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Britain, Germany, France, Italy and others considering joining China-led investment bank, against US advice


China launches World Bank in Asia

China launches World Bank in Asia

The United States urged countries on Tuesday to think twice about signing up to a new China-led Asian development bank that Washington sees as a rival to the World Bank, after Germany, France and Italy followed Britain in saying they would join.

The concerted move by U.S. allies to participate in Beijing’s flagship economic outreach project is a diplomatic blow to the United States and its efforts to counter the fast-growing economic and diplomatic influence of China.

Europe’s participation reflects the eagerness to partner with China’s economy, the world’s second largest, and comes amid prickly trade negotiations between Brussels and Washington.

European Union and Asian governments are frustrated that the U.S. Congress has held up a reform of voting rights in the International Monetary Fund that would give China and other emerging powers more say in global economic governance.

Washington insists it has not actively discouraged countries from joining the new bank, but it has questioned whether the Asian Infrastructure Investment Bank (AIIB) will have sufficient standards of governance and environmental and social safeguards.

“I hope before the final commitments are made anyone who lends their name to this organisation will make sure that the governance is appropriate,” Treasury Secretary Jack Lew told U.S. lawmakers.

Lew warned the Republican-dominated Congress that China and other rising powers were challenging American leadership in global financial institutions, and he urged lawmakers to swiftly ratify stalled reform of the IMF.

German Finance Minister Wolfgang Schaeuble announced at a joint news conference with visiting Chinese Vice Premier Ma Kai that Germany, Europe’s biggest economy and a major trade partner of Beijing, would be a founding member of the AIIB.

In a joint statement, the foreign and finance ministers of Germany, France and Italy said they would work to ensure the new institution “follows the best standards and practices in terms of governance, safeguards, debt and procurement policies.”

Luxembourg’s Finance Ministry confirmed the country, a big financial centre, has also applied to be a founding member of the $50 billion AIIB.

The AIIB was launched in Beijing last year to spur investment in Asia in transportation, energy, telecommunications and other infrastructure. It was seen as a rival to the Western-dominated World Bank and the Asian Development Bank. China has said it will use the best practices of those institutions.

A spokeswoman for the European Commission, the EU’s executive arm, endorsed member states’ participation in the AIIB as a way of tackling global investment needs and as an opportunity for EU companies.

The World Bank is traditionally run by a U.S. nominee and Washington also has the most influence at the IMF.

The adjustment of shares and voting rights in the IMF was brokered by Britain at a Group of 20 summit in 2010, and European countries ratified it long ago.

Lew told lawmakers that the U.S. delay in ratifying the agreement was undermining its credibility and influence as countries question the United States’ commitment to international institutions.

“It’s not an accident that emerging economies are looking at other places because they are frustrated that, frankly, the United States has stalled a very mild and reasonable set of reforms in the IMF,” Lew said.

The reforms would double the fund’s resources and hand more IMF voting power to countries such as the BRICS – Brazil, Russia, India, China and South Africa.

Some Republicans have complained the changes would cost too much at a time Washington is running big budget deficits. The reforms have also ran afoul of a growing isolationist trend among the party’s influential Tea Party wing.

“HIGH WATERMARK”

China said earlier this year a total of 26 countries had been included as AIIB founder members, mostly from Asia and the Middle East. It plans to finalise the articles of agreement by the end of the year.

China’s state-owned Xinhua news agency said South Korea and Switzerland were also considering joining.

Chinese Foreign Ministry spokesman Hong Lei would not comment on which countries had applied, and repeated that the bank would be “open, inclusive, transparent and responsible.”

Washington says it sees a role for the IAAB given Asia’s immense infrastructure needs and regards it as a potential partner for established institutions like the ADB.

But its strategy of questioning the IAAB’s standards has drawn criticism from some observers, who say the administration should have been more accepting of the new bank or offered alternatives within the existing institutions.

