – but with caveats around governance," a government source said emphasising that no one country should dominate the bank.

 

All three countries are under pressure to join the AIIB by the end of the month deadline set by China for foundation membership status that will allow the original countries to decide on future membership.

 

Despite being opposed to the AIIB, the Japanese government appeared to split over joining on Friday when Finance Minister Taro Aso said Japan could join if the conditions were right while other officials said the position had not changed.

The bank’s secretary general Jin Liqun says he expects 35 countries to apply for membership by the deadline but does note that the US has nothing to fear from the institution which he explains is not a competitor the ADB but rather an unassuming “lean, clean, and green” multinational talent scout backed by the support of everyone but Washington. Nothing threatening about that.

From Bloomberg:

  • AIIB is complementary to the Asian Development Bank, Jin says at forum in Beijing today
  • AIIB founding countries to exceed 35 at end of this month, Jin says
  • China will dilute its own share in AIIB as more countries join, Jin says
  • China will act as a multilateral partner in AIIB, Jin says
  • China will respect international standards in setting up AIIB, Jin says
  • AIIB will recruit talented people from all over the world, Jin says
  • AIIB will be lean, clean and green, Jin says

Jin’s conciliatory (and unmistakenly patronizing) remarks notwithstanding, it’s impossible to not see this for exactly what it is: a shift away from US hegemony. Here’s The Economist to explain exactly what we’ve been saying for months: 

The AIIB is but one of a number of new institutions launched by China, apparently in frustration at the failure of the existing international order to accommodate its astonishing rise. Efforts to reform the International Monetary Fund are stalled in the American Congress. America retains its traditional grip on the management of the World Bank. The Manila-based Asian Development Bank (ADB) is always directed by a Japanese official. Partly for that reason—that the AIIB would amount to a diminution of Japanese influence in favour of China at a time when their relations are fraught—Japan is sniffy about the new bank. Its cabinet secretary, Yoshihide Suga, this week repeated that Japan will “carefully study” the AIIB’s governance standards…

 

China, flush with the world’s biggest foreign-exchange reserves and anxious to convert them into “soft power”, is building an alternative architecture. It has proposed not just the AIIB, but a New Development Bank with its “BRICS” partners—Brazil, Russia, India and South Africa—and a Silk Road development fund to boost “connectivity” with its Central Asian neighbours…

 

Despite the obvious need, America has, either by design or ineptitude, turned the AIIB into a test of diplomatic strength. That has proved a disaster. Its officials have, anonymously, rebuked Britain for its “constant accommodation” of China—and many observers would agree that they have a point. But that its closest allies have proved so keen to court China’s favour and so willing to flout American views suggests America picked the wrong fight.

*  *  *

So there you have it. Washington picked a completely unnecessary fight with China over the ostensibly non-contentious topic of infrastructure development because the US can’t stand the fact that traditionally US-dominated multinational institutions are on the verge of being supplanted by sinocentric ambition — and lost. Apparently though, the White House is now out to prove that if it can’t win a war fought with infrastructure development dollars it can still win a war fought with bullets, as evidenced by the “line” of soldiers and armed vehicles in place on or near the Russian border. 

And for any country that’s still on the fence with regard to joining the standardless abomination seeking to undermine the ADB, Jack Lew has a tough question for you: 

"Will it protect the rights of workers, the environment, will it deal with corruption issues appropriately?"