BRUSSELS — Tilting toward China in a blow to
Washington’s domination of international financial institutions,
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 rival to existing lenders set up at the height of
American power following World War II.
The announcement on Tuesday by Germany,
France and Italy that they would follow Britain in breaking ranks with
Washington and join the Chinese-led venture delivered a stinging rebuff
to Washington from some of its closest allies.
It
also helped efforts by Xi Jinping, China’s president and Communist
Party chief, to reshape the global balance of power and the institutions
that underpin it.
China has worked steadily
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,” Theresa Fallon, a China expert at the European Institute for Asian
Studies, a Brussels research group, said. “They are entering the big
league now and think that with lending comes power.”
The
United States lobbied its allies not to join the new China-based bank,
the Asian Infrastructure Investment Bank, or A.I.I.B. The U.S. sees the
rival bank as duplicating and perhaps undermining the role of the
Washington-based World Bank and International Monetary Fund, and also
the Asian Development Bank, which has its headquarters in the
Philippines, a close American ally at odds with Beijing over the South
China Sea.
Ms.
Fallon said she expected that South Korea, another close American ally,
to also sign up for the new Chinese 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 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 governance.
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.”
Martin Schulz, the president of
the European Parliament, sounded the same cautionary note in remarks on
Tuesday during a visit to Beijing. He welcomed the three countries’
decision to join and urged other members of the 28-nation European Union
to follow. But he stressed that the new bank must not deviate from
established lending rules.
“Such new organizations must answer to the requirements of international standards,” Mr. Schulz said. “That is quite important.”
Europe’s
defiance of pressure from Washington over the Chinese-led bank does not
signal a major rupture, according to analysts. 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
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
Chinese-led bank when it was clear that even staunch allies like Britain
wanted to join it.
The new bank was initially proposed by President 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 power base in Asia, 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, 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.
China’s
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 language 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 new informal grouping of 16 east 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 east 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 in Washington
on Tuesday, 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.”
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