“If you try to fight the rising power’s peaceful ascent you sow big problems in the future,” said Fred Bergsten, a former top international affairs official at the U.S. Treasury and currently a fellow at the Peterson Institute in Washington.

Scott Morris, a former U.S. Treasury official who led U.S. engagement with the multilateral development banks during the first Obama administration, said Washington was paying the price for delay on IMF reform.

“It’s a clear sentiment among a pretty diverse group of countries: We would like to mobilise more capital for infrastructure through MDBs (multilateral development banks),” said Morris, now with the Washington-based Centre for Global Development.

“And the U.S. stands in the way of that and now finds itself increasingly isolated as a result.”

A government official in India, which also has joined, said the members of the AIIB would meet in Almaty, Kazakhstan, on March 29-31 to discuss the articles of agreement.

China has said March 31 is the deadline for accepting founder-members into the organisation.

Japan, Australia and South Korea remain notable regional absentees from the AIIB. Australian Prime Minister Tony Abbott said at the weekend he would make a final decision on membership soon. South Korea has said it is still in discussions with China and other countries about possible participation.

Japan is unlikely to join the AIIB, but ADB head Takehiko Nakao told the Nikkei Asian Review that the two institutions were in discussions and could work together.

Source: Reuters – “U.S. urges allies to think twice before joining China-led bank”
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About chankaiyee2

Author of the book "Tiananmen's Tremendous Achievements" about how with the help of Tiananmen Protests, talented scholars with moral integrity seized power in the Party and state and brought prosperity to China. The second edition of the book will be published within a few days to mark the 25th anniversary of Tiananmen Protests All the parts in the first edition remain in the second edition with a few changes due to information available later and better understanding. There are also some changes for improvements of style. The new parts are Chapters 12-19 on events in China after the first edition was published: The fierce power struggle for succession between reformists and conservatives; Xi Jinping winning all elders’ support during his mysterious disappearance for 2 weeks in early September, 2012; and Xi Jinping Cyclone. Chan Kai Yee's new book: SPACE ERA STRATEGY: The Way China Beats The US An eye-opening book that tells the truth how the US is losing to China. The US is losing as it adopts the outdated strategy of Air-Sea Battle while China adopts the space era strategy to pursue integrated space and air capabilities: It is losing due to its diplomacy that has given rise to Russian-Chinese alliance. US outdated strategy has enabled China to catch up and surpass the US in key weapons: Hypersonic weapons (HGV) that Pentagon regards as the weapon that will dominate the world in the future. Aerospaceplane in China’s development of space-air bomber that can engage enemy anywhere in the world within an hour and destroy an entire aircraft carrier battle group within minutes. Anti-satellite (ASAT) weapons, anti-ASAT weapons, stealth aircrafts, drones, AEW&C, etc. The book gives detailed descriptions of China’s weapon development based on information mainly from Chinese sources that the author monitors closely. U.S. Must Not Be Beaten by China! China is not a democracy. Its political system cannot prevent the emergence of a despotic leader or stop such a leader when he begins to bring disasters to people. A few decades ago, Mao Zedong, the worst tyrant in world history did emerge and bring disasters to Chinese people. He wanted to fight a nuclear war to replace capitalism with communism but could not bring nuclear holocaust to world people as China was too weak and poor at that time. If a despot like Mao Zedong emerges when China has surpassed the US in military strength, world people will suffer the misery experienced by Chinese people in Mao era. China surpassing the US in GDP is not something to worry about as China has the heavy burden to satisfy its huge population, but China surpassing the US in military strength will be world people’s greatest concern if China remains an autocracy. US people are of much better quality than Chinese people. What they lack is a wise leader to adopt the correct strategy and diplomacy and the creative ways to use its resources in developing its military capabilities. I hope that with the emergence of a great leader, the US can put an end to its decline and remain number one in the world. China, US, space era strategy, air-sea battle, space-air bomber, arms race, weapon development, chan kai yee

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