US raises concerns over China-led infrastructure bank

The United States has raised concerns with China over its recently proposed Asian Infrastructure Investment Bank (AIIB), questioning whether the lender would ensure that its projects meet global standards for good governance and environmental protection.

Dr Robert Wang, a US senior official for Asia Pacific Economic Cooperation (Apec), told reporters on Wednesday that Washington's key concern was whether the bank's safeguards would match those of existing development banks.

He revealed that the US had met Chinese leaders, including Mr Jin Liqun, who is expected to head the bank, over the matter.

"We've been very clear about what our concerns are... that they're able to meet the various standards of other multilateral development banks," Dr Wang said.

He highlighted three key areas of concern - governance, labour and the environment.

"When you start an infrastructure project, you must make sure you look at its environmental impact, or labour, and what kind of labour you use, the conditions under which they work."

He added that construction projects involve large sums of money, so issues of governance would come into play.

"How should it be dealt with in terms of transparency, governance, so there's no corruption?" he asked, adding that he hopes China will address these concerns.

The AIIB was proposed by Chinese President Xi Jinping while he was in Indonesia for the Apec summit in October last year.

The move is widely seen as being part of China's efforts to dilute the influence of existing multilateral lenders, such as the World Bank, which it regards as being too dominated by the US, Europe and Japan.

While analysts agree with the White House's concerns, most note that American distrust of the Chinese proposal stems also from the perception that Beijing has an ulterior motive for pushing it.

Said Ms Yun Sun, a fellow at the Stimson Centre's East Asia programme: "Potentially, the AIIB would represent an expansion of Chinese influence and China's consolidating and strengthening of its regional status... it raises questions about whether China is trying to consolidate its leadership and exclude other powers from the region."

US involvement, she said, will most likely be that of an observer, but it would not keep silent if certain decisions made by the AIIB were problematic or controversial.

So far, countries such as India and Singapore - both were invited by Beijing to join - have expressed interest in participating in the China- backed bank. Prime Minister Lee Hsien Loong said at the ASEAN summit last October that Singapore is open to taking part in the new AIIB, and favours an inclusive membership, open to ASEAN and non-ASEAN countries.

Dr Ellen Frost, adjunct senior fellow at the East West Centre, said: "I believe Singapore's membership will help ensure that the AIIB follows sound banking practices and that the Chinese government will not use it as a political instrument."

simlinoi@sph.com.sg

This article was published on Aug 29 in The Straits Times.

Get a copy of The Straits Times or go to straitstimes.com for more stories.