Australia has baulked at signing up to a powerful new Chinese development bank amid concerns within the Abbott government that Beijing could use it to expand its strategic influence in the region.
Australian officials were absent on Friday from a ceremonial signing of an inter-governmental “memorandum of understanding” between China and 20 other Asian countries, held in Beijing.
The 21 signatories, which include significant economies such as India, Thailand and Singapore, but also many other smaller countries that are effectively client states of China, will now negotiate the bank’s articles of agreements before officially becoming founding members.
Australia’s hesitation to sign up to the bank – which will have $50 billion in initial capital to fund badly needed infrastructure projects in countries throughout the region – came after United States Secretary of State John Kerry personally asked Prime Minister Tony Abbott this week to keep Australia out of the bank.
But Fairfax Media has been told doubts about Australia’s involvement within the cabinet go back as far as March.
Australia’s chance to become a founding member of the bank – which has been called a “strategic choice point” by a top China expert – comes ahead of the November G20 Leaders’ Summit in Brisbane at which both US President Barack Obama and Chinese President Xi Jinping will be present.
China, which is keen to extend its influence in the region while also answering its critics who argue it should take on greater responsibilities as a world power, hopes the new bank will rival both the World Bank and the Manila-based Asian Development Bank.
But Australia’s hesitation to join the bank reflects division within the Abbott government about whether it would be in Australia’s strategic and national interest.
It is understood Treasurer Joe Hockey has been emphasising the potential economic benefits of the bank in cabinet and National Security Committee meetings, while Foreign Minister Julie Bishop has placed more emphasis on strategic and governance concerns.
But Mr Hockey’s early enthusiasm for Australia to join the bank ran into resistance from key colleagues as far back March.
Ms Bishop and key department officials arranged for China’s proposal to establish the bank to be scrutinised by an inter-governmental committee before the idea could be added to Mr Abbott’s agenda for his north-east Asia tour in April, according to well-placed government sources.
Mr Hockey and Treasury officials were initially supportive of the Chinese proposal on the grounds it would add much-needed infrastructure investment throughout the region while also redressing inequities in current institutional arrangements that have denied China a proportionate share in the International Monetary Fund, World Bank and Asian Development Bank.
But concerns were raised that China had not produced any assurances that prevailing governance standards would be maintained, potentially undermining existing transparency and governance standards in developing countries.
Deeper concerns included that China could use its control of the new bank in pursuit of strategic objectives, including to increase leverage over the nations of south-east Asia, where most of the infrastructure bank investment money would be headed, and undermine leverage of China’s two great rivals, Japan and the US.
Chinese Finance Minister Lou Jiwei made a last-minute pitch to Mr Hockey this week, with the pair speaking at length about the bank during the Treasurer’s visit to Beijing.
Mr Hockey told Mr Lou Australia had “yet to decide” whether to sign on, and that position had not changed by Friday.
Peter Drysdale, head of the East Asian Bureau of Economic Research and East Asia Forum at the Crawford School of Public Policy, Australian National University, told Fairfax Media Australia would be crazy not to sign up to the new bank.
“I would have thought it was a no-brainer that the Australian government should sign onto this thing; it’s in our national strategic interest, economically and politically,” he said.
This story Administrator ready to work first appeared on Nanjing Night Net.