Australia ponders ‘vote of confidence’ on joining China-led bank, Japan on fence

Australia has signaled its intention to become a member of the China-led Asian Infrastructure Investment Bank (AIIB) after the UK and EU major members’ decision to join. However, Japan is hesitating over its position.

Canberra shows signs of possible joining, Reuters reported on Friday, although no formal decision has been made. Australia rejected China's proposal last year, but is now signaling its intention to join the bank with an investment of $2.3 billion, according to Chinese Xinhua news agency. Meanwhile, Japan, China’s main regional rival, suggested it could become a member of the institution if certain conditions are met.

After a cabinet meeting on Friday, Finance Minister Taro Aso told reporters Japan “could consider entering talks” on joining the AIIB if some of its concerns about lending standards and the bank’s governance were addressed, the Financial Times says. Japan is hesitant to join the China-led bank over its relations with Washington and over the AIIB's potential rivalry with the Asian Development Bank.

"Views are split within the Japanese government on whether to join the AIIB,"a person with close knowledge of Japan's financial policy-making was cited as saying by Reuters.

Considering the standoff within the government of Japan, the country’s participation "is not going to happen under the Abe administration,” according to a senior official in the ruling coalition.

READ MORE: France, Germany, Italy to join China-led $50bn infrastructure bank

The possible move comes after EU major members France, Germany and Italy confirmed on Tuesday they will become founding AIIB members in the wake of Britain's application last week. This is despite the increasing pressure and negative reaction from the United States.

While the new China-led bank is expected to challenge the Western dominance of the US-led World Bank and the IMF, Washington expressed concerns that the new investment bank might not have high enough standards of governance and environmental and social safeguards.

The AIIB is also a potential rival of the Asian Development Bank (ADB), the Manila-based multilateral institution dominated by Japan and the United States. The new bank can amount to diminish the Japanese influence in favor of China in the Asia Pacific region.

After the collapse of Soviet Union the United States as a single superpower with the IMF and the World Bank at its disposal used those institutions as a way to help its own operations and did not help people from other countries, chief economist at a major international consulting firm John Perkins, who has advised the World Bank, UN, IMF, and US Treasury Department, told the Sputnik Radio.

“China’s stepping in to offer an alternative now and much of the rest of the world welcome this opportunity. It’s a real shift in financial power now around the globe,” Perkins added.

Meanwhile, South Korea is reportedly ready to announce its entry to the AIIB in the near future, Xinhua reported. Switzerland and Luxembourg are also considering joining. Twenty-seven countries had applied to jointly build the bank as founding members. The application deadline is March 31.

With an expected initial subscribed capital of $50 billion, the AIIB will be an international financial institution to fund infrastructure projects in Asia and is expected to be formally established by the end of this year.