As dead­line looms, U.S. al­lies rush to join China’s bank Diplo­matic de­feat for Obama

The Washington Times Weekly - - Politics - BY DAVID R. SANDS

The rush to join the China’s new devel­op­ment bank for Asia has be­come a stam­pede, with even long­time U.S. al­lies such as Ge­or­gia, South Korea, Australia and even Tai­wan now say­ing they are ready to join de­spite the clear reser­va­tions of the Obama ad­min­is­tra­tion.

China is putting up half of the planned $100 bil­lion ini­tial cap­i­tal­iza­tion for the Shang­haibased Asian In­fra­struc­ture In­vest­ment Bank (AIIB), de­signed to help fi­nance tril­lions of dol­lars in in­fra­struc­ture projects needed for the boom­ing East Asian re­gion in the com­ing decades.

At least 42 coun­tries are now ex­pected to be “found­ing mem­bers” of the AIIB, up from 21 when China and a group of Asian and Mid­dle East coun­tries for­mally signed a mem­o­ran­dum of un­der­stand­ing to open the bank last Oc­to­ber, in­clud­ing Ger­many, Bri­tain, France, Switzer­land, Turkey and Rus­sia. Bei­jing has pressed coun­tries to join by the March 31 dead­line, say­ing 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,” said Swedish Fi­nance Min­is­ter Mag­dalena An­der­s­son Mon­day, shortly af­ter Stock­holm be­came the lat­est Euro­pean power to sign on with the bank.

The U.S. have never for­mally op­posed the AIIB idea, but was no­tice­ably cool to the con­cept. Obama ad­min­is­tra­tion of­fi­cials said they feared the bank would du­pli­cate the work of the World Bank and Asian Devel­op­ment Bank, dom­i­nated by the U.S. and its al­lies, while po­ten­tially un­der­min­ing lend­ing stan­dards on such is­sues as the en­vi­ron­ment and cor­rup­tion.

China and other emerg­ing economies com­plain they are un­der­rep­re­sented in the ex­ist­ing in­ter­na­tional or­ga­ni­za­tions such as the World Bank and IMF, and that Asia’s public fi­nan­cial needs are sim­ply not be­ing met by World Bank and ADB.

To date, the U.S. and Ja­pan are the only two ma­jor play­ers on the out­side as the AIIB comes to­gether.

Trea­sury Sec­re­tary Ja­cob Lew, in a pos­si­ble at­tempt to mend fences, was in Bei­jing Mon­day for talks on a range of eco­nomic is­sues with Chi­nese Pre­mier Li Ke­qiang and other of­fi­cials. Mr. Lew gave no sign that Wash­ing­ton was ready to join the AIIB, but said the Obama ad­min­is­tra­tion was will­ing to work with the bank once it was es­tab­lished.

“We very much wel­come China’s in­creased par­tic­i­pa­tion in in­fra­struc­ture in­vest­ment, and the con­cerns we’ve raised about the need for stan­dards con­tinue,” Mr. Lew said, ac­cord­ing to The As­so­ci­ated Press, say­ing talks be­tween Wash­ing­ton and Bei­jing on the AIIB have been “co­op­er­a­tive and col­lab­o­ra­tive.”

“The ini­tial de­ci­sions of what kinds of projects are in­vested in will ob­vi­ously be a very im­por­tant sig­nal as to how they’ll pro­ceed,” Mr. Lew added.

Chi­nese of­fi­cials have been care­ful not to gloat about the spec­ta­cle of long­time U.S. al­lies ig­nor­ing Wash­ing­ton in the rush to have a stake at the new bank, in no small part be­cause China’s mas­sive re­serve, huge do­mes­tic mar­ket and global clout are too at­trac­tive to ig­nore.

“The AIIB is ex­pected to in­crease in­vest­ment, boost de­mand and spur eco­nomic ex­pan­sion in the re­gion,” said Zhu Min, a for­mer top of­fi­cial at the Peo­ple’s Bank of China and now deputy man­ag­ing direc­tor of the IMF.

But out­side ob­servers say the episode marks a clear diplo­matic de­feat of the U.S. and an equally clear sign of a shift in the global eco­nomic peck­ing or­der. Bri­tish Prime Min­is­ter David Cameron be­gan the rush of top pow­ers to join the AIIB ear­lier this month, giv­ing lit­tle ad­vance warn­ing to the U.S. or to Bri­tain’s Euro­pean Union part­ners.

“Con­fu­sion is the re­sult, and fur­ther fric­tion and con­flict in­side the EU, in the G7 and across the At­lantic are fore­see­able,” wrote Volker Stanzel, a se­nior ad­viser at the Ger­man Mar­shall Fund of the United States in a new anal­y­sis of the AIIB fight. “‘Divide and rule’ is an art mas­tered long ago by Bei­jing.”

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