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Editorial: Will the China-led AIIB be able to avoid arbitrary management?

  • 2015-03-18 15:00:00
  • , Sankei
  • Translation

(Sankei: March 18, 2015 – p. 2)

 

 The UK has become the first G7 country to participate in the Asian Infrastructure Investment Bank (AIIB) that China is planning to set up before the end of this year. It is possible that other European countries may follow suit.

 

 There has been criticism that the founding of the AIIB is aimed at disrupting the international financial order built by the Western countries and Japan. The UK’s participation threatens to undermine the unity of the G7. On the other hand, this will serve as a tailwind for China in its campaign to establish economic hegemony.

 

 The problem is that concerns remain over China’s arbitrary management of this new organization. If the AIIB is used to dole out funds through lenient screening of loan applications for the purpose of enhancing China’s economic and diplomatic influence, it will not be possible for the developing countries to achieve healthy, sustainable growth.

 

 As a donor, the UK will have to address the question of to what extent it will be able to fulfill its responsibility of ensuring the transparency of the AIIB.

 

 Japan is right in deciding not to participate in the AIIB scheme at this point since there are lingering concerns about the bank’s fair governance and loan procedures. We hope that together with the U.S., which has distanced itself from the AIIB, and the UK, Japan will step up efforts to influence China.

 

 The AIIB’s goal is to provide loans for infrastructure construction in developing countries. China, as the biggest donor, is expected to appoint its first president and control the management of the bank.

 

 China has long begrudged its inability to exercise influence befitting its economic power in the World Bank, the International Monetary Fund, and the Asian Development Bank. Existing frameworks are insufficient to meet the strong demand for infrastructure in Asia, so there is indeed room for the AIIB to play a role.

 

 However, appropriate management in keeping with the standards of an international organization will be indispensable. It is unacceptable to provide loans without regard for the environment or without paying attention to graft and corruption. It is also unacceptable to provide self-serving loans or to hand out excessive loans without regard for repayment ability.

 

 China is also trying to solve its problem of surplus production capacity resulting from the economic slowdown by exporting infrastructure. It also wants to achieve international status for the yuan.

 

 The UK’s participation will help boost the AIIB’s credibility when it raises funds in the market, while the UK hopes to strengthen its ties with China’s enormous market. Compared to Japan and the U.S., which have security issues with China, it is probably easier for the UK and other European countries to participate in the AIIB.

 

 This paradigm of Japan and the U.S. competing with China in building the economic order is also being echoed in trade negotiations such as the Trans-Pacific Partnership (TPP) talks. The important thing here is strong unity between Japan and the U.S.

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