Australia moved a big step closer to becoming the latest U.S. ally to buck Obama administration and sign on as a founding member of the China’s proposed Asian Infrastructure Investment Bank, according to press reports.
The Sydney Morning Herald reported Tuesday that the Australian Cabinet voted to reverse its earlier stand and sign an memorandum of understanding by the end of the month to join the $100 billion venture, half of which will be financed with seed capital provided by Beijing.
The AIIB, conceived to help finance the massive infrastructure financing needs of Asia’s booming economies, has provoked a sharp tug-of-war between the United States and China — one that China appears to be winning handily.
Despite U.S. reservations, Britain, Germany, France and other European powers announced last week they had agreed to become “founding members” of the AIIB, with experts saying the lure of China’s vast capital reserves and global trading clout has clearly outweighed Washington’s concerns.
Nearly three dozen countries, mostly in Asia and the Middle East, are expected to join the AIIB as inaugural members, and many regional analysts say South Korea, another close U.S. Asian ally, will also sign on before the March 31 deadline.
U.S. officials have warned both privately and publicly that the AIIB could undercut existing Western-dominated international financial organizations such as the World Bank and Asian Development Bank. Treasury Department officials have said there are doubts the new AIIB, dominated by China, would observe the same standards on corruption, labor and environmental standards as do existing bodies.
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An unspoken concern for many in the U.S. government is that China could use its clout as the inspiration, host country and top investor in the AIIB to advance its political and strategic goals in the region.
But Beijing argues that the AIIB is needed to meet the huge need for bridges, roads and other infrastructure that aren’t being met by existing multilateral institutions. Chinese officials also say the U.S. government itself has long been urging Beijing to take a more active “stakeholder” role in the world economy, but now is trying to block China’s efforts to do so.
Support for the bank has come together with surprising speed, after Chinese President Xi Jinping first floated the idea on a trip to Indonesia in October 2013.
China, India (another founding member of the bank) and other rising economies also say the World Bank and International Monetary Fund understate their growing power, and that it is the U.S. Congress that is blocking an IMF reform package designed to rebalance the global pecking order.
The World Bank has traditionally been run by an America, the IMF by a European and the Asian Development Bank by a Japanese national.
Even some American analysts have said the U.S. efforts to prevent the AIIB from taking off have proven both ineffectual and counterproductive. For both South Korea and Australia, China in recent years has become the single biggest import and export market, making it difficult for either country to keep out of the AIIB indefinitely.
And officials at the Manila-based Asian Development Bank (ADB) were signaling this week that they did not see China’s initiative as a challenge to the ADB’s mission.
ADB President Takehiko Nakao told The Associated Press Tuesday that China’s bank could be a potential partner rather than a rival, and that officials from the two organizations are already consulting on how to make the new bank more effective.
“I think we can complement each other,” Mr. Nakao said of the ADB and AIIB.
China is said to be offering concessions to boost the number of countries joining as founding members, including renouncing any veto power for AIIB decisions. Beijing also said the bank will be governed by a multinational secretariat.
Jin Liqun, secretary-general of the organizing committee in China setting up the bank, told a Beijing forum over the weekend that AIIB will attempt to make investment decisions by unanimous consent.
Although China has kept the invitation open to Washington, the U.S. is not expected to meet the March 31 deadline to become a founding member. Japanese Finance Minister Taro Aso said Tokyo also was “not ready” to commit to membership this month, according to the Reuters news service.
But there were fresh signs Tuesday that another U.S. ally may be breaking ranks: Canadian officials confirmed they were seriously considering joining, although David Barnabe, a Finance Department spokesman in Ottawa, said the talks may take “several months.”
• David R. Sands can be reached at dsands@washingtontimes.com.
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