IMF backing leaves Washington on the sidelines over China-led Asian Infrastructure Investment Bank

http://www.independent.co.uk/news/business/news/imf-backing-leaves-washington-on-the-sidelines-over-chinaled-asian-infrastructure-investment-bank-10128158.html

Version 0 of 1.

Christine Lagarde, director of the International Monetary Fund, said on Sunday that she would be ‘delighted’ to co-operate with the £30 billion ($50 billion) Asian Infrastructure Investment Bank, an international financial institution proposed by China to finance infrastructure projects in Asia, according to reports.

IMF backing is a further blow to a US strategy to block the AIIB, which came to the fore after the UK agreed to lend money to the fledgling project – becoming its first western ally earlier this month. France, Germany and Italy followed the UK’s lead. White House officials were quick to criticise Osborne’s decision, sticking by the notion that the west should exert its influence from outside the organisation.

The US is concerned that the AIIB will threaten the dominance of the World Bank and be used by China to leverage greater power in Asia. There are further fears that it will not adhere to western environmental and social standards when it opens later this year.

Osborne’s decision to back the AIIB is part of a wider effort to establish the UK as an investment centre for Chinese cash. South Korea is said to be reconsidering its earlier refusal to back the AIIB. A decision either way could have serious consequences for its relationship with the US, its ally, or China, its biggest trading partner.

With the IMF on board, pressure is mounting for the US to join the AIIB. “Opposition to the Asian Infrastructure Investment Bank has become a millstone around Washington’s neck. It is time to remove it one way or another,” said Elizabeth Economy, director of Asia Studies at the Council on Foreign Relations.

Economy said that US support would allow it to keep an eye on the AIIB as it progresses, while helping ensure that US companies get the opportunity to bid for resulting infrastructure projects. She conceded, however, that joining now will be hard to do without losing face.

Meanwhile, the project gains pace. On Monday, Bambang Brodjonegoro, Indonesia’s finance minister, told reporters that the country will compete to have the AIIB headquartered in Jakarta.