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Japan reluctant to join China-led investment bank

Kyodo

Japan has told China that it is reluctant to accept an invitation to be one of the founding members of a new infrastructure investment bank Beijing aims to set up in Asia this autumn, Japanese government sources said Saturday.

Tokyo’s stance on the envisioned “Asia Infrastructure Investment Bank” may affect how other countries respond to Beijing’s bid to expand its influence in the Asia-Pacific region.

With the United States warning against China’s growing regional assertiveness, Prime Minister Shinzo Abe might urge Australian counterpart Tony Abbott not to take part in the AIIB during their planned summit Tuesday, the sources said.

At a meeting in Tokyo last month, Jin Liqun, head of the working group for setting up the AIIB, asked Japan’s then top finance diplomat, Mitsuhiro Furusawa, to provide capital for the project, which is aimed at improving infrastructure in developing Asian economies, the sources said.

But Furusawa, the vice finance minister for international affairs, told Jin that Tokyo is “not convinced.” He also cast doubt on the necessity of the bank, given that the Asia Development Bank already plays that role, they said.

Jin asked Furusawa to continue talks on the matter, saying the AIIB would be launched even if Japan does not sponsor it, they added.

“The ADB has worked well so far. There is skepticism about whether we need to create a new (international) body,” one of the sources said.

Japan and the United States are the largest shareholders in the ADB, which has provided financial support to industrializing countries in Asia for around 50 years. Since the ADB was established in 1966, the presidency has traditionally been held by a Japanese.

Tokyo has apparently decided to act together with Washington to maintain the status quo in the 67-member ADB, in which China has roughly 6 percent of the shares. The ADB tripled its capital base from $55 billion to $165 billion in 2009.

Since voting rights are allocated to ADB members in proportion to their contributions, China is trying to challenge the leadership of the United States and Japan in the Asian finance sector by creating the AIIB, which is expected to have initial capital of $50 billion to $100 billion, the sources said.

Chinese President Xi Jinping announced the AIIB plan last October. Beijing has since been stepping up efforts to invite many countries, including members of the Association of Southeast Asian Nations, to fund the venture.

From January to June, Beijing held a series of events to prepare for the bank’s establishment. At an event on June 10, the number of participating countries hit 22, up from 15 at separate event on March 28.

China has told Japan that around 20 nations, including those in the Middle East and Central Asia, have been eager to engage in the Beijing-led project, the sources said, but some major countries in the Asia-Pacific region are unwilling to do so.

The United States has applied pressure behind the scenes on ally South Korea to refrain from joining the AIIB, a U.S. government official and a diplomatic source said.

India, Asia’s third-largest economy, is reluctant to become a member of an institution in which China would have more than half of the shares, but Australia may be interested in it as a way to boost infrastructure investment in Asia, the Japanese sources said.

  • itoshima2012

    China at its finest! Talking ill and bullying all it’s neighbors but than coming to ask for money and financial expertise! Don’t give in japan!

    • Demosthenes

      I don’t see what the problem is here. More competition means better prices and more options for developing nations in the region. If developing nations don’t like the AIIB terms they can still go to the ADB.

      • itoshima2012

        China is between a rock and a hard place, you can’t treat a member if the democratic world and your biggest foreign capital investor like scum and than expect them to jump on board to help you project your power in Asia…. Japan will never sign up to this, they’re to proud and to smart.

      • Demosthenes

        Actually, from 2012 Canada has been China’s biggest investor – followed by the U.S. and then Australia.

        And I wouldn’t be too proud here if I was Japan. Considering that Japan is already almost bankrupt,
        if Abenomics fails then In a few years, Japan might be coming to the AIIB to borrow money from China.

  • http://blog.goo.ne.jp/srachai srachai

    cite from yomiuri dated 2014/07/06

    China-ROK anti-Japanese campaign threatens to bring regional instability

    As for the Asian Infrastructure Investment Bank that Xi is proposing, the joint statement only said the two nations will continue talks on the matter. China will not easily realize its ambitions to lead efforts to build a financial order in Asia to counter the Asian Development Bank, which is led by Japan and the United States.

    • itoshima2012

      You’re spot in. China is very troubling. No clue why ROK is stamlining with this fascist regime in China….. ROK should choose its friends very well and Japan and the US are their best partners….

  • Richard Chiu

    If China were smart, they should forget Japan and the US, but form stronger tie with Russia and central Asia. Japan and the US will always work hand in hand to try and balance China’s rise. Japan is not only a pawn of the US, they think they are superior to all other Asian race and they cannot stand an arrangement where they are just an equal to other Asian countries.

    The other countries like SK, India and Australia, it’s going to be about money and sense, and the opportunity to participate in growing economy. Forget lending, how these MDB works is sell project to developing countries, and send their consultants and infrastructure companies over to do the job and -> profit. If China/AIIB can sign up countries with growing infrastructure need, SK, India and Australia will want to participate.

    There are a few countries with growing infrastructure needs right now, and China signed a few. Malaysia, Indonesia, Thailand, Loa, Sri Lanka, Pakistan are all decent. But the biggest opportunities lies in the central Asia region, Kazakhstan, Kyrgyzstan, Uzbekistan, Turkmenistan and Tajikistan. These countries were mostly old Soviet States with close ties to Russia, American don’t have much influence in these countries. There are vast land, small population, abundant resources. These countries are starting to develop and will be needing lots of investment and projects.

    If China can sign up those countries, obtain a steady and plentiful demand for investment, and give it’s partner the opportunities to participate in those growing and new markets, India, SK and the others will come beg for China to let them join.

    • Demosthenes

      I think we can see most of the cooperation you are saying happening now. Eg. China UnionPay has been moving into Russia to take over when sanctions forced out Visa and MasterCard, preventing the Russian economy from collapsing. Russia will surely be nestling up with China in return for this, and old allied states of Russia will be following with their infrastructure needs. If the Chinese economy can profit off the rise of these emerging countries, the China of the future will be a lot larger than the one we see today.