National / Politics

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.