US miffed at UK joining China-led Asia infra bank

Britain’s plans to join the Chinese-led initiative, the Asian Infrastructure Investment Bank (AIIB), as a founding member has not gone down well with the US administration.

In an unusually candid message, an unnamed official in the Obama administration hit out at Britain’s “constant accommodation” of China. He told the Financial Times that there had been almost no consultation with the US.

The British Conservative-led government has long made its eagerness to have a close relationship with China plain – in 2013 during a visit to China, Chancellor George Osborne announced plans to ease the visa process for Chinese visitors, as well as enabling Chinese banks to set up wholesale banking branches in the UK. Since 2012 it has been pushing for London to become a major international hub for Renminbi (RMB) trading.

“This government has actively promoted closer political and economic engagement with the Asia-Pacific region and forging links between the UK and Asian economies to give our companies the best opportunity to work and investment in the world’s fastest growing markets is a key part of our long term economic plan,” British Chancellor George Osborne said in a statement on Thursday, as the government announced its decision to become the first major Western nation to sign up to the bank.

“This is certainly a case of the US trying to send a strong message to the UK,” said Xenia Wickett, of London-based foreign policy think tank Chatham House. She pointed to the candid comments made by the head of the US Army earlier this month, expressing concern about Britain’s spending on defence.

The $50-billion infrastructure bank has been pushed by China, to reduce Asia’s dependence on institutions such as the World Bank and IMF that have been largely dominated by Western nations, as well as the Asian Development Bank, which it considers dominated by Japan and the US. It is also expected to provide funding for the estimated $8 trillion needed to fund infrastructure projects across Asia by 2020.

India and 26 other countries signed up to be founding members of the bank late last year. The US has, however, expressed its concerns about the bank since the outset.

Last year, US Secretary of State John Kerry warned of the “ambiguous nature” of the AIIB proposals.

There are currently 28 members including Singapore, Pakistan, and New Zealand.

Discussions have been going on within the G7 and G20 in the past few months over how to respond to the AIIB, with other countries such as South Korea, Japan, Australia and continental Europe remaining undecided.

Wickett, however, added that the latest developments were unlikely to have a lasting impact on transatlantic relations – “This tell us that this relationship is strong enough for the two sides to have different opinions and move forward.”