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Wednesday, March 18, 2015, 09:51

AIIB: US urges allies to think twice before joining

By Reuters

BERLIN/WASHINGTON - The United States has urged countries to think twice before signing up to a new China-led Asian development bank that Washington sees as a rival to the World Bank, after Germany, France and Italy followed Britain in saying they would join.

The concerted move by US allies to participate in Beijing's flagship economic outreach project comes as a diplomatic blow to the United States.

Europe's participation reflects the eagerness to partner with China's economy, the world's second largest, and comes amid prickly trade negotiations between Brussels and Washington.

European Union and Asian governments are frustrated that the US Congress has held up a reform of voting rights in the International Monetary Fund that would give China and other emerging powers more say in global economic governance.

Washington insists it has not actively discouraged countries from joining the new bank, but it has questioned whether the Asian Infrastructure Investment Bank (AIIB) will have sufficient standards of governance and environmental and social safeguards.

"I hope before the final commitments are made anyone who lends their name to this organization will make sure that the governance is appropriate," Treasury Secretary Jack Lew told US lawmakers.

German Finance Minister Wolfgang Schaeuble announced at a joint news conference with visiting Chinese Vice Premier Ma Kai that Germany, Europe's biggest economy and a major trade partner of Beijing, would be a founding member of the AIIB.

In a joint statement, the foreign and finance ministers of Germany, France and Italy said they would work to ensure the new institution "follows the best standards and practices in terms of governance, safeguards, debt and procurement policies."

In a short statement, China's Ministry of Finance said it welcomed the decision and hoped to receive written confirmation soon.

"If all goes smoothly, France, Italy and Germany could formally become founding members of the AIIB two weeks after," it said.

Luxembourg's Finance Ministry also confirmed the country, a big financial centre, has applied to be a founding member of the US$50 billion AIIB.

Chinese Foreign Ministry spokesman Hong Lei would not comment on which countries had applied, and repeated that the bank would be "open, inclusive, transparent and responsible."

Washington's strategy of questioning the AIIB's standards has drawn criticism from some observers, who say the administration should have been more accepting of the new bank or offered alternatives within existing institutions.

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