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Hostility From U.S. as China Lures Allies to New Bank

OWoN: Jeez Obuma, even his Golf handicap is limp wrist like his policies. What part of "the parties over, you have lost" does he not get? The Empire is ending. Time out.


China's President Xi Jinping (front C) poses for photos with guests at the Asian Infrastructure Investment Bank launch ceremony at the Great Hall of the People in Beijing, October 24, 2014 - Image: Reuters


Hostility From U.S. as China Lures Allies to New Bank


The New York Times
By Jane Perlez
19 March 2015

BEIJING — When Xi Jinping, then the newly minted Chinese leader, first broached the idea of a new Asian development bank in a public speech in 2013, few in Washington paid it much heed.

But as Beijing systematically recruited longtime American allies to help fund and oversee the new bank, it became clear that the push was more than a public relations gesture to China’s Asian neighbors. It was also a direct threat to the post-World War II financial institutions led primarily by the United States, and to President Obama’s pledges to make a “pivot” to Asia in American foreign policy.

Now with Britain, France, Germany and Italy signing up to join the new bank, despite direct pleas from Washington to steer clear, the question is whether the Obama administration mishandled a significant challenge from China, and what it might have done differently.

“The administration made a major mistake in its opposition. It was a very shortsighted,” said Paul Haenle, director of the Carnegie-Tsinghua Center in Beijing. “The bank was going to go ahead whether we supported it or not.”

The United States would have been wiser, he and others said, to temper its resentment of China’s efforts to raise its international profile and play a bigger role in global financial affairs. Some argue it may also have sought to play a role in an Asia-focused bank led by China, just as Washington expects China to contribute more to the World Bank and the International Monetary Fund, the Washington-based lending agencies for development and monetary stability.

The willingness of Britain to join the China bank over American objections was an especially clear sign of China’s sophisticated strategy for winning friends, and Washington’s failure to respond effectively.

The British chancellor, George Osborne, had made clear his desire to change Britain’s attitude toward China. The Chinese knew that he wanted to make London a platform for overseas business transacted in Chinese currency, a first step to the convertibility of the renminbi. Just two weeks after Mr. Xi’s speech on the bank, which the Chinese leader delivered in Indonesia, Mr. Osborne visited Beijing, where the courting began.

The confluence of Chinese and British interests led to Mr. Osborne’s announcement last week that Britain would become a founding member of the bank, the Asian Infrastructure Investment Bank. American opposition was made clear, but most likely came late in the process.

The British decision cleared the way for other European allies that China had courted to go Beijing’s way, as well. Australia is expected to sign up in the next week, according to government officials, and South Korea is likely to follow.

Speaking of Britain, an angry senior administration official told The Financial Times that the decision to join the bank was one more sign of “constant accommodation” of China.

One problem is that Washington did not offer much of an alternative to China’s call to inject far more funding into building roads, railroads and pipelines around Asia, much of which remains underdeveloped. There is little dispute, Mr. Haenle said, that the World Bank and the Asian Development Bank have been unable to fulfill the infrastructure needs in the region.

“But there is a strain in Washington that if the U.S. is not in the lead, then the U.S. should not be part of it,” he said.

Early on, the United States should have realized that China was determined to create the bank, and that Washington should have tried to influence its creation rather than block it, analysts in Washington and Asia said.

China was upset that after the 2008 financial crisis, Congress rebuffed legislation intended to increase Beijing’s voice in the World Bank and the International Monetary Fund. Now that China was sitting on more than $3 trillion in foreign exchange reserves, Beijing could easily afford to finance an entirely new institution that would have a majority Chinese stake with other countries as minority shareholders, they said.

Moreover, China had decided that it wanted to use its excess capacity in steel, concrete and pipes to build up neighboring economies and benefit the Chinese economy, said Laurence J. Brahm, an American who worked with Prime Minister Zhu Rongji on China’s entry to the World Trade Organization in 2001.

“China’s economy will benefit from the export of its own labor to build the infrastructure in the region,” he said.

That China would use the bank for its own pet projects in Asia and try to knit together the poorer countries of Southeast and Central Asia into an economic sphere of influence was one of the main worries in Washington.

Even so, the administration could have adopted a positive approach. It had the option of agreeing that investing in infrastructure was needed in Asia, and that China, flush with cash, had the ability to fill the gap, said Matthew Goodman, senior adviser on Asian economics at the Center for Strategic and International Studies.

From that more supportive position, Washington would have been in a better position to try to shape the new bank’s rules on lending, the environment and transparency, he said.

China’s Finance Ministry has told prospective members that it will strive to make the new bank a first-class operation that will manage to deliver projects more efficiently than the World Bank or the Asian Development Bank.

To that end, the Chinese have asked a lawyer who worked at the World Bank for over 30 years, Natalie Lichtenstein, to help prepare the bank’s charter. Such people are important to the bank’s success, said Fred Hu, the founder of Primavera Capital, a private equity firm in Beijing, who early in his career worked at the World Bank.

“The last thing China and A.I.I.B. needs is that some of the fears expressed by Washington are validated,” he said. “Attracting world-class talent is absolutely crucial.”

And mindful of reputation, the Finance Ministry has deflected an interest in bank membership from Iran, saying it might consider Iran in a second round, but not as a founding member.

No matter how the bank shaped up, it was highly unlikely that the United States would be a member. That was an unfortunate situation, said an Asian diplomat whose country is a founding member.

“The truth is no one in the region wants to choose between the United States and China,” he said. But Washington’s hostility to the bank, he said, made countries choose in China’s favor.

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3 comments :

  1. America just saw its own Butt here and it IS the end game looking.

    ReplyDelete
  2. America just saw its own Butt here and it IS the end game looking.

    ReplyDelete
  3. How long can they hold out, the world is tired of their wars and financial terrorism. They thrive on secrecy and lies to keep their sceme alive they are being exposed daily and the walls are closing in. Matter of time before they either break or unleash another false flag

    ReplyDelete

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