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The World Joins China’s Development Fund as America Protests

China’s World Bank rival, the Asian Infrastructure Investment Bank, a $50 billion dollar fund dedicated to infrastructure development, is picking up steam. Last week, China scored a major coup by getting the UK to announce it will be joining—against the loud protestations of the White House, which accused London of “constantly accomodating” China. Now, other major European powers (and U.S. allies) are signing on as well.

Reuters reports:

Germany, France and Italy said on Tuesday they had agreed to join a new China-led Asian investment bank after close ally Britain defied U.S. pressure to become a founder member of a venture seen in Washington as a rival to the World Bank.

The concerted move to participate in Beijing’s flagship economic outreach project was a diplomatic blow for the United States, reflecting European eagerness to partner with China’s fast-growing economy, the second largest in the world.

It comes amid prickly trade negotiations between Brussels and Washington, and at a time when EU and Asian governments are frustrated that the U.S. Congress has held up a reform of voting rights in the International Monetary Fund due to give China and other emerging economies more say in global economic governance.

Australia is also just now getting in on the project, and Japan, India and New Zealand have already signed up.

America’s understandable objection to the joiners is based on the concern that China will have greater leeway to act outside of the American-led global system of finance and trade if it leads parallel institutions to the ones based in Washington. But the motivations of those who want to participate in China’s project is understandable too. Being involved with infrastructure contracts in bull markets just seem like a good idea, and Western countries are desperate for anything that looks like it will provide for more growth. As huge swathes of ‘the third world’ turn into ‘the developing world’ in more than name only, the incentives to be a part of that rise become huge.

It’s not the most brilliant American policy to turn this into a diplomatic failure by protesting our allies’ decisions loudly and publicly. In fact, if anything, the way to make sure that China’s push for Beijing-based global institutions does not allow it to create a separate and parallel global system would have been to get in on the ground floor by joining the bank ourselves—not to mention, it might have made us some money.

Why exclude ourselves from a possible profit source? Why not be in the club, rather than loudly chastising our most important allies for looking out for their economic interests?  American foreign policy is complicated enough without manufacturing crises that introduce further problems into it. And keep in mind that this is only a $50 billion project. It’s not going to be the factor that makes or breaks the future.

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  • Anthony

    The AIIB has been launched and has been seen as a challenge to both the World Bank and the Asian Development Bank. Indeed, Beijing has intimated its view of the confining nature of both relative to its 2nd largest economy status (not to mention U.S. Congress IMF voting changes reform – as china has limiting voting power in all three (3) global organizations). China’s AIIB may not be the beginning of the end for America’s linchpin role in the global economy but China’s rising influence is undeniable as “The World Joins China’s Development Fund…” attests.

    “China stepping up its role as lender of last resort upends an economic development game that’s been decades in the making” – our global allies are attentive (China has nearly $4 trillion of currency reserves).

  • Corlyss

    Gee! If only Hitler and Stalin had thought o’ that!!!!! Whadda scam!!!! Get the developed world to fund the PRC/PLA and thus its own destruction. What makes any of them or all of them think that that money will be there for them to use or that the Chinese will not use the money to cultivate allies for itself as opposed to western allies? It’ll go directly into the PLA’s coffers.

  • Jacksonian_Libertarian

    Obama is the worst president in American History.

  • Fat_Man

    Remind me again why the US needs NATO?

  • Brett Champion

    If this forces Congress into finally agreeing to the reform measures on tap for the World Bank and IMF, then it would be all to the good. The only reason that China’s alternative institutions have even the small chance of becoming rivals to the IMF and World Bank that they do is due to the intransigence of Congressional Republicans to allow China and other non-Western states to take positions within those institutions that are commensurate with their economic and political importance in the contemporary world system.

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