The eurozone’s biggest economies — Germany, France and Italy — have followed Britain’s lead to confirm intentions to become founding members of the Asian Infrastructure Investment Bank (AIIB) despite U.S. concerns.
Experts say the development is a diplomatic and financial success for China, which is behind the new financial institution, and shows how Europe is prepared to look east for trade deals.
The news came amid increased pressure on the United States to relinquish its domination of the International Monetary Fund (IMF), and coincides with Chinese and European concerns over America’s dominance of trade in the Pacific.
European Commission spokesperson Mina Andreeva welcomed the new European cooperation with Beijing.
“Underinvestment in infrastructure is a global challenge,” she said, adding that “in Asia, as in Europe, there are extensive needs for investment. Increased investment in Asia’s infrastructure is highly welcome and is also a business opportunity for EU companies.”
Her declaration came after U.S. Secretary Treasury Jack Lew had urged caution over AIIB membership. “Whoever joins the new AIIB should first make sure it adheres to rigid standards,” he said. “They must protect workers and the environment. There must be no corruption.”
But a joint statement by the foreign and finance ministers of Germany, France and Italy said they would work to ensure the AIIB “follows the best standards and practices in terms of governance, safeguards, debt and procurement policies.”
A spokesman for the Chinese Foreign Ministry said the new bank would be “open, inclusive, transparent and responsible.”
The AIIB was launched in Beijing last year to spur investment in Asian transport, energy, telecommunications.
China said earlier this year a total of 26 countries had been included as AIIB founding members, mostly from Asia and the Middle East. The participation of the four biggest European economies is particularly significant.
European finance pundits have welcomed the news. Professor Stefano Gatti, a banking expert at Milan’s Bocconi Business School, told Xinhua that China’s status as an emerging economic power was behind European willingness to participate in the venture.
“I think this new joint venture is simply about European countries wanting to invest in a huge emerging economy,” he said. “I don’t see anything suspicious or shady, or any political interference.”
Nonetheless, some senior U.S. officials still see the AIIB as a Chinese ploy to reduce its influence over the international banking system. The United States has sought to persuade regional allies such as Australia, South Korea and Japan to snub the bank. However, Australian Prime Minister Tony Abbott said at the weekend he had yet to make a final decision on whether or not to join.
While Japan is unlikely to join the AIIB according to some analysts, the Japanese head of the Asian Development Bank, Takehiko Nakao, has said that the two institutions were in discussions and might work together.
Unusually, the United States even appeared to criticize Britain, one of its closest allies, for becoming a founding member of the AIIB. But significantly, the British government shrugged off the U.S. unease. “There will be times when we take a different approach,” a spokesperson for British Prime Minister David Cameron said.
British finance minister George Osborne hailed the country’s participation. He said that joining the AIIB at the founding stage would create “an unrivalled opportunity for the UK and Asia to invest and grow together,” underlining that this was one diplomatic mission in which the United States had not got its own way.
Meanwhile, the Obama administration has upped pressure on the U.S. Congress to approve reforms that would allow emerging powers such as China to have more say in the running of the IMF.
“Critically, we are seeking Congressional approval of the IMF quota and governance reforms,” Lew told a hearing of the House of Representatives financial services committee on Tuesday. “Our international credibility and influence are being threatened,” he admitted.
Lew noted that due to delays in introducing reforms, emerging-market powers were making parallel multilateral financial institutions of their own.
As a result, BRICS nations announced their own development bank in 2014, and now, he said, China had launched the AIIB.
Italy’s leading business newspaper Il Sole 24 Ore has also criticized the U.S. “contradictory position.”
It noted that the United States had “reacted badly to the participation of several European countries, including Italy, in the AIIB. But if the United States paralyzes the international system that it leads, there’s no surprise in European nations trying to build their own bridge with Beijing for growth and development.”
With an expected initial subscribed capital of 50 billion U.S. dollars, the AIIB will be an international financial institution to fund infrastructure projects in Asia and is expected to be formally established by the end of this year.
Twenty-one countries including China, India and Singapore signed a Memorandum of Understanding in Beijing in October last year to build the bank.
Lou Jiwei, China’s Minister of Finance, said on March 6 that 27 countries had applied to jointly build the bank as founding members. The application deadline is on March 31. Enditem