Canada to apply to join China-backed infrastructure bank

Yahoo – AFP, Fran Wang, August 31, 2016

Canada's Finance Minister Bill Morneau announced Ottawa's decision to join  the
China-backed Asian Infrastructure Investment Bank (AIIB) (AFP Photo/Chris Wattie)

Beijing (AFP) - Canada will apply to join the China-backed Asian Infrastructure Investment Bank (AIIB), Ottawa's finance department said Wednesday, in a coup for Beijing after Washington had tried to dissuade US allies from signing up.

"Canada is always looking for ways to create hope and opportunity for our middle class as well as for people around the world," Finance Minister Bill Morneau said in a statement issued in Beijing.

"Membership in the AIIB is an opportunity to do just that."

Jin Liqun, the first president of the 

Asian Infrastructure Investment Bank 

(AIIB) welcomed Canada's decision join

 the China-backed multilateral lender

(AFP Photo/Fred Dufour)

The Beijing-headquartered multilateral lender, which began operations earlier this year, has been seen by some as a rival to the World Bank and the Philippines-based Asian Development Bank, which was founded in 1966.

The $100 billion AIIB counts several major European countries among its shareholders after they joined up despite the objections of the United States, which remains by far the world's largest economy and hosts both the World Bank and International Monetary Fund.

Critics feared the new bank would set much lower standards for projects and undermine principles of social, environmental and economic sustainability adhered to by the World Bank and other multilateral development finance institutions.

AIIB president Jin Liqun welcomed Canada's decision, which he called "a vote of confidence" in the institution that showed Ottawa's "confidence in the strong foundations the bank has built in our first few months".

The US and Japan -- the world's third-largest economy -- have notably declined to join the AIIB.

But Jin said that Washington now had a "very positive" opinion on the bank".

China "does not regard itself as the big boss" in the lender, he added, and its shareholding would "definitely be diluted" as more members joined, which could ultimately lead to Beijing losing the de facto veto power it holds over some of its decisions.

'Best interest'

In a speech Morneau suggested Canada was seeking to strike a balance between its close ally and neighbour the US, and the growing Asian giant.

China is Canada's second-largest trading partner after the United States, with exchanges topping Can$85 billion ($66.5 billion) last year.

"We have important relationships with the world's most powerful nations and have developed a capacity for mutual accommodation and governance," Morneau said.

"Should we become the first North American member of the AIIB, I have every confidence that we bring constructive and balanced views to the table."

The Beijing-based Asian Infrastructure Investment Bank (AIIB) has been seen 

by some as a rival to the World Bank and the Philippines-based Asian Development 

Bank (AFP Photo/Fred Dufour)

Joining the China-backed lender would create jobs and business opportunities for Canadians, he said, adding: "Participation in the bank is clearly in Canada's best interest."

Canada's announcement came during Prime Minister Justin Trudeau's visit to China, where he met Prime Minister Li Keqiang to try to strengthen ties before the G20 summit this weekend in Hangzhou.

The relationship has been strained recently by Chinese plans to impose new rules on canola imports, which could risk Can$2 billion a year of Canadian oilseed sales to the Asian giant.

They were due to come into force on Thursday, but Premier Li said Wednesday that the existing rules would continue to apply while the two countries negotiate a long-term agreement.

In June China's Foreign Minister Wang Yi berated a Canadian journalist while visiting Ottawa for questioning Beijing's human rights record, saying her question was "full of prejudice and arrogance" and that she had "no right to speak".

The incident provoked a public outcry and led Canada to lodge a formal complaint with Beijing.

The 2014 detention on espionage charges of Canadian citizen Kevin Garratt, who had run a Christian-themed coffee shop near the North Korean border, has also raised tensions.

At the Great Hall of the People in Beijing on Wednesday, Trudeau said he had "highlighted" Garratt's case in meetings with Chinese leaders but stressed that the goal of the visit was to establish a "strong, stable relationship and ongoing dialogue" with China.

Premier Li said judicial authorities would handle Garratt's case "in strict accordance with the law" and that his right to consular visits would be upheld.

He added it was essential for the two countries to "remove disturbances" and focus on the "overall interest" of Sino-Canadian relations.

President Obama Just Took a Major Step in Response to the Panama Papers

U.S. Uncut, Rosette Newcomb, April 5, 2016

President Obama has ordered the U.S. Department of the Treasury to stop corporate tax inversions following the release of the Panama Papers.

