Diplomatic disaster: Obama humiliated by allies’ rush to join China’s new bank
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TaiShang
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China's growing support to lead multilateral lending bank worries US | Business | The Guardian
China has received critical support from the International Monetary Fund and Asian Development Bank for its goal of establishing a new Chinese-led multilateral lender, adding to a growing wave of endorsements that has worried the United States.
Leaders of the IMF and ADB, speaking at a conference in Beijing on Sunday, said they were in talks with or happy to cooperate with the Asian Infrastructure Investment Bank (AIIB), a $50bn (£33bn) lender to be majority funded by Chinathat is seen by some as a rival to these established international financial institutions.
The United States, concerned about China’s growing diplomatic clout, has urged countries to think twice about signing up and questioned whether the AIIB will have sufficient standards of governance and environmental and social safeguards.
Twenty-seven countries have already signed up to participate in the AIIB, China’s finance minister, Lou Jiwei, told China National Radio on Saturday. It will provide project loans to developing countries and is slated to begin operations at the end of 2015.
The United States’ key strategic allies in the region, Australia, Japan and South Korea, are also considering joining the proposed Beijing-based bank.
Early opposition to the AIIB from western countries partially dissolved after Britain said this month it would join, with France, Germany and Italy swiftly following suit.
Canberra could formally decide to sign up to the AIIB when the full cabinet meets on Monday, Australian media have said.
At least eight more countries may join the lender by the 31 March deadline, Jin Liqun, secretary general of the interim secretariat that is establishing the AIIB, told a panel at the conference on Sunday.
The fund will have approval from its shareholders at the start to double its capitalisation to $100bn, he said.
“China will follow the rules of the international community and will not bully other members but work together with them and try to reach consensus in all the decisions we make without brandishing the majority shareholder status,” he said.
In an editorial published on the same day, China’s official Xinhua news agency suggested that the US might be embarrassed that many of its allies had not heeded its warnings.
“For decision-makers in the United States, they really have to be reminded that if they do not jump on the bandwagon of change in time, they will soon be overrun by the bandwagon itself,” it said.
The IMF’s managing director, Christine Lagarde, said on Sunday that the fund would be delighted to cooperate with the AIIB.
China’s Lou and ADB president, Takehiko Nakao, said at the conference they had held discussions on possible cooperation, with the Chinese finance minister adding that topics discussed included safeguard standards.
Lou has previously said AIIB would complement rather than compete with other institutions such as the ADB, the Manila-based multilateral lender dominated by Japan and the United States.
The AIIB’s Jin said developing countries in Asia would receive the bulk of loans for infrastructure projects, which could be co-provided with commercial banks and pension funds.
Non-Asian countries would also only hold 25% of the AIIB’s shareholding, lower than their stakes at the founding of the ADB, he said.
China has received critical support from the International Monetary Fund and Asian Development Bank for its goal of establishing a new Chinese-led multilateral lender, adding to a growing wave of endorsements that has worried the United States.
Leaders of the IMF and ADB, speaking at a conference in Beijing on Sunday, said they were in talks with or happy to cooperate with the Asian Infrastructure Investment Bank (AIIB), a $50bn (£33bn) lender to be majority funded by Chinathat is seen by some as a rival to these established international financial institutions.
The United States, concerned about China’s growing diplomatic clout, has urged countries to think twice about signing up and questioned whether the AIIB will have sufficient standards of governance and environmental and social safeguards.
Twenty-seven countries have already signed up to participate in the AIIB, China’s finance minister, Lou Jiwei, told China National Radio on Saturday. It will provide project loans to developing countries and is slated to begin operations at the end of 2015.
The United States’ key strategic allies in the region, Australia, Japan and South Korea, are also considering joining the proposed Beijing-based bank.
Early opposition to the AIIB from western countries partially dissolved after Britain said this month it would join, with France, Germany and Italy swiftly following suit.
Canberra could formally decide to sign up to the AIIB when the full cabinet meets on Monday, Australian media have said.
At least eight more countries may join the lender by the 31 March deadline, Jin Liqun, secretary general of the interim secretariat that is establishing the AIIB, told a panel at the conference on Sunday.
The fund will have approval from its shareholders at the start to double its capitalisation to $100bn, he said.
