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Diplomatic Disaster: Obama humiliated by allies' rush to join China's new bank

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Diplomatic Disaster: Obama humiliated by allies' rush to join China's new bank

Post  .dinarmama7 on Sat Mar 21, 2015 1:00 am



Diplomatic disaster: Obama humiliated by allies’ rush to join China’s new bank

Britain, France, Germany, Italy sign on as Beijing courts Australia, South Korea
The Obama administration has been skeptical of the proposed Asian Infrastructure Investment Bank from the start, arguing that it could prove redundant and could undercut lending standards on such issues as worker protections and the environment. (Associated Press)
The Obama administration has been skeptical of the proposed Asian Infrastructure Investment Bank from the start, arguing that it could prove redundant and could undercut lending standards on such issues as worker protections and the environment. (Associated Press) more >
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By David R. Sands - The Washington Times - Wednesday, March 18, 2015

The battle of wills between Beijing and Washington over a China-sponsored development bank for Asia is turning into a rout, and the Obama administration has found itself isolated and embarrassed as its top allies lined up this week to join the proposed Asian Infrastructure Investment Bank.

In what one analyst dubbed a “diplomatic disaster” for the U.S., Britain became the first major European ally to sign on as a founding member of the Shanghai-based investment bank, joined quickly by France, Germany and Italy, which dismissed public and private warnings from the U.S. about the bank’s potential impact on global lending standards and the competition it could provide to existing institutions such as the U.S.-dominated World Bank.

Luxembourg, a major global financial center, revealed this week that it would sign up. China also is also wooing Australia and South Korea, two of America’s closest Asian allies, to join before the March 31 deadline. A South Korean wire service reported Wednesday that Seoul was “seriously considering” the offer.

The reason for the stampede is clear: China’s market and its huge hoard of cash to invest override any concerns voiced by the U.S. Treasury Department and State Department over Beijing’s half-ownership stake in the bank.

“Simply put, if you partake, you have a stake,” Thomas Koenig, a policy analyst with the European Union Chamber of Commerce, told the German broadcast service Deutsche Welle.

With 32 countries on board and more expected in the coming days, Chinese state media have begun to gloat about the failure of the Obama administration to rally even its closest allies and trading partners to shun the Asian Infrastructure Investment Bank. They noted that U.S. officials have long lectured China, now the world’s second-largest economy, to take a more active “stakeholder” role in global economic affairs, but then tried to undermine the investment bank almost from the time Chinese President Xi Jinping floated the idea of an Asian development fund during a trip to Indonesia in October 2013.

“Welcome Germany! Welcome France! Welcome Italy!” the official Chinese Xinhua News Agency wrote in a commentary published Wednesday.

“Despite a petulant and cynical Washington,” more and more major countries are joining, the commentary noted. “Holding sour grapes over the AIIB makes America look isolated and hypocritical.”

Chinese officials noted Wednesday that the Asian Infrastructure Investment Bank will be on the agenda for the summit of top Chinese, Japanese and South Korean diplomats Saturday in Seoul. Chinese Deputy Finance Minister Shi Yaobin told reporters in Beijing that the U.S. would still be welcomed as a founding partner.

Saying Asia’s booming infrastructure financing needs — estimated at a staggering $700 billion annually — aren’t being met by institutions such as the World Bank and the Asian Development Bank, China is putting up half of the planned initial $50 billion financing to launch the Asian Infrastructure Investment Bank. India, another U.S. ally, is the second-biggest investor, and a group of developing countries from Asia and the Middle East quickly signed on.

The Obama administration has been skeptical of the idea from the start, arguing that the proposed bank could prove redundant and could undercut lending standards on such issues as worker protections and the environment. China’s large stake also raised red flags, U.S. officials said, about whether the bank would favor Beijing’s economic and strategic priorities.

Clash over clout

Underlying the public debate was a clear clash between Washington and Beijing over clout in the globe’s leading financial infrastructure, set up largely by the United States in the wake of World War II and still largely dominated in the senior ranks by U.S., European and Japanese officials.

“We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power,” an unidentified U.S. official told the Financial Times newspaper after news broke that Britain would join the bank.

Rising powers such as China, Brazil and India also have expressed mounting frustration that a proposed overhaul of the International Monetary Fund to reset voting rights to reflect the new global pecking order has been blocked because the Obama administration and the Republican-dominated Congress have been unable to pass it.

Story Continues →

Read more: http://www.washingtontimes.com/news/2015/mar/18/obama-humiliated-as-allies-join-chinas-asian-infra/#ixzz3UzcL0Jnq
Follow us: @washtimes on Twitter




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