"@USTreasury has taken new action to prevent more corporations from taking advantage of one of the most insidious tax loopholes" —@POTUS

— The White House (@WhiteHouse) April 5, 2016

Inversion is one of the multiple corporate tax loopholes companies exploit to avoid paying U.S. taxes. Under inversion, an American company acquires a foreign competitor, then re-registers in the home country or territory of that competitor to get around American tax laws. The new rules enacted by the Treasury Department will put a cap on new foreign acquisitions of U.S. assets to skirt ownership requirements for potential inversions in the future.

“When politicians perpetuate a system that favors the wealthy over the middle class, its not surprising that people feel like they cant get ahead,” President Obama said on Tuesday morning. “Rather than doubling down on policies that let a few big corporations and wealthy people make their own rules, we should build an economy that gives everyone a fair shot.”

The Treasury Department’s new rules could completely derail the proposed $150 billion merger between pharmaceutical giants Pfizer and Irish-based Allergan, along with other proposed corporate inversions. The New York Times described the new rules, outlined in a 300-page document, as “thorough and, if not exhaustive, exhausting.” Obama praised the Treasury Department’s latest moves, but called on Congress to pass legislation permanently ending the corporate inversion loophole.

“Only Congress can close it for good,” Obama said.

Obama’s move comes on the heels of the historic Panama Papers leak and the subsequent resignation of Iceland’s prime minister, Sigmundur David Gunnlaugsson, who was found to have used a shell corporation to hide assets overseas.

Iceland’s prime minister was the first of what could be many world leaders to face accountability in response to the Panama Papers. Gunnlaugsson, in particular, was found to have holdings in the British Virgin Islands, some of which included his own country’s debt. The Panama Papers revealed him to be an officer of Wintris, Inc., which is registered in the European tax haven of Luxembourg. Wintris is a shell company set up by Panamanian law firm Mossack Fonseca specifically for the Icelandic Prime Minister’s tax evasion.

Watch archived video of President Obama’s statement below (statement begins at the 30 minute mark):

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Modi's government reveals pro-poor, farmer-friendly budget for India

New Delhi has promised to spend billions to boost infrastructure, help poor farmers and increase rural employment. The budget comes as years of economic growth have done little to improve conditions in rural India.

Deutsche Welle, 29 February 2016

Indian Finance Minister Arun Jaitley outlined the "nine pillars" of a "transformative agenda" for India's economy on Monday. These included boosting education, increasing investments in infrastructure and improving the country's tax rules.

Ram Vilas Paswan, the union minister for food and public distribution, tweeted the plan:

Budget 2016 - Nine pillars of VikasKaBudget, for transforming India pic.twitter.com/0vbZui8fbv

— Ram Vilas Paswan (@irvpaswan) February 29, 2016

Jaitley described India's 120 million farmers as the "backbone of the country's food security," and pledged to spend $5.2 billion (4.8 billion euros) on the agricultural sector. "We need ... to give back to our farmers a sense of income security," he told members of the parliament in New Delhi.

"We plan to double farmers' income in five years," Jaitley said.

The plan foresees introducing crop insurance schemes to boost farmers' incomes, increasing access to markets and funding village councils. "For rural development as a whole I have allocated 877.6 billion rupees (11.8 billion euros/$12.7 billion) in this budget," Jaitley said.

The government would also increase spending for the National Rural Employment Guarantee Scheme, which offers 100 days of employment in public companies to village households.

The government would also work toward ensuring electricity for all villages in the coming years. "The government is committed to achieve 100-percent village electrification by May 1, 2018," Jaitley said.

Jaitley's 'nine pillars' aim to transform India

A test for Modi

Despite the increased spending, Jaitley said the government would continue to try to reduce its fiscal deficit to 3.5 percent of its gross domestic product in the next year.

India, the world's fastest growing major economy, is expected to grow at 7.6 percent this fiscal year. But attempts to overhaul manufacturing have not been as successful as intended, and farming remains the major source of employment. Years of drought and falling crop prices led more than 12,000 farmers to commit suicide in 2014 alone.

The pro-farmer budget could also be an indication that Prime Minister Narendra Modi's Bharatiya Janata Party is trying to attract more supporters after its members performed dismally at local elections in Bihar last year.

