Australia Cabinet Thumbs Up Joining China-Led Bank, Abbott Tells Obama There’s No Stopping Country From Enlisting

Australia is almost all systems go in joining the China-led Asia Infrastructure Investment Bank, or AIIB, after its cabinet approved in principle on Tuesday the country’s signing of a "memorandum of understanding." Prime Minister Tony Abbott had admitted talking with U.S. President Barak Obama and Japanese Prime Minister Shinzo Abe about the country’s enlistment into the bank, saying it “serves a very useful purpose … particularly in our region.”

Australia is believed to sign the MoU this week, formalising its enlistment into the $50 billion AIIB. But before that, Australia made certain that the bank will be run by a board and not by any one country, specifically alluding to China. Should the latter fail to deliver, Australia has enough leg room to leave the bank. “In theory, signing the MoU will still provide room for Australia to pull back if China does not deliver on governance commitments,” the Sydney Morning Herald writes.

The U.S. had warned allies the bank was a tool for China to claim supremacy over the global order. It had claimed the AIIB will weaken the Asian Development Bank, controlled dominated by Japan and the U.S. But China's Finance Minister Lou Jiwei said last week in a report by Xinhua News Agency that the AIIB would not compete but rather complement the already established rules of the older international lenders, including World Bank and the International Monetary Fund. The Big Three banks had also expressed willingness to collaborate with the AIIB on financing projects.

If Australia pushes through with its MoU, it will contribute up to AU$3 billion ($2.3 billion) into AIIB. The biggest seed capital came from Beijing.

“If we do sign the memorandum of understanding, Australia will move quickly to secure our place in the negotiations and will work closely with like-minded countries,” Bloomberg quoted Treasurer Joe Hockey. “We will seek to ensure that all members have a voice in the AIIB’s operations.”

The AIIB was conceived to help bring in capital infusion to push the massive infrastructure financing needs of Asia’s booming economies. Nearly three dozen countries, mostly in Asia and the Middle East, are expected to join as inaugural members. Last week, Britain, Germany, France and other European powers announced their intent to join as well.

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