Western powers flock to new Asian investment bank

24 March 2015


GLOBAL – The new Asian Infrastructure Investment Bank (AIIB) has drawn several western countries into its fold. The China-led venture is an international financial institution that aims to marry Asia’s vast financial reserves with its dire need for ever-higher infrastructure funding. The startup capital is USD 50bn.

Politically, it is also a good device for Chinese diplomatic efforts to increase its 'soft power', or general influence. As a result, the US initially indicated its displeasure in a rare attack on the UK, the first western nation to voice its support for the venture, but has indicated regret over its remarks since Germany, France Italy, Australia, and New Zealand have also lined up to join in the weeks since.

The US, which generally dominates the financial markets, claimed to be concerned that existing 'high financial standards' might not be met by the new entity. However, it is widely believed that the US often tries to "hem China in" on the world stage, as financial magazine The Economist puts it.

The AIIB, the idea for which was confirmed in October 2014, also has the backing of India and 20 or so Asian countries. It is seen as a rival to the US-dominated 'World Bank', the Japanese 'Asian Development Bank', and the International Monetary Fund (IMF), which is largely dominated by Europeans.

The Economist again points out that Chinese efforts to expand the existing financial institutions with its financial might, and in turn leverage more control, have been repeatedly delayed by the US Congress.

Countries had until 31 March to decide whether to seek membership of the AIIB. In keeping with European enthusiasm for the project, IMF chief Christine Lagarde has said she would be "delighted" to work with the AIIB and saw "massive room" for cooperation.