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US attacks UK’s ‘constant accommodation’ with China

OWoN: Isn't he up himself? The worst President ever in US history can't do anything right and doesn't know when to keep his mouth shut. The Irish have a word for it, 'Eejit'!

So much for the Atlantic Accord. Yesterday's world is not today and Britain has adjusted to the reality of a fast changing world. What else can be expected? The British empire has survived many global changes and seen many Empires fade, but not theirs. Failure to recognize shifts would be a failure and threat to its existence as a financial and economic center. Without securing that, Britain would risk failure itself so the the reaction by the U.S. is not unexpected and will likely become more pointed in days to come. 

As realities change so do friends and one can expect Britain to be seen as a threat, something not imagined a decade ago. Eventually, accommodation and acceptance will become reality, but not before the onslaught of hubris. And friendship, while different, will remain.

It's just business and the UK is moving on.


Martin Wolf on US-UK row over China by FinancialTimes


US attacks UK’s ‘constant accommodation’ with China


Financial Times
By Geoff Dyer
and George Parker
12 March 2015

The Obama administration accused the UK of a “constant accommodation” of China after Britain decided to join a new China-led financial institution that could rival the World Bank.

The rare rebuke of one of the US’s closest allies came as Britain prepared to announce that it will become a founding member of the $50bn Asian Infrastructure Investment Bank, making it the first country in the G7 group of leading economies to join an institution launched by China last October.

Thursday’s reprimand was a rare breach in the “special relationship” that has been a backbone of western policy for decades. It also underlined US concerns over China’s efforts to establish a new generation of international development banks that could challenge Washington-based global institutions. The US has been lobbying other allies not to join the AIIB.

Relations between Washington and David Cameron’s government have become strained, with senior US officials criticising Britain over falling defence spending, which could soon go below the Nato target of 2 per cent of gross domestic product.

A senior US administration official told the Financial Times that the British decision was taken after “virtually no consultation with the US” and at a time when the G7 had been discussing how to approach the new bank.

“We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power,” the US official said.

British officials were publicly restrained in criticising China over its handling of Hong Kong’s pro-democracy protests while Mr Cameron has made it clear he has no further plans to meet the Dalai Lama, Tibet’s spiritual leader — after a 2012 meeting that prompted a furious response from Beijing.

While Beijing has long been suspicious about US influence over the World Bank and International Monetary Fund, China also believes that the US and Japan have too much control over the Manila-based Asian Development Bank. In addition to the AIIB, China is the driving force behind last year’s creation of a Brics development bank and is promoting a $40bn Silk Road Fund to finance economic integration with Central Asia.

The Obama administration has said it is not opposed to the AIIB but US officials fear it could become an instrument of Chinese foreign policy if Beijing ends up having veto power over the bank’s decisions.

The UK Treasury denied that Britain had acted out of the blue, saying there had been “at least a month of extensive consultation” at a G7 level, including with Jack Lew, US Treasury secretary.

George Osborne, UK chancellor of the exchequer, was unrepentant, arguing that Britain should be in at the start of the new bank, ensuring that it operates in a transparent way. He believes it fills an important gap in providing finance for infrastructure for Asia.

“Joining the AIIB at the founding stage will create an unrivalled opportunity for the UK and Asia to invest and grow together,” Mr Osborne said. 

He expects other western countries, which have been making positive noises privately about the new bank, to become involved.

Beijing launched the AIIB in October with the backing of 20 other countries but Japan, South Korea and Australia —US allies in the region — did not become founding members. There has been a strong debate within the Australian cabinet about whether to join, after US pressure to stay on the sidelines.

A decision by the major economies to join now would give up leverage they might have over the AIIB as it was being set up, the US official said. “Large economies can have more influence by staying on the outside and trying to shape the standards it adopts than by getting on the inside at a time when they can have no confidence that China will not retain veto powers.”

Mr Osborne’s decision reflects London’s desire to pursue commercial relations with China aggressively, even at the expense of antagonising Washington.

When Mr Osborne visited Beijing in 2013 he said he wanted to “change Britain’s attitude to China”. The chancellor hailed the British government’s sovereign renminbi bond issue in October, the first by a western government. The UK has been keen to establish the City of London as a platform for overseas business in the Chinese currency as it starts to play a bigger role in the global economy.

The House of Commons foreign affairs committee said last week the British government should press China harder to introduce political reforms in Hong Kong. The committee also said it was “profoundly disappointed” at the “mild” response of the government when MPs were prevented from visiting Hong Kong in November during the protests.


Q&A: The Asia Infrastructure Investment Bank

The AIIB — what is it?

The Asia Infrastructure Investment Bank is one of four institutions created or proposed by Beijing in what some see as an attempt to create a Sino-centric financial system to rival western dominated institutions set up after the second world war. The other institutions are: the New Development Bank, better known as the Brics bank, and a contingent reserve arrangement, seen as alternatives to the World Bank and International Monetary Fund; a proposed Development Bank of the Shanghai Co-operation Organisation, a six-country Eurasian political, economic and military grouping dominated by China and Russia.

What is it for?

The AIIB offers an alternative to the Asian Development Bank, which focuses on poverty relief and lacks the firepower to undertake the large-scale infrastructure projects that are the remit of the AIIB.

What’s wrong with that?
In principle, nothing. But the ADB and the AIIB are seen as rival, rather than complementary organisations. The ADB was established in 1966 and now has 67 members including 48 from Asia and the Pacific. But it is seen by many in the region as overly dominated by Japan and the US, which are by far its biggest shareholders with holdings of 15.7 per cent and 15.6 per cent respectively, compared with China’s 5.5 per cent. The AIIB was founded last year with 21 members. Notably absent were the US, Japan, Australia and South Korea. The US, it is said, lobbied countries not to join, while China worked hard to get them in.

Does that matter?

Both sides clearly think it does. Proponents of the AIIB criticise the ADB for being overly bureaucratic. The AIIB’s critics say the new lender will play fast and loose with conditionality and other restrictions on the behaviour of borrowers, allowing corruption to flourish. More significant, however, are strategic considerations. The US and China are increasingly engaged in a struggle for regional influence, played out through institutions such as these.

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