From the SovereignWealthFundInstitute. Story by Michael Maduell, president of the SWFI.
In March, the U.K., a historical staunch U.S. ally, joined the Asian Infrastructure Investment Bank (AIIB), China’s counter to the U.S.-led World Bank.
The U.K. treasury examined the structure and governance arrangements of the AIIB. An important note is that London is keen on becoming the largest offshore center for the renminbi.
Other nations applying include the following countries: Saudi Arabia, France, Germany and Italy. South Korea and Australia also plan to join the AIIB, understanding that China’s influence is growing and U.S. influence is waning (at least economically speaking) in the region.
In April, Israel announced its intentions to join the new bank. A lone key U.S. ally that has not committed to the AIIB is Japan.
Since 2010, the U.S. Senate refused to ratify governance reform at the World Bank, which would have bolstered the bank’s financial resources, but given expanded ownership weight to countries like China and Brazil versus proportionally shrinking European economies like France.
The lack of reform at the World Bank and failure to boost commitments from its nation partners has solidified the case for alternative development banks. Not surprisingly, Brazil, Russia, India and China launched the BRICS Bank (now called New Development Bank) soon after.
Furthermore, Asia’s massive infrastructure gap is too much for the World Bank to tackle alone. And by dissuading its natural allies to join the Chinese-backed institution, America cements greater isolation among major donor nations, endangering future investment access.
Read more at SovereignWealthFundInstitute.