3 European Powers Say They Will Join China-Led Bank
Source Louis Proyect
Date 15/03/19/17:42
3 European Powers Say They Will Join China-Led Bank

BRUSSELS — Ignoring direct pleas from the Obama administration, Europe’s
biggest economies have declared their desire to become founding members
of a new Chinese-led Asian investment bank that the United States views
as a rival to the World Bank and other institutions set up at the height
of American power after World War II.

The announcement on Tuesday by Germany, France and Italy that they would
follow Britain and join the Chinese-led venture delivered a stinging
rebuke to Washington from some of its closest allies. It also called
into question whether the World Bank and the International Monetary
Fund, which grew out of a multination conference in Bretton Woods, N.H.,
in 1944 and established an economic pecking order that lasted 70 years,
will find their influence diminished.

The announcement by Germany, Europe’s largest economy, came only six
days after Secretary of State John Kerry asked his German counterpart,
Frank Walter-Steinmeier, to resist the Chinese overtures until the
Chinese agreed to a number of conditions about transparency and
governing of the new entity. But Germany came to the same conclusion
that Britain did: China is such a large export and investment market for
it that it cannot afford to stay on the sidelines.

American officials have fumed that China never approached the Group of 7
— the consortium of economic powers that the United States has led — but
rather decided to pick off individual members, setting a deadline of the
end of March for them to decide whether to join the new organization,
the Asian Infrastructure Investment Bank, which many refer to by its
initials, the A.I.I.B.

China, in turn, has long chafed at the idea that the World Bank’s
president is traditionally an American, and that France appoints the
head of the I.M.F.

“This has been a power struggle,” one senior European official said.
“And we have moved from the world of 1945.”

In Washington, Jen Psaki, the State Department spokeswoman, declined to
criticize the countries that announced they would seek to participate,
but expressed reservations. “It will be important for prospective
members of the A.I.I.B. to push for the adoption of those same high
standards that other international institutions abide by, including
strong board oversight and safeguards,” she said.

The European decision is bound to help efforts by Xi Jinping, China’s
president and Communist Party chief, to reshape the global balance of
power, starting with the institutions that underpin it.

Mr. Xi’s predecessors chose to join some of those institutions,
including the World Trade Organization, and work from within to amend
some of their rules more to China’s liking. But with the new bank, China
appears to be stepping up previously halting efforts to also build new,
Sino-centric institutions from scratch. China’s control of the bank,
however, will face constraints. Britain has insisted on a senior post on
its board, and Germany will do the same.

China has worked for years to break what it regards as an unfair grip by
the United States on global political and financial institutions and to
set up rival structures more responsive to Chinese demands for a voice
in international affairs commensurate with its status as the world’s
second-biggest economy.

“China is shaping an alternative universe and getting America’s European
allies to support it,” said Theresa Fallon, a China expert at the
European Institute for Asian Studies, a Brussels research group.

The United States lobbied its allies not to join the new China-based
bank. The United States has argued that the bank at best duplicates, and
at worst undermines, the role of the Washington-based World Bank and the
Asian Development Bank, which has its headquarters in the Philippines, a
close American ally at odds with Beijing over the South China Sea. The
I.M.F., which manages financial crises, is less directly affected.

Ms. Fallon said she expected that South Korea, another close American
ally, would also sign up for the new bank and that “in the end, only
Japan won’t say yes.” China, she said, is offering a “whole economic and
political package that provides an alternative to the creaking
international structures shaped by the U.S. in the postwar period.”

Western officials and anticorruption groups have long criticized China’s
lending practices, particularly for infrastructure projects in Africa
involving Chinese companies, saying they foster corruption and undercut
efforts by the World Bank and I.M.F. to link loans to demands for good
governing. China rejects such complaints, pointing to its success in
building roads and railway lines quickly in countries bereft of Western

In an apparent reference to such concerns, France, Germany and Italy, in
a statement declaring their eagerness to join the Asian Infrastructure
Investment Bank, said they were “keen to work with the A.I.I.B. founding
members to establish an institution that follows the best standards and
practices in terms of governance, safeguards, debt and procurement

Snubbing the bank would have angered Beijing, but aside from earning
Chinese good will, it was not immediately clear what European countries
would gain by joining other than the right to endorse and help finance
infrastructure projects that, in many case, are likely to be dominated
by Chinese, not European, construction companies.

