Germany to Join Asia Infrastructure Bank
Wolfgang Schäuble, the German finance
minister, announced Tuesday that Germany, with France and Italy, would
become a founding member of the Asian Infrastructure Investment Bank.
BRUSSELS
— Ignoring direct pleas from the Obama administration, Europe’s
biggest economies have declared their desire to become founding members
of a new Chinese-led Asian investment bank that the United States views
as a rival to the World Bank and other institutions set up at the height
of American power after World War II.
The announcement on Tuesday by Germany,
France and Italy that they would follow Britain and join the
Chinese-led venture delivered a stinging rebuke to Washington from some
of its closest allies. It also called into question whether the World
Bank and the International Monetary Fund, which grew out of a
multination conference in Bretton Woods, N.H., in 1944 and established an economic pecking order that lasted 70 years, will find their influence diminished.
The announcement by Germany,
Europe’s largest economy, came only six days after Secretary of State
John Kerry asked his German counterpart, Frank Walter-Steinmeier, to
resist the Chinese overtures until the Chinese agreed to a number of
conditions about transparency and governing of the new entity. But
Germany came to the same conclusion that Britain did: China is such a
large export and investment market for it that it cannot afford to stay
on the sidelines.
American
officials have fumed that China never approached the Group of 7 — the
consortium of economic powers that the United States has led — but
rather decided to pick off individual members, setting a deadline of the
end of March for them to decide whether to join the new organization,
the Asian Infrastructure Investment Bank, which many refer to by its
initials, the A.I.I.B.
China,
in turn, has long chafed at the idea that the World Bank’s president is
traditionally an American, and that France appoints the head of the
I.M.F.
“This has been a power struggle,” one senior European official said. “And we have moved from the world of 1945.”
In
Washington, Jen Psaki, the State Department spokeswoman, declined to
criticize the countries that announced they would seek to participate,
but expressed reservations. “It will be important for prospective
members of the A.I.I.B. to push for the adoption of those same high
standards that other international institutions abide by, including
strong board oversight and safeguards,” she said.
The
European decision is bound to help efforts by Xi Jinping, China’s
president and Communist Party chief, to reshape the global balance of
power, starting with the institutions that underpin it.
Mr.
Xi’s predecessors chose to join some of those institutions, including
the World Trade Organization, and work from within to amend some of
their rules more to China’s liking. But with the new bank, China appears
to be stepping up previously halting efforts to also build new,
Sino-centric institutions from scratch. China’s control of the bank,
however, will face constraints. Britain has insisted on a senior post on
its board, and Germany will do the same.
China
has worked for years to break what it regards as an unfair grip by the
United States on global political and financial institutions and to set
up rival structures more responsive to Chinese demands for a voice in
international affairs commensurate with its status as the world’s
second-biggest economy.
“China
is shaping an alternative universe and getting America’s European
allies to support it,” said Theresa Fallon, a China expert at the European Institute for Asian Studies, a Brussels research group.
The
United States lobbied its allies not to join the new China-based bank.
The United States has argued that the bank at best duplicates, and at
worst undermines, the role of the Washington-based World Bank and the
Asian Development Bank, which has its headquarters in the Philippines, a
close American ally at odds with Beijing over the South China Sea. The
I.M.F., which manages financial crises, is less directly affected.
Ms.
Fallon said she expected that South Korea, another close American ally,
would also sign up for the new bank and that “in the end, only Japan
won’t say yes.” China, she said, is offering a “whole economic and
political package that provides an alternative to the creaking
international structures shaped by the U.S. in the postwar period.”
Western
officials and anticorruption groups have long criticized China’s
lending practices, particularly for infrastructure projects in Africa
involving Chinese companies, saying they foster corruption and undercut
efforts by the World Bank and I.M.F. to link loans to demands for good
governing. China rejects such complaints, pointing to its success in
building roads and railway lines quickly in countries bereft of Western
capital.
In
an apparent reference to such concerns, France, Germany and Italy, in a
statement declaring their eagerness to join the Asian Infrastructure
Investment Bank, said they were “keen to work with the A.I.I.B. founding
members to establish an institution that follows the best standards and
practices in terms of governance, safeguards, debt and procurement
policies.”