State elections are scheduled to take place in farming states such as West Bengal and Uttar Pradesh later this year. Modi's victory in the polls could help him get a majority in the upper house of the parliament in New Delhi, making it easier for him to pass stalled economic reforms.

mg/kms (AP, AFP, Reuters)

New $100 bn BRICS bank opens in China to challenge US-led lenders

Yahoo – AFP, 21 July 2015

The bank's opening comes two weeks after a BRICS summit hosted by

Russian President Vladimir Putin (AFP Photo/Alexander Nemenov)

A new $100 billion international bank dedicated to the emerging BRICS countries opened in China's commercial hub Shanghai on Tuesday, officials said, as an alternative to other multilateral lenders.

The "New Development Bank", backed by the so-called emerging BRICS nations Brazil, Russia, India, China and South Africa, has been viewed as a challenge to Washington-based institutions.

The NDB's website explicitly describes it as an "alternative to the existing US-dominated World Bank and International Monetary Fund" which will address needs for infrastructure and sustainable development.

It comes as Beijing -- which is seeking a greater role on the global political stage to mirror its rise to become the world's second-largest economy -- is also setting up a separate Asian Infrastructure Investment Bank (AIIB).

Chinese Finance Minister Lou Jiwei played down the competitive aspect.

"The NDB will supplement the existing international financial system in a healthy way and explore innovations in governance models," he told the NDB's opening ceremony in Shanghai, as quoted by the official Xinhua news agency.

The bank says on its website that it will have authorised capital of $100 billion, with $50 billion paid in initially.

From L: Brazil's President Dilma Rousseff, Indian Prime Minister Narendra Modi, 

Russia's President Vladimir Putin, China's President Xi Jinping and South Africa's

 President Jacob Zuma at the 7th BRICS summit in Ufa on July 9, 2015 (AFP

Photo/Alexander Nemenov)

Xinhua quoted bank president K. V. Kamath, formerly a private banker in India, as saying the institution's management was "working on initiation of operations", including "making business policy" and "developing project preparations".

Operations would begin late this year or early in 2016, he added.

The opening comes two weeks after a BRICS summit hosted by Russian President Vladimir Putin.

Moscow -- which has suffered huge currency fluctuations and struggled to attract investors since the outbreak of the crisis in Ukraine -- sees the bank and a BRICS currency reserve pool as alternative global financial institutions.

At the time of the summit, Russian Foreign Minister Sergei Lavrov said in a statement that BRICS "illustrates a new polycentric system of international relations" demonstrating the increasing influence of "new centres of power".

'Financial order'

The BRICS nations, which represent 40 percent of the world's population, formally agreed to establish the bank at a meeting in Brazil in July last year.

The World Bank said it hopes to work with the newcomer.

"We are committed to working closely with the New Development Bank and other multilateral institutions, offering to share our knowledge and to co-finance infrastructure projects," World Bank president Jim Yong Kim said in a statement.

China, the world's second-largest economy, is also leading the setting up of 

another new multilateral lender, the Asian Infrastructure Infrastructure Bank (AIIB)

(AFP Photo/Johannes Eisele)

The regionally-focused Asian Development Bank also said it would "look forward" to working with the NDB.

Chinese analysts denied the BRICS bank was aimed at challenging other multilateral agencies.

"It's a complement, instead of a challenge, to existing international institutions," Li Daxiao, chief economist of Yingda Securities, told AFP.

"It can help strengthen the currency markets and maintain a stable financial order through the internal stabilisation of the BRICS countries," he said.

The other new Chinese-based multilateral lender, the AIIB, will be headquartered in Beijing and China will be its biggest shareholder with about 30 percent, according to the legal framework signed late last month by 50 founding member countries.

Major European and Asian economies including Germany, Britain, France and Australia have joined the AIIB, but the United States and Japan -- the world's largest and third-largest economies, respectively -- have declined to do so.

Xi and Putin driving Eurasia resurgence, says Duowei

Want China Times, Staff Reporter 2015-07-13

Chinese president Xi Jinping and his Russian counterpart Vladimir
Putin in the Russian city of Ufa, July 10, 2015. (Photo/Xinhua)

Chinese president Xi Jinping and his Russian counterpart Vladimir Putin are actively driving the resurgence of Eurasia, reports Duowei News, a US-based Chinese political news outlet.