Europe’s defiance of pressure from Washington over the bank does not
signal a major rupture, analysts said. But, they say, it does add
friction at a time when the marquee project of trans-Atlantic
solidarity, a proposed free trade deal, has lost much of its momentum in
the face of fierce hostility from European politicians and activists
opposed to American-style capitalism.

While heavily dependent on the United States for security, especially
since the crisis in Ukraine erupted last year, European countries, Ms.
Fallon said, “tend to take the U.S. for granted,” while “China is very
good at lobbying them and promising them things.” But she said
Washington had been unwise to expend diplomatic and political capital
over the bank when it was clear that even staunch allies like Britain
wanted to join it.

The bank was first proposed by Mr. Xi to help fund infrastructure
projects in poor Asian countries, something the World Bank and the Asian
Development Bank already do. China has pledged a large part of the
initial $50 billion of capital, and Beijing hopes the institution will
contribute to the expansion of its Asian power base, even as its growing
might, economic and military, reshapes the political dynamics of the
region and beyond.

Since taking over leadership of the Chinese Communist Party in 2012, Mr.
Xi has steadily expanded a longstanding Chinese policy of seeking
political influence through lending and investment, putting his weight
behind an ambitious plan to build maritime and land links between China
and Europe that span the Eurasian continent. China began the plan after
a 2011 call by Hillary Rodham Clinton, who was then secretary of state,
for a “new silk road” to help Afghanistan’s economy.

Miffed that Washington had appropriated a term China considers an
inseparable part of its own heritage, Mr. Xi in 2013 put forward his own
“silk road” plan. This was initially called the Silk Road Economic Belt
but, since expanded and shorn of any echoes of the American proposal, is
now known in China as the “Belt and Road” scheme, said Ms. Fallon, who
has studied the evolution of China’s minutely calibrated nomenclature.

China first signaled its desire to set up its own alternative structures
as its economy took off in the 1990s. In 1996, in Shanghai, it
established a security grouping comprising China, Russia, Kazakhstan,
Kyrgyzstan and Tajikistan.

The body, since joined by Uzbekistan and known as the Shanghai
Cooperation Council, has Chinese and Russian as its working languages
instead of English, the lingua franca of most international
organizations set up under the auspices of the United States.

Under Mr. Xi, Beijing has also put itself at the center of a
four-year-old grouping of 16 Eastern and Central European countries,
promising investment to the region in a push for economic and political
influence that has raised eyebrows in Brussels, the headquarters of the
European Union.

Some see the venture as an attempt to divide the European Union and
circumvent the bloc’s rigid rules and standards. Eleven of the nations
courted by China in Eastern and Central Europe belong to the union.

But China has voiced annoyance at what it derides as “Cold War thinking”
that divides the world into fixed camps, promoting its efforts to win
friends and also contracts in formerly Communist Eastern Europe and
elsewhere as part of a “win-win strategy” beneficial to all.

Commenting in Beijing on the decision by European countries to join the
new investment bank, a Foreign Ministry spokesman, Hong Lei, said China
“wants to work together with all parties to set up a mutually
beneficial, professional infrastructure investment and financing
platform to contribute to regional infrastructure and economic development.”

While China has risen over the last decades to become the second-largest
economy — or even the largest, by some measures — it is still sidelined
at the international level by the reluctance of developed nations to
relinquish their privileged places.

In one such case, the United States and its partners at the
International Monetary Fund agreed in 2010 to give emerging nations an
expanded role in the institution. Congress has so far refused to sign on.

Speaking on Tuesday in Washington, Treasury Secretary Jacob J. Lew said
it was “urgent that we address prior unmet commitments, which have grown
to levels that raise significant questions about U.S. credibility and
leadership in the multilateral system.”

Failure to do so, he added, could “result in a loss of U.S. shareholding
at a time when new players are challenging U.S. leadership in the
multilateral system.”

Andrew Higgins reported from Brussels, and David E. Sanger from
Washington. David Jolly contributed reporting from Paris, and Michael
Forsythe from Hong Kong.

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