US Loses Asian Infrastructure Battle

March 22, 2015 Updated: April 24, 2016

The controversy over the Asian Infrastructure and Investment Bank escalated during the week ending March 20, even though the entity isn’t even set up yet and doesn’t even have a website.

During the week, several European nations—United Kingdom, Germany, Italy, and France—said they would join the China-led institution and play a part in funding infrastructure development in Asia through AIIB lending.

In a key blow to the Obama administration, ally Australia also said it would start negotiations to join. A blow because Washington repeatedly pressured its allies not to join the bank chaired by China and India.

The last shoe to drop was Japan, usually a very dependable ally of the United States in the Pacific. Finance Minister Taro Aso said Japan could consider joining the AIIB under certain conditions.

Logically, this doesn’t make a lot of sense, as Japan is already in the driver’s seat of another, even bigger development institution, called the Asian Development Bank.

However, it seems both Europe and Asia don’t want to lose this opportunity to act on their different grievances with the United States and at the same time sweeten their relationship with China.

All of the previously mentioned players depend on China for their exports and don’t want to lose out when valuable contracts are given out by the new bank, in spite of each of them also having their issues with China itself: territorial conflicts in the Pacific for Japan; illicit subsidies and dumping for Europe.

As for China, it may win its diplomatic battle, but actually, it gives up leadership of its own creation and might lose opportunities to influence foreign policy via the bank.