“China will follow the rules of the international community and will not bully other members but work together with them and try to reach consensus in all the decisions we make without brandishing the majority shareholder status,” he said.
In an editorial published on the same day, China’s official Xinhua news agency suggested that the US might be embarrassed that many of its allies had not heeded its warnings.
“For decision-makers in the United States, they really have to be reminded that if they do not jump on the bandwagon of change in time, they will soon be overrun by the bandwagon itself,” it said.
The IMF’s managing director, Christine Lagarde, said on Sunday that the fund would be delighted to cooperate with the AIIB.
China’s Lou and ADB president, Takehiko Nakao, said at the conference they had held discussions on possible cooperation, with the Chinese finance minister adding that topics discussed included safeguard standards.
Lou has previously said AIIB would complement rather than compete with other institutions such as the ADB, the Manila-based multilateral lender dominated by Japan and the United States.
The AIIB’s Jin said developing countries in Asia would receive the bulk of loans for infrastructure projects, which could be co-provided with commercial banks and pension funds.
Non-Asian countries would also only hold 25% of the AIIB’s shareholding, lower than their stakes at the founding of the ADB, he said.
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Yay! Australia is in.
AIIB: Australia does the smart thing, finally
AIIB: Australia does the smart thing, finally
March 23, 2015 - 11:45PM
Ross Buckley
On Monday, the federal cabinet approved Australia's membership of the Asian Infrastructure Investment Bank. We were invited to join more than six months ago. Treasurer Joe Hockey and Trade Minister Andrew Robb supported the idea, Tony Abbott and Julie Bishop, heavily influenced by United States opposition, were against it. The expressed reason for their opposition was that without proper governance procedures in place the bank could be used by China as a tool of foreign policy. Of course it will - precisely as the World Bank has been used as a tool of US policy.
The Washington consensus promoted by the World Bank and Asian Development Bank has had a patchy record in promoting development in recipient countries, and a much stronger record in supporting the interests of US multinational corporations. Why would anyone expect anything different? The World Bank has always been headed by an American and the International Monetary Fund by a European, and the location of these two institutions in Washington, DC, has meant a great deal of informal influence of the staff as a result of where they live and a considerable amount of formal influence from the US Treasury, located just down the street.
The US opposes the AIIB precisely because its being headquartered in China will afford China some of the same opportunities. However, this is absolutely no reason for us not to join. More investment in infrastructure in East Asia is wonderful news for Australian engineers, architects, investment bankers and lawyers. We still tend to think about commodities exports but our future lies in services exports. Opportunities on AIIB projects will go to its member nations, as is the way of these things.
We should strongly support any move by China to establish multilateral institutions. To date, China has not engaged strongly with the institutions of international finance. In part this is due to China not being given voting rights even remotely approaching its economic significance. In part this is due to China's unwillingness to accept the premises of the current system. And why should they? Why would China accept a financial system predicated on the US dollar as the global reserve currency, with all the exorbitant privileges that brings? Why would it accept a system in which the two most significant institutions of governance are headed by an American and a European and located in Washington, DC? Why would China accept a system it never would have participated in designing?
It is more sensible for China to begin to construct a parallel system, centred in China, serving China's interests. Last year, along with the AIIB, China led the establishment of the BRICS Development Bank, of which the five members are Brazil, Russia, India, China and South Africa, and which is also based in China. These two new banks are part of this new architecture, together with China's many bilateral agreements to begin to denominate trade between China and its principal trading partners in the currencies of either Chinese or the trading partner (but not US dollars).
Throughout history, great powers have acted in their own interests. The new great power is doing the same. Certainly neither the Americans, nor the British before them, acted otherwise. So, given these developments are inevitable, our participation in them becomes all the more important as it gives us an opportunity to influence and shape their future direction.
While it is better to join now than not, we have lost something by procrastinating for six months on this issue. Our decision was prompted by the recent decisions of Britain, Germany, France, Italy and New Zealand to join. It would have been far better for us to accept the initial invitation some six months ago and be seen as a leader in this regard rather than a somewhat embarrassed follower. Such symbolism matters more in China than it does here. It matters enormously to Beijing to be treated as a leading power and be respected, and has throughout China's history.
