AIIB Update: Japan Joins U.S. Against Chinese-Backed Lender

Published on Author martint16

My last blog post mentioned that several European banks have signed up for China’s new development bank, despite U.S. opposition. As of yesterday, the Wall Street Journal published another article relating to the Asian Infrastructure Investment Bank (AIIB).   China’s plans for a new development bank to fund infrastructure in Asia poses a challenge to Japan, which has been a major donor in the region and controls a decades-old institution with similar responsibilities, the article says. Many other Asian countries are following the Europeans in their decision to join, however Japan is an exception.

Asian Development Bank President Takehiko Nakao, left, meets with Chinese Premier Li Keqiang in Beijing.
Asian Development Bank President Takehiko Nakao, left, meets with Chinese Premier Li Keqiang in Beijing.

The U.S. and Japan control the Asian Development Bank (ADB), and the push to set up a new China-backed lender is a direct challenge to Japan’s reign. Former U.S. ambassador to the ADB, Curtis Chin, says the two development banks “will be very much competitors.”

China, among other emerging nations, complains they lack influence over the ADB, since it is dominated by the U.S and its allies. Japanese officials raise concerns over whether the new development bank will follow global standard practices. For now, Japan will “maintain an extremely cautious stance” toward joining the bank, they say.



3 Responses to AIIB Update: Japan Joins U.S. Against Chinese-Backed Lender

  1. Yesterday, Thursday March 26, South Korea also expressed interest in becoming a ‘founding member’ of the AIIB, which is seen as a direct attempt to increase its economic and banking power in the region. This poses problems for many of the major players in the East Asian game, namely China, the South Korea, and the United States. As is mentioned in your article, the United States has been fighting back against the AIIB because it will challenge American influence in the region by diminishing the sway both the World Bank and Asian Development Bank have. The United States is deeply embedded in both of these institutions. But by South Korea in effect seeking to undermine its largest military partner for improved relations with its biggest economic partner, tension between the three nations is seemingly increasing. And this fits surprisingly well into the framework provided for us by Ambassador Chun. Is this one of the first initiatives by China to overtly begin weeding out the United States in Asia?

  2. South Korea’s announcement also reignited the deployment of THHAD and China’s opposition against the plan. After South Korea’s official announcement of its participation in AIIB, China’s media released that it signifies the obligation boundary between U.S. and South Korea is becoming remolded. Even though several economists in Korea argue that the issue of AIIB and THHAD is completely separate agenda, I believe it will definitely affect South Korea’s stance on THHAD afterwards.

  3. Note Japan since said “yes” to AIIB. This is not something of interest to regular commercial banks; it’s a channel for foreign aid targeting sovereign project finance and development initiatives.

    See my previous comments on why ADB is not a viable alternative: the US Congress refuses to allow ADB to expand its operations even as Asia grows. If Japan wants to maintain a presence in Southeast Asia, they have to jettison these US-constrained institutions. [For the Japan side, there’s a lot of material on the Japan Forum discussion list.]