Soft Power Victory for China over USA as Australia and South Korea near joining Infrastructure bank

Australia said on Friday there was a lot of merit in the China-led Asian Infrastructure Investment Bank (AIIB) while Japan’s finance minister signalled cautious approval of the institution that the United States has warned against.

The Sydney Morning Herald newspaper reported that Canberra could formally decide to sign up to the AIIB when the full cabinet meets on Monday.

Japan, Australia and the South Korea, all major U.S. allies, are the notable regional absentees from the AIIB. The United States, worried about China’s growing diplomatic clout, has questioned whether the AIIB will have sufficient standards of governance and environmental and social safeguards.

But the opposition to the AIIB began crumbling after Britain said earlier this month that it would join the institution, maintaining it was in its national interest. France, Germany and Italy swiftly followed suit.

Australia now appears close to joining, although no formal decision has been made, and Beijing said Japan and South Korea were also considering the possibility.

The Sydney Morning Herald said Canberra could invest as much as A$3 billion ($2.3 billion) in the bank and that the National Security Committee has cleared the way for the investment.

South Korean government officials denied a newspaper report that Seoul had decided to join in exchange for a five percent stake in the AIIB and the position of deputy chief.

The finance ministry said in a statement South Korea will make a decision on whether to join the bank “through close consultation with major countries and after considering various factors such as economic advantages and disadvantages”.

Soft Power Victory for China

This counts as a soft-power victory for China over the U.S., which reportedly lobbied allies not to sign up. But Washington largely has itself to blame. For years, the U.S. has called on China to bind itself to international norms and financial institutions — without making room for it to do so. Congress persists in blocking efforts to dilute U.S. dominance of the World Bank or to increase China’s voting share at the International Monetary Fund, which stands at less than 4 percent, compared with almost 17 percent for the U.S.

London is clearly eager to establish itself as the main offshore trading hub for the renminbi. And the economic rationale for the bank — in an era when the World Bank itself is facing something of an existential crisis and the global market for private capital is robust — may be diminishing. Nevertheless, the region has huge infrastructure needs — up to $800 billion worth every year, according to a much-cited study from the Asian Development Bank. American opposition to any new source of financing looks churlish and hypocritical.

Concerns that a Chinese-dominated institution might encourage lowered lending standards are overstated. If China wanted to hand out dodgy loans to buy loyalty, it could easily continue to do so on a bilateral basis. But that practice has largely backfired; Beijing faces souring debts from Myanmar to Sri Lanka to Ukraine. The whole point of working through a multilateral organization is for China to gain global legitimacy for its largess.

If the USA and Japan are concerned about China’s increasing influence, they could do much more to strengthen the institutions they already dominate. American officials should be pushing harder, for example, to carry out financial reforms that would bolster the Asian Development Bank’s ability to lend. If the U.S. really doesn’t want other nations following China’s lead, it will have to offer a stronger alternative.

World Infastructure Gap

China will be leveraging its $4 trillion in reserves to provide low interest financing for high speed rail, export of Chinese nuclear reactors, factories and property development.

Europe and China can work together on a Pan-Europe asian high speed rail network and on energy and infrastructure throughout central and south asia and into Africa.

China is offering to fill the worlds infrastructure gap. This will enable all of the developing world to follow the China economic development plan. In a few decades, they will have no shortfall in transportation, industry, modern buildings, energy plants, energy grid and other infrastructure needs. China will also help them finance it. China will also have progressively richer trading partners who have ports, roads and rail and warehouses to build or buy what China needs or wants to sell.

China will build a global prosperity network.

People look at China’s massive domestic construction of the last few decades and are amazed at the scale. China will further expand domestic construction to get to 90-95% urbanization and will have 3-5 times the construction externally for the entire world. This global construction will be in full bloom around 2040-2060. China will be completing dozens of nuclear reactors every year. The high speed rail network will stretch across Europe, Asia and Africa. There will also be a separate South America network.

The $4 trillion is just the seed financing to get the first phases rolling for the global transformation. This is following the money for futurist prediction. $4 trillion is a lot of money to follow.

There are trillions of dollars needed to build a shortfall of global infrastructure. China is going to try to finance and build as much as possible. It will solve the problem for decades of how will China still have high levels of investment driven GDP growth. Notice- Electricity is half of the need. China will fill this with nuclear exports in the 2020s and beyond

Factories, properties, rail, ports and high speed rail will be first

Boosted by President Xi Jinping’s Silk Road belt and road initiatives, China is currently in negotiations with 28 nations, most of which are along the trade route. Should discussions bear fruit, a network of over 5,000 km is on the cards.

The Silk Road economic belt and the 21st century maritime Silk Road are a land-based belt from China via Central Asia and Russia to Europe; and a maritime route through the Strait of Malacca to India, the Middle East and East Africa

SOURCES – World Nuclear Association, Reuters, China Daily, Wall Street Journal, Reuters, Chicago Tribune