US Should Divest From CCP-Linked Banks

A man walks past the Asian Infrastructure Investment Bank headquarters in Beijing on June 15, 2023. Jade Gao/AFP via Getty Images

Commentary

China’s international development bank, patterned after the Washington-based World Bank, gives Beijing influence over the bank’s 110 member states and anyone else lured by the Chinese Communist Party’s (CCP’s) largesse.

The bank has more than $100 billion to play with, including not only China’s own funds but also direct and indirect funds through co-financing from the United States, Japan, the UK, France, and Germany.

The United States had enough sense not to join directly when the bank—called the Asian Infrastructure Investment Bank (AIIB) and headquartered in Beijing—was founded in 2016. But U.S. taxpayer dollars are commingled with AIIB loans through co-financing with the World Bank and other loans funded by U.S. taxpayers. In those cases, Beijing is leveraging the hard-earned income of U.S. families for its own purposes.

On April 20, 2024, the World Bank signed a memorandum of understanding (MOU) with the AIIB, following two other agreements in 2017 and 2021. The MOU lasts until 2029, supports the 2021 co-financing agreement, and lacks transparency in that it includes confidential addenda, which Beijing frequently uses to hide material to which the public would object. This is fundamentally undemocratic and worse than a waste of U.S. taxpayer dollars. It represents the use of those dollars against the United States.

The MOU will effectively increase Beijing’s power by providing for the giveaway of World Bank data, the increase of China’s technological penetration internationally, and the prioritization of industries in which China already leads. In 2023, Japan’s Asian Development Bank also signed a co-financing agreement with the AIIB.

The regime in Beijing initiated the AIIB to support the CCP’s Belt and Road Initiative, which, in turn, supports China’s international infrastructure industry, influence networks, and, indirectly through port-building, its global naval projection. AIIB loans have funded Belt and Road Initiative projects, meaning that any country that contributes to such loans, including through World Bank co-financing, contributes to the financing of CCP-linked initiatives.

Last year, the AIIB started guaranteeing “panda bonds” that are denominated in yuan and offered directly to entities in China. Egypt issued a panda bond of 3.5 billion yuan (worth $479 million) at a competitive 3.5 percent interest rate—well below the rate on U.S. dollar bonds at the time. The Egyptian bond’s capital and interest payments were partly backed by the AIIB and the African Development Bank (AfDB), to which the United States contributes.

This means that if Egypt fails to pay, the AIIB and AfDB would be on the hook to pay back the Chinese entities that bought the bond. Repayment would be made from AIIB and AfDB money, which comes from many countries, including the United States and its allies. It makes no sense for U.S. and allied taxpayers to insure debts between China and Egypt, let alone to do so in a way that increases Beijing’s influence in Cairo. Yet that is exactly what happens at the stroke of a pen in Washington and allied capitals.

The CCP dominates the AIIB through the regime’s 27 percent share of AIIB votes. That is enough, along with the votes of its partners, to control the bank and promote CCP goals such as the displacement of the U.S. dollar as the primary international currency. This is partly why it wants to issue panda bonds in yuan to countries such as Egypt. Also, Cairo knows that it is less likely to get these loans and guarantees from Beijing if it allows criticism of the CCP’s genocide against the Uyghurs, for example. So Cairo is silent and takes the money, and Beijing’s global influence grows despite its human rights abuses.

While helping relatively impoverished countries around the world is a good thing, there are better ways to do that than through entities such as the World Bank, AIIB, Asian Development Bank, or AfDB, which cooperate with the CCP. Given the CCP’s growing global influence, taxpayers in the United States need to be much more careful about how their international development assistance is used, diluted, or, in the worst case, hijacked against U.S. interests and American values such as democracy and human rights. Japanese, European, and British taxpayers should do the same.

The United States, its allies, and the international development banks it supports should cancel all forms of cooperation with Beijing, including any co-financing with the AIIB. Any funds that have been granted or promised to the AIIB should be recalled in a full divestment from the institution. We must recognize that the CCP has set itself against democracy and human rights, as well as against the United States and its allies, including such major contributors to international development as Japan, Europe, and the UK.

Until China democratizes and again begins to respect human rights, the world should stop funding international development banks that cooperate with the CCP.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.