This post goes along with many others we have been sharing, which you can find below. Australia did in fact join the BRICS nations as mentioned in the following. Japan also recently hinted about joining.
Add the IMF to the (now long) list of those who apparently share the UK’s view that joining the China-led Asian Infrastructure Investment Bank is an “unrivaled opportunity,” as Christine Lagarde says her institution not only sees a “massive” opportunity for cooperation with the AIIB but is also “delighted” to explore the possibilities. Here’s more from BBC:
International Monetary Fund chief Christine Lagarde has said the IMF would be “delighted” to co-operate with the China-led Asian Infrastructure Investment Bank…
Mrs Lagarde said there was “massive” room for IMF co-operation with the AIIB on infrastructure financing.
Mrs Lagarde, speaking at the opening of the China Development Forum in Beijing, also said she believed that the World Bank would co-operate with the AIIB.
Meanwhile, Switzerland is now on board and India, Indonesia, and New Zealand are reportedly set to follow. As a reminder, the deadline for applications is the end of this month and it appears that the UK’s move to become a founding member has suddenly made the AIIB the coolest club on the block. Australia is expected to tender a “qualified yes” tomorrow.
The Asian Infrastructure Investment Bank is expected to receive, in principle, endorsement from Federal Cabinet on Monday but the government will continue to make Australia’s full participation dependent on the adoption of appropriate governance standards.
The government is set to maintain a common front with Japan and South Korea on how the bank will be run despite backing away from its previous opposition to joining last October, amid divisions in Cabinet.
“There will be a decision – but with caveats around governance,” a government source said emphasising that no one country should dominate the bank.
All three countries are under pressure to join the AIIB by the end of the month deadline set by China for foundation membership status that will allow the original countries to decide on future membership.
Despite being opposed to the AIIB, the Japanese government appeared to split over joining on Friday when Finance Minister Taro Aso said Japan could join if the conditions were right while other officials said the position had not changed.
The bank’s secretary general Jin Liqun says he expects 35 countries to apply for membership by the deadline but does note that the US has nothing to fear from the institution which he explains is not a competitor the ADB but rather an unassuming “lean, clean, and green” multinational talent scout backed by the support of everyone but Washington.Nothing threatening about that.
Jin’s conciliatory (and unmistakably patronizing) remarks notwithstanding, it’s impossible to not see this for exactly what it is: a shift away from US hegemony. Here’s The Economist to explain exactly what we’ve been saying for months:
The AIIB is but one of a number of new institutions launched by China, apparently in frustration at the failure of the existing international order to accommodate its astonishing rise. Efforts to reform the International Monetary Fund are stalled in the American Congress. America retains its traditional grip on the management of the World Bank. The Manila-based Asian Development Bank (ADB) is always directed by a Japanese official. Partly for that reason—that the AIIB would amount to a diminution of Japanese influence in favour of China at a time when their relations are fraught—Japan is sniffy about the new bank. Its cabinet secretary, Yoshihide Suga, this week repeated that Japan will “carefully study” the AIIB’s governance standards…
China, flush with the world’s biggest foreign-exchange reserves and anxious to convert them into “soft power”, is building an alternative architecture. It has proposed not just the AIIB, but a New Development Bank with its “BRICS” partners—Brazil, Russia, India and South Africa—and a Silk Road development fund to boost “connectivity” with its Central Asian neighbours…
Despite the obvious need, America has, either by design or ineptitude, turned the AIIB into a test of diplomatic strength. That has proved a disaster. Its officials have, anonymously, rebuked Britain for its “constant accommodation” of China—and many observers would agree that they have a point. But that its closest allies have proved so keen to court China’s favour and so willing to flout American views suggests America picked the wrong fight.
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So there you have it. Washington picked a completely unnecessary fight with China over the ostensibly non-contentious topic of infrastructure development because the US can’t stand the fact that traditionally US-dominated multinational institutions are on the verge of being supplanted by sinocentric ambition — and lost. Apparently though, the White House is now out to prove that if it can’t win a war fought with infrastructure development dollars it can still win a war fought with bullets, as evidenced by the “line” of soldiers and armed vehicles in place on or near the Russian border.
And for any country that’s still on the fence with regard to joining the standardless abomination seeking to undermine the ADB, Jack Lew has a tough question for you:
Washington Blinks: Will Seek Partnership With China-Led Development Bank
Don’t look now, but Washington just blinked. As we’ve documented exhaustively over the past week, pressure has been building steadily for the US to strike some manner of conciliatory tone towards China with regard to the Asian Infrastructure Investment Bank, a China-led institution aimed at rivaling the US/Japan-backed ADB. Britain’s decision to join China in its new endeavor has prompted a number of Western nations to throw their support behind the bank ahead of the March 31 deadline for membership application. Because the AIIB effectively represents the beginning of the end for US hegemony, the White House has demeaned the effort from its inception questioning the ability of non-G-7 nations to create an institution that can be trusted to operation in accordance with the proper “standards.” Now, with 35 nations set to join as founders, it appears Washington may be set to concede defeat. Here’s more, via WSJ:
The Obama administration, facing defiance by allies that have signed up to support a new Chinese-led infrastructure fund, is proposing the bank work in a partnership with Washington-backed development institutions such as the World Bank.
The collaborative approach is designed to steer the new bank toward economic aims of the world’s leading economies and away from becoming an instrument of Beijing’s foreign policy. The bank’s potential to promote new alliances and sidestep existing institutions has been one of the Obama administration’s chief concerns as key allies including the U.K., Germany and France lined up in recent days to become founding members of the new Asian Infrastructure Investment Bank.
The Obama administration wants to use existing development banks to co-finance projects with Beijing’s new organization. Indirect support would help the U.S. address another long-standing goal: ensuring the new institution’s standards are designed to prevent unhealthy debt buildups, human-rights abuses and environmental risks. U.S. support could also pave the way for American companies to bid on the new bank’s projects.
“The U.S. would welcome new multilateral institutions that strengthen the international financial architecture,” said Nathan Sheets, U.S. Treasury Under Secretary for International Affairs. “Co-financing projects with existing institutions like the World Bank or the Asian Development Bank will help ensure that high quality, time-tested standards are maintained.”
So essentially this is just the old “if you can’t beat ‘em, join ‘em” strategy disguised as an attempt to bring the AIIB into the fold of US-dominated multinational institutions.
But make no mistake, this is at best an example of Washington cutting its losses and at worst an outright surrender, as no one should pretend that the AIIB, which is starting with $50 billion in capital, will remain subservient to the ADB which, after five decades, has barely three times that amount:
Infrastructure needs around the world are enormous. Emerging countries need new ports, railways, bridges, airports and roads to support faster growth. Developed economies, meanwhile, must replace aging infrastructure.The Asian Development Bank estimates its region alone faces an annual financing shortfall of $800 billion a year. The consulting firm McKinsey & Company estimates global infrastructure-investment needs through 2030 total $57 trillion.
By comparison, the Asian Development Bank has just $160 billion in capital and the World Bank-which has co-financed with other regional institutions for years—has around $500 billion. The China-led bank plans to have a $50 billion fund to start.
And with that, one more leap towards de-dollarization is now in the books.
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