Australia tends to think of itself as relatively unimportant. We don't really expect to be listened to or followed. These traits are not shared by the giant to our north. Early participation in this initiative would have garnered us greater respect and capacity to influence. The idea that we should have held out until China improved the governance standards, using the prospect of our membership as some sort of leverage, is not the way things are best done in Asia.
At the individual level Australia does well in our region. The willingness of individual Australians to listen, rather than lecture, and not take ourselves so seriously, tends to go down well. Collectively, at the governmental level, we behave rather less effectively, but in the end, the decision to join the AIIB is better late than never.
Ross Buckley is CIFR King & Wood Mallesons Professor of International Finance Law at the University of NSW.
AIIB: Australia does the smart thing, finally
AIIB: Australia does the smart thing, finally
March 23, 2015 - 11:45PM
Ross Buckley
On Monday, the federal cabinet approved Australia's membership of the Asian Infrastructure Investment Bank. We were invited to join more than six months ago. Treasurer Joe Hockey and Trade Minister Andrew Robb supported the idea, Tony Abbott and Julie Bishop, heavily influenced by United States opposition, were against it. The expressed reason for their opposition was that without proper governance procedures in place the bank could be used by China as a tool of foreign policy. Of course it will - precisely as the World Bank has been used as a tool of US policy.
The Washington consensus promoted by the World Bank and Asian Development Bank has had a patchy record in promoting development in recipient countries, and a much stronger record in supporting the interests of US multinational corporations. Why would anyone expect anything different? The World Bank has always been headed by an American and the International Monetary Fund by a European, and the location of these two institutions in Washington, DC, has meant a great deal of informal influence of the staff as a result of where they live and a considerable amount of formal influence from the US Treasury, located just down the street.
The US opposes the AIIB precisely because its being headquartered in China will afford China some of the same opportunities. However, this is absolutely no reason for us not to join. More investment in infrastructure in East Asia is wonderful news for Australian engineers, architects, investment bankers and lawyers. We still tend to think about commodities exports but our future lies in services exports. Opportunities on AIIB projects will go to its member nations, as is the way of these things.
We should strongly support any move by China to establish multilateral institutions. To date, China has not engaged strongly with the institutions of international finance. In part this is due to China not being given voting rights even remotely approaching its economic significance. In part this is due to China's unwillingness to accept the premises of the current system. And why should they? Why would China accept a financial system predicated on the US dollar as the global reserve currency, with all the exorbitant privileges that brings? Why would it accept a system in which the two most significant institutions of governance are headed by an American and a European and located in Washington, DC? Why would China accept a system it never would have participated in designing?
It is more sensible for China to begin to construct a parallel system, centred in China, serving China's interests. Last year, along with the AIIB, China led the establishment of the BRICS Development Bank, of which the five members are Brazil, Russia, India, China and South Africa, and which is also based in China. These two new banks are part of this new architecture, together with China's many bilateral agreements to begin to denominate trade between China and its principal trading partners in the currencies of either Chinese or the trading partner (but not US dollars).
Throughout history, great powers have acted in their own interests. The new great power is doing the same. Certainly neither the Americans, nor the British before them, acted otherwise. So, given these developments are inevitable, our participation in them becomes all the more important as it gives us an opportunity to influence and shape their future direction.
While it is better to join now than not, we have lost something by procrastinating for six months on this issue. Our decision was prompted by the recent decisions of Britain, Germany, France, Italy and New Zealand to join. It would have been far better for us to accept the initial invitation some six months ago and be seen as a leader in this regard rather than a somewhat embarrassed follower. Such symbolism matters more in China than it does here. It matters enormously to Beijing to be treated as a leading power and be respected, and has throughout China's history.
Australia tends to think of itself as relatively unimportant. We don't really expect to be listened to or followed. These traits are not shared by the giant to our north. Early participation in this initiative would have garnered us greater respect and capacity to influence. The idea that we should have held out until China improved the governance standards, using the prospect of our membership as some sort of leverage, is not the way things are best done in Asia.
At the individual level Australia does well in our region. The willingness of individual Australians to listen, rather than lecture, and not take ourselves so seriously, tends to go down well. Collectively, at the governmental level, we behave rather less effectively, but in the end, the decision to join the AIIB is better late than never.
Ross Buckley is CIFR King & Wood Mallesons Professor of International Finance Law at the University of NSW.
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