New Zealand Decides To Join China-led AIIB Despite US Reservations

New Zealand has confirmed its intent to become a founding member of the Asian Infrastructure Investment Bank, led by China, and it will be investing NZ $125 million over five years. "Increased infrastructure investment will enhance the Asian region's growth and that will be good for New Zealand," Finance Minister Bill English said in a statement. The minister also noted that New Zealand is the first western developed nation to join negotiations to set up the Bank and enhance the already strong economic, trade and investment links with the Asian region.

US Concerns

The Bank of China led initiative is being promoted as a means of bridging the infrastructure deficit between Asia and other parts of the world. However, the U.S factor has injected a diplomatic struggle into the whole exercise. The United States is against its allied countries joining the AIIB on the grounds of the entity’s governance issues.

Many diplomats also share the U.S position that the bank could be used to expand China's influence. But Prime Minister John Key has allayed such concerns and said New Zealand is of the view that the bank would be established and can make sure that it is run properly. Mr Key already discussed the matter with president Xi Jinping during the latter’s visit to New Zealand in 2014. New Zealand Cabinet agreed in December 2014 to join the negotiations and establish the founding articles of agreement for the new bank and explore acceptable governance arrangements.

According to foreign Minister Murray McCully, there would be a formal signing ceremony in Beijing later in June, with the bank expected to begin operations "before the end of the year." Radio NZ reports that many still see the bank as a counterweight to the U.S.-backed World Bank and International Monetary Fund though it is seeking to invest in new infrastructure across Asia.

Victoria University professor of strategic studies, Robert Ayson said New Zealand would be joining the bank despite the reservations of the United States and noted it was the first time China will be leading a new institution. "This in a sense is different to the types of Western-led institutions that we've been a part of since the end of the Second World War. So it's an important and potentially defining moment,” Ayson noted.

Move Hailed

Labour Party finance spokesperson Grant Robertson welcomed the step and said it is a tribute to China's growing influence in the global economy. Green Party co-leader James Shaw said what makes the decision significant is that New Zealand has ignored the United States' objections and sided with its Asia Pacific partners. He said this is a multilateral world and it is important that New Zealand continues to have an “independent foreign policy and not be completely beholden to the Americans all of the time.”

(For feedback/comments, contact the writer at k.kumar@ibtimes.com.au)