Tag Archives: Asian Infrastructure Investment Bank

Beijing Counts Its AIIB Blessings — And Reaches 46 So Far

THE ASIAN INFRASTRUCTURE Investment Bank (AIIB) is turning into the gift that just keeps on giving for Beijing. State media report that the China-instigated lending institution attracted 46 applications by the March 31 deadline for would-be founding members. The list includes the likes of Australia, the U.K. and a raft of other European nations who defied Washington’s desire that its allies have nothing to do with the AIIB.

It also includes Taiwan. Even this potentially awkward application for Beijing (and controversial one in Taipei) is being turned by Beijing to its advantage. “The AIIB is open and inclusive,” Taiwan Affairs Office spokesman Ma Xiaoguang is quoted as saying. “We welcome Taiwan to participate in the AIIB under an appropriate name.” (Taiwan belongs to the Asian Development Bank as Taipei, China.) Beijing’s magnanimity in accepting its “renegade province” pointedly makes the U.S. stance look even more mean-spirited.

It also opens the door to Hong Kong to join by the time the founders list is finalised on April 15. Members’ stakes seem set to be based on relative GDP. Hong Kong membership would provide Beijing with a conveniently captive wodge of votes to add to its own, and the AIIB with the city-state’s financial markets expertise.

The April 15 date might also provide time for the sole Asian holdout, Japan, to come on board, though June is the more likely date being mentioned in Tokyo. As for the U.S., the only position that would be worse than being left isolated over the AIIB would be to join now in what the rest of the world would inevitably regard as an embarrassing climb-down. Even Beijing would scarcely believe its good fortune should that happen.

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China’s Unexpected European Bank Bonus

CHINA IS PLAYING a long game when it comes to gaining the power and influence over the world’s multilateral institutions to befit its standing as an emerging global power. But it has gained a big short-term win with its proposed $100 billion Asian Infrastructure Investment Bank (AIIB).

Britain, first, and now France, Germany and Italy have broken ranks with the United States in signing on to be founding members. South Korea and Australia are reconsidering their initial adherence to the U.S.’s line of having nothing to do with the AIIB.

The new bank will be a rival to the World Bank (U.S. dominated) and to the Asian Development Bank (dominated by Japan) when it comes to funding development projects in the region — although Asia’s infrastructure needs, at an estimated $8 trillion, are so great there would be plenty of lending demand to go around. However,  an ability to dispense large scale investment funding will give Beijing new-found political clout in the region, not to mention an order pipeline for China’s state-own engineering firms and their legions of suppliers — a honeypot also irresistible to the Europeans.

Beijing is already backing two other development funding initiatives, the $100 billion BRICS Bank with Brazil, India, Russia and South Africa, and its own $40 billion Silk Road Fund. For its part, Washington is promoting the TransPacific Partnership, a trade and investment agreement that Beijing has pointedly not been invited to join and is countering with the partly overlapping proposed common market with ASEAN plus India, the Regional Comprehensive Economic Partnership, and the bigger Free Trade Area of the Asia-Pacific. (That is TPP vs RCEP and FTAAP for acronym collectors.)

With the U.S. and China jockeying for position in the region via these new economic institutions, one indication of Washington’s desire to emasculate the AIIB from the outset was the unusually sharp and public criticism that it heaped on Britain for applying to be a founding member. It is now the U.S. rather than the U.K. that looks the outcast.

There is still much to be decided about the AIIB. The deadline for signing up for founding membership is the end of this month, but the target date for articles of association is not until the end of this year. The working assumption has been that capital participation and thus voting power, will be proportionate to members’ GDP.

Absent the U.S., that was always going to mean that China would have the most votes among the now 27 countries Beijing says have signed on. The involvement of four big European economies would deny it a majority. Matters like veto rights over projects, required voting majorities and even the basis on which GDP is calculated now become matters to watch carefully in the drafting of the AIIB’s charter as the new bank’s governance standards become another front in the China-U.S. rivalry in their own right.

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