Snubbing
the bank would have angered Beijing, but aside from earning Chinese
good will, it was not immediately clear what European countries would
gain by joining other than the right to endorse and help finance
infrastructure projects that, in many case, are likely to be dominated
by Chinese, not European, construction companies.
Europe’s
defiance of pressure from Washington over the bank does not signal a
major rupture, analysts said. But, they say, it does add friction at a
time when the marquee project of trans-Atlantic solidarity, a proposed
free trade deal, has lost much of its momentum in the face of fierce
hostility from European politicians and activists opposed to
American-style capitalism.
While
heavily dependent on the United States for security, especially since
the crisis in Ukraine erupted last year, European countries, Ms. Fallon
said, “tend to take the U.S. for granted,” while “China is very good at
lobbying them and promising them things.” But she said Washington had
been unwise to expend diplomatic and political capital over the bank
when it was clear that even staunch allies like Britain wanted to join
it.
The bank was first proposed by Mr. Xi to help fund infrastructure projects
in poor Asian countries, something the World Bank and the Asian
Development Bank already do. China has pledged a large part of the
initial $50 billion of capital, and Beijing hopes the institution will
contribute to the expansion of its Asian power base, even as its growing
might, economic and military, reshapes the political dynamics of the
region and beyond.
Since
taking over leadership of the Chinese Communist Party in 2012, Mr. Xi
has steadily expanded a longstanding Chinese policy of seeking political
influence through lending and investment, putting his weight behind an
ambitious plan to build maritime and land links between China and Europe
that span the Eurasian continent. China began the plan after a 2011
call by Hillary Rodham Clinton, who was then secretary of state, for a
“new silk road” to help Afghanistan’s economy.
Miffed
that Washington had appropriated a term China considers an inseparable
part of its own heritage, Mr. Xi in 2013 put forward his own “silk road”
plan. This was initially called the Silk Road Economic Belt but, since
expanded and shorn of any echoes of the American proposal, is now known
in China as the “Belt and Road” scheme, said Ms. Fallon, who has studied
the evolution of China’s minutely calibrated nomenclature.
China
first signaled its desire to set up its own alternative structures as
its economy took off in the 1990s. In 1996, in Shanghai, it established a
security grouping comprising China, Russia, Kazakhstan, Kyrgyzstan and
Tajikistan.
The
body, since joined by Uzbekistan and known as the Shanghai Cooperation
Council, has Chinese and Russian as its working languages instead of
English, the lingua franca of most international organizations set up
under the auspices of the United States.
Under
Mr. Xi, Beijing has also put itself at the center of a four-year-old
grouping of 16 Eastern and Central European countries, promising
investment to the region in a push for economic and political influence
that has raised eyebrows in Brussels, the headquarters of the European
Union.
Some
see the venture as an attempt to divide the European Union and
circumvent the bloc’s rigid rules and standards. Eleven of the nations
courted by China in Eastern and Central Europe belong to the union.
But
China has voiced annoyance at what it derides as “Cold War thinking”
that divides the world into fixed camps, promoting its efforts to win
friends and also contracts in formerly Communist Eastern Europe and
elsewhere as part of a “win-win strategy” beneficial to all.
Commenting
in Beijing on the decision by European countries to join the new
investment bank, a Foreign Ministry spokesman, Hong Lei, said China
“wants to work together with all parties to set up a mutually
beneficial, professional infrastructure investment and financing
platform to contribute to regional infrastructure and economic
development.”
While
China has risen over the last decades to become the second-largest
economy — or even the largest, by some measures — it is still sidelined
at the international level by the reluctance of developed nations to
relinquish their privileged places.
In
one such case, the United States and its partners at the International
Monetary Fund agreed in 2010 to give emerging nations an expanded role
in the institution. Congress has so far refused to sign on.
Speaking
on Tuesday in Washington, Treasury Secretary Jacob J. Lew said it was
“urgent that we address prior unmet commitments, which have grown to
levels that raise significant questions about U.S. credibility and
leadership in the multilateral system.”
Failure
to do so, he added, could “result in a loss of U.S. shareholding at a
time when new players are challenging U.S. leadership in the
multilateral system.”
Andrew Higgins reported from
Brussels, and David E. Sanger from Washington. David Jolly contributed
reporting from Paris, and Michael Forsythe from Hong Kong.
