UK decision to support new China-led bank comes under fire from US

By Nicole Miskelly | 13 March 2015

The Obama administration has accused the UK of accommodating China after Britain’s decision to join the new China-backed Asian Infrastructure Investment Bank (AIIB) which could be a direct rival to the World Bank.

Since Britain prepared to announce it would become the first country in the G7 group of leading economies to join an institution launched by China, the US raised questions over the bank’s commitment to internal standards on governance and have accused the UK of “constant accommodation” of China, reports the Financial Times (FT).

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

Britain’s decision to become a founding member of the $50bn bank, which intends to fund Asian transport, energy and infrastructure projects, sparked a rare outburst from the US about one of their closest allies. However, the FT reports that tensions between Washington and London have become strained since senior US officials criticised Britain over falling defence spending.

The criticism of the UK also demonstrates US concerns over China’s plans to establish a new generation of international development banks to rival Washington-based global banks. A senior US administrator told the FT that the UK’s decision was made after “virtually no consultation with the US” and during a time when the G7 were in discussions about how to approach the new bank.

Beijing launched the AIIB in October with the backing of 21 other countries except Japan, South Korea and Australia which are all US allies. A US official told the FT that, “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.”

The Asian Development Bank (ADB) and AIIB are seen as rivals and it is reported that China believes the US and Japan have too much influence over the ADB and Beijing has the same suspicions over US control of the World Bank and International Monetary Fund. The ADB was established in 1966 has 67 global members, but the largest shares are held by Japan and the US.

According the FT, In response to the accusations, the UK Treasury denied that Britain had acted out of the blue and said there had been a month of extensive consultation. UK Chancellor of the Exchequer, George Osbourne said: “Joining the AIIB at the founding stage will create an unrivalled opportunity for the UK and Asia to invest and grow together.”

 

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