Euro leaders to back new Chinese investment bank

Germany, France and Italy plan to sign up for China’s Asian Infrastructure Investment Bank, joining the UK in a project that is raising concern in Washington.

Euro leaders to back new Chinese investment bank

The governments of the three biggest euro-area economies intend “to become prospective founding members” and the bank “could play an important role to provide funds for addressing the large infrastructure needs in Asia,” the German Finance Ministry said in a statement yesterday.

China, the world’s second-largest economy, has promoted the creation of the $50 billion lender, a potential rival to institutions such as the Asian Development Bank, to help finance construction in the region. The US says the AIIB needs sound governance and might initially benefit from joining up with established institutions.

Europe’s signal of growing interest in the Chinese project follows two days of talks between German Finance Minister Wolfgang Schaeuble and Chinese Vice Premier Ma Kai in Berlin on boosting commercial and financial links, including renminbi trading in Frankfurt.

Germany, France and Italy want to help “establish an institution that follows the best standards and practices in terms of governance, safeguards, debt and procurement policies,” according to the German statement.

The US concern is whether the AIIB will “adhere to the high standards that the international financial institutions have developed,” including on environmental and labour safeguards and combating corruption, Treasury Secretary Jacob J. Lew told the House Financial Services Committee on Tuesday.

Any country joining the lender “needs to ask those questions at the outset,” Mr Lew said.

The UK is looking to apply for membership in the AIIB, which plans to finance infrastructure projects with loans, equity investments and other instruments, Chancellor of the Exchequer George Osborne said last week. India, Vietnam, Singapore and Thailand were among 21 nations that signed a memorandum for the bank’s establishment last year.

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