For almost a year, China has been pitching an idea to its neighbors in Asia: A big, internationally funded bank that would offer quick financing for badly needed transportation, telecommunications and energy projects in underdeveloped countries across the region.
With the public backing of Chinese President Xi Jinping (習近平) and a pledge from Beijing to contribute much of the US$50 billion in initial capital, the plan could be seen as an answer to critics who have long argued that China should take on greater responsibilities as a world power. However, the US — perhaps the most vocal of such critics, especially on issues such as climate change and arms proliferation — has not embraced Beijing’s proposal.
Instead, in quiet conversations with China’s potential partners, US officials have lobbied against the proposed development bank with unexpected determination and engaged in a vigorous campaign to persuade important allies to shun the project, according to senior US officials and representatives of other governments involved.
Illustration: Yusha
The dispute, the latest manifestation of China-US competition in Asia, could escalate in the coming weeks, as Beijing pushes to confirm South Korea and Australia as founding partners of the bank in time for Xi to formally announce it at a summit meeting of Asian leaders next month.
US President Barack Obama is scheduled to attend the meeting and Washington is pressing the two countries to reject China’s proposition.
NEGATIVE PUBLICITY
Beijing has asked dozens of nations to contribute funds to what it calls the Asian Infrastructure Investment Bank and hopes it will become a global institution that rivals the World Bank.
To give it broader scope, China has invited and won the support of some wealthy Middle Eastern nations, including Qatar and Saudi Arabia. However, if Washington persuades South Korea and Australia to abstain, it would all but ensure membership in the bank would be limited to smaller countries, depriving it of the prestige and respectability China seeks.
Senior South Korean and Australian officials said that the US Department of the Treasury has criticized the proposed bank as a deliberate effort to undercut the World Bank and the Asian Development Bank (ADB), international financial institutions established after World War II that are dominated by the US and Japan.
Washington also sees the proposed bank as a political tool for China to pull countries in Southeast Asia closer to its orbit, a soft-power play that promises economic benefits while polishing its image among neighbors anxious about its territorial claims.
A senior Obama administration official said the Treasury Department had concluded that the new bank would fail to meet environmental standards, procurement requirements and other safeguards adopted by the World Bank and the Asian Development Bank, including protections intended to prevent the forced removal of vulnerable populations from their lands.
“How would the new institution add value? How would the Asian Infrastructure Investment Bank be structured so that it doesn’t undercut the standards with a race to the bottom?” asked the senior official, who spoke on the condition of anonymity because the administration has asked its members to refrain from publicly criticizing Beijing’s proposal.
However, Washington’s arguments run up against undisputed needs on the ground in Asia — needs that existing institutions have been unable to meet, some development experts have said.
The Asian Development Bank estimated in 2009 that the region would need as much as US$8 trillion in investments in physical infrastructure by 2020 — an amount that exceeds what it or the World Bank can muster, experts at the two banks said.
Clay Lowery, a senior US Treasury official from 2005 to 2009, said the Obama administration’s objections are not entirely well-founded.
The Chinese government’s plan “could be a positive development — potentially a great way to get Asian countries to work together on significant financial needs in the region,” he said.
Last year, the US said it would oppose the financing of coal-fired power plants by the Asian Development Bank because of concerns about global warming. Early this year, Washington said it would not support the construction of dams by the regional bank if they displaced people from their homes.
“Energy is one of the biggest needs of economic growth in Asia and China will be able to promise projects without these hindrances,” said a senior ADB official, who spoke on the condition of anonymity because the institute does not want to engage in a public spat with China.
The Manila-based bank has become so encumbered with restrictions that it now takes up to seven years on average for a project to go from proposal to approval to completion, the official said.
He added that the ADB, worried about competition from China, has begun looking at ways to streamline its procedures. The regional institute has reason to be anxious, because the US$50 billion in capital planned by China would immediately make the new bank a significant competitor, he said.
China has also told prospective members that it expected another US$50 billion from financial institutions and private capital. By comparison, the ADB has about US$78 billion in capital, including retained earnings and borrowings.
The Chinese government has tapped one of its top finance officials, Jin Liqun (金立群), former head of China’s sovereign wealth fund and a former senior official at the ADB, to lead the new bank.
In a sign of the discord between Washington and Beijing over the proposed bank, Jin met in August with US Ambassador to China Max Baucus and bluntly told him to tell Washington to soften its opposition to the planned bank, a senior Obama administration official familiar with the encounter said.
Jin, who was in Washington last month trying to chip away at the administration’s opposition to the Chinese-conceived bank, declined interview requests.
That a banker from Japan — China’s chief rival in Asia — has led the ADB since its inception in the mid-1960s is an incentive for Beijing to establish and lead a development bank, said He Fan (何帆), assistant director of the Institute of World Economics and Politics in Beijing. However, the major motivation for the initiative is the failure of the US to live up to promises to allow greater Chinese participation in the World Bank and the IMF, He said.
“China is more suspicious of the existing international institutions because China feels it was not one of the founders,” he said. “China feels a lack of ownership.”
US BEING ‘CHURLISH’
Australia, which depends on China for its economic well-being and on the US for its security, has not announced if it will support the Chinese proposal. However, the Australian government was ready to sign up if China meets its conditions on how the bank will be governed, said Peter Drysdale, a professor of economics at Australian National University who has advised Australian governments.
Drysdale described US opposition to the bank as a “churlish” reaction to the “economic and diplomatic kudos” that China might win, and called concerns that the bank would adopt looser standards “nonsense” because “the Chinese are inviting participation in funding and governance.”
In Seoul, South Korean President Park Geun-hye, whose government has enjoyed warm relations with Beijing, demurred when the Chinese president formally asked Seoul to join the bank during a visit there in July, South Korean officials said at the time.
In public, her government praised the proposal and said it would consider it.
However, soon after, the senior South Korea specialist in the White House, Sydney Seiler, broke with US silence on the subject and expressed reservations about the bank in an interview with Japan’s Yonhap news agency. He also said that the World Bank and the Asian Development Bank were taking steps to increase their lending capacity.
A senior South Korean official, speaking on the condition of anonymity because he was not authorized to discuss the matter, said Seoul remained hesitant partly because Beijing has insisted that the bank’s Chinese president make the big decisions, not its board of directors.
One US ally has signed up despite Washington opposition: Singapore became a founding member two months ago, saying it wanted to shape the bank from the inside rather than remain a critic outside.
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
Former president Ma Ying-jeou’s (馬英九) trip to China provides a pertinent reminder of why Taiwanese protested so vociferously against attempts to force through the cross-strait service trade agreement in 2014 and why, since Ma’s presidential election win in 2012, they have not voted in another Chinese Nationalist Party (KMT) candidate. While the nation narrowly avoided tragedy — the treaty would have put Taiwan on the path toward the demobilization of its democracy, which Courtney Donovan Smith wrote about in the Taipei Times in “With the Sunflower movement Taiwan dodged a bullet” — Ma’s political swansong in China, which included fawning dithyrambs