U.S. Allies Flock To Chinese-Led Development Bank
More than 40 countries, including several staunch U.S. allies, are expected to sign on as founding members of the Chinese-led Asian Infrastructure Investment Bank, despite the fact that Washington has yet to indicate any interest of its own.
“The rush to join the China’s new development bank for Asia has become a stampede,” The Washington Times reports, “with even longtime U.S. allies such as Georgia, South Korea, Australia, and even Taiwan now saying they are ready to join.” (RELATED: Beyond the Washington Consensus: Pro-Market Voices from the South)
At least 42 countries are now expected to join the AIIB as founding members by Tuesday’s deadline, double the number that had signed on when the bank was first launched in October, with many incentivized by the knowledge that only founding members will have a say in setting up the AIIB’s initial structure and lending guidelines.
“As one of the founders, you have a better position to influence, like steering [the bank] towards sustainable investments,” Swedish Finance Minister Magdalena Andersson explained after announcing that Sweden would join the AIIB.
“The U.S. has never formally opposed the AIIB idea,” The Times says, though President Obama has expressed concerns about issues such as lending standards and environmental protections, and the U.S. and Japan are now “the only two major players” to demur on joining the bank. (RELATED: Obama Doesn’t Want Poor Countries to Use Coal Power)
That is because “the AIIB is evidence of Beijing’s desire to create an Asia-led economic order,” argues Curtis Chin, a former ambassador who also sat on the board of directors of the Asian Development Bank (ADB), in an op-ed for The Wall Street Journal.
Chin points out that the AIIB is explicitly intended to serve as a direct competitor to existing international lending institutions like the International Monetary Fund and the World Bank, “which Western leaders established as a pillar of the post-World War II financial architecture.” (RELATED: Putin to Form ‘Energy Alliance’ of Major Developing Countries)
Those institutions “leave plenty of room for improvement,” but Chin says that during his time at the ADB, “I saw how the management and staff of that Japan-led institution undercut or delayed initiatives advocated by U.S. and European shareholders.” Whether the AIIB will pursue a similar course, he says, will depend on whether European and other minority members are successful in pushing for rigorous internal review standards.
While China has reportedly disavowed any desire to retain veto power for itself, Chin claims that “the lesson of the ADB is simple: Money matters, and the shareholders that contribute the most have the most influence, regardless of explicit veto power.”
As a result, he predicts, “The AIIB is likely to be no different [from the ADB], with China, as the dominant shareholder, calling the shots.”
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