France, Germany and Italy on Tuesday joined the U.K. in signing onto the Chinese-led Asian Infrastructure Investment Bank (AIIB), brushing off Washington’s reservations about the burgeoning institution and leaving the U.S. on the sidelines of yet another Chinese challenge to the global financial architecture.
Tuesday’s decision followed a surprise announcement by the U.K. last week that it would join the $50 billion development bank, which is meant as a small-scale complement to the Western-dominated World Bank. Analysts now believe Washington’s efforts to keep heavyweight allies outside the bank — a stance it argued would give them leverage to bargain for greater influence and higher lending standards, like those of the World Bank — have all but collapsed.
“I think Europe is suggesting that this doesn’t make any sense for them,” said Peter Hakim, the president emeritus of the think tank Inter-American Dialogue. “They’re saying, ‘We’re borrowing from China, it’s already a major trading partner, so why shouldn’t we join with them on this?’”
The AIIB is designed as another complementary fund to the World Bank, akin to the Japanese-led Asian Development Bank, that could help patch the massive infrastructure gaps in rapidly growing Asia. The World Bank cannot come close to providing the estimated $700 billion the continent will require annually to build roads, expand water supply and wire vast swathes of land for Internet access. Hundreds of billions more would be needed to remedy poverty and meet ambitious emissions-reduction goals.
But the bank is also the latest in a spate of development banks launched by emerging powers like China who are seeking to spread their soft power by doling out sought-after loans and who resent the outsize — and, many say, outdated — influence that the U.S. and Europe still have in the world’s pre-eminent lending institutions: the World Bank and International Monetary Fund (IMF).