China forgoes veto power at new bank to win key European support
China has offered to forgo veto power at a new Beijing-led development bank, in a proposal that helped attract European countries to break with Washington and line up as founding members.
Chinese negotiators presented the no-veto position to some of the U.S.’s staunchest allies in Europe in the past few weeks, according to officials from China and Europe involved in negotiations to set up the bank. The offer proved critical in getting the U.K., France, Germany and Italy to join Beijing’s Asian Infrastructure Investment Bank, these people said.
In proposing that no single country dictate decision-making at the new bank, Beijing is making a sharp departure from the long-standing practice at U.S.-backed international lenders such as the International Monetary Fund. The U.S. has a lock on some big decisions at the IMF despite holding less than 20% of its voting shares, a structure that has drawn complaints from the rest of the world.
Negotiations are still taking place over how the bank will be run and how its board will be structured. Beijing still is likely to have the upper hand, even without veto power, over major decisions, said people involved in the discussions. That is likely to fuel concerns — expressed by the U.S., India and others — that the bank will ultimately be a tool of Chinese foreign policy.
The progress China has made so far marks a rare victory for Beijing on the world stage, officials from both inside and outside China said, and the careful planning by Beijing is making the new bank a more serious challenge to U.S. dominance of the international economic system in place since the end of World War II.
“China is playing the long game effectively,” said Cornell University economist Eswar Prasad, a former senior China official at the IMF. “They are in absolutely no rush. They know other countries will come to them.”
Tatsuo Ito in Tokyo contributed to this article.