Xi and Putin were among the leaders who attended the "dual summit" of the BRICS nations — Brazil, Russia, India, China, South Africa — and the Shanghai Cooperation Organisation — China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Uzbekistan —in the Russian city of Ufa on July 8-10.

In his speech at the BRICS summit, Xi called for the formation of a community of responsibility and common destiny based on mutual political trust, economic integration and cultural tolerance.

The importance Xi has placed on the dual summits reflects China's growing investment in diplomacy as part of the country's continuing plan to comprehensively deepen reforms, Duowei said.

Since coming to power in November 2012 as general secretary of the Communist Party, Xi has sought to strengthen ties with Africa and Latin America, as well as build a new type of "major powers" relationship with the US, Duowei said, though it is clear that his primary focus is firmly on Eurasia.

According to Duowei, China's main strategic emphasis now is Xi's ambitious "Belt and Road" initiative, which aims to boost connectivity and cooperation among countries in Eurasia. The two-tier project comprising the land-based Silk Road Economic Belt and the sea-based Maritime Silk Road is likely to be tied in with the newly formed, Beijing-led Asian Infrastructure Investment Bank and New Development Bank (NDB), formerly the BRICS Development Bank, and its US$100 billion emergency reserve fund, of which China is the largest contributor with a share of 41%.

China is not the only country aiming for a Eurasia resurgence, Duowei said, adding that Russia as well as other emerging nations have also been moving towards developing stategies of regional integration.

This is not surprising given Eurasia's strong potential, Duowei said. Eurasia accounts for 75% of the world's population and holds a significant portion of the world's mineral resources. Up to 60% of the world's gross national product is attributable to Eurasia, and three-quarters of the world's known energy resources are also found on the Eurasia mainland, Duowei added, noting that proper strategies and management will reap massive benefits for every party in the long run.

The three main powers in Eurasia are the European Union, Russia and China, Duowei said. The EU is struggling with the Greek debt crisis, while Russia is reeling from the economic sanctions imposed as a result of its annexation of the Crimean penninsula from Ukraine last year, leaving China as the most important driving force of the region, Duowei added.

The unprecendented level of cooperation and integration developing across Eurasia provides cause for optimism, notwithstanding the instability caused by sluggish economies, terrorism, religious fundamentalism, environmental pollution, territorial disputes and military conflicts, Duowei said.

For Beijing, a prosperous Eurasia is not only the key to reviving China's slowing economy, it is the road to greater international credibility and authority, Duowei said. While there is still much integration to be coordinated and many obstacles to overcome, China must face these problems head on if it intends to succeed, Duowei added.

A limited attendance meeting of the Shanghai Cooperation Organisation Heads

of State Council in the Russian city of Ufa, July 10, 2015. (Photo/CFP)

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Framework for China-led international bank signed

Yahoo – AFP, Benjamin Haas, 29 June 2015

Supporters of the Asian Infrastructure Investment Bank say fears over

 undue Chinese influence are overblown, and that the participation by more 

than 50 countries will dilute Beijing's power (AFP Photo/Wang Zhao)

Beijing (AFP) - Countries from five continents formally signed up Monday to the China-led Asian Infrastructure Investment Bank -- a potential rival to the Washington-based World Bank -- as Beijing steps up its global diplomatic and economic role.

Australia was the first country to sign the articles of association creating the AIIB's legal framework at a ceremony in Beijing's Great Hall of the People, an AFP journalist saw, followed by 49 other founding members.

Seven more are expected to do so by the end of the year.

The bank will have a share capital of $100 billion, with $20 billion paid in initially, the document showed.

The signing "is an embodiment of the concrete action and efforts made by all countries in the spirit of solidarity, openness, inclusion and cooperation", Chinese President Xi Jinping said after the ceremony.

Supporters of the Asian Infrastructure Investment Bank say fears over

 undue Chinese influence are overblown, and that the participation by more

than 50 countries will dilute Beijing's power (AFP Photo/Wang Zhao)

Signalling China's central role at the bank, he added: "Now we are willing to listen to your views and proposals."

The AIIB has been viewed by some as a rival to the World Bank and Asian Development Bank, and the United States and Japan -- the world's largest and third-largest economies, respectively -- have notably declined to join.

Earlier this month, former Federal Reserve Chairman Ben Bernanke rebuked US lawmakers for effectively encouraging the AIIB's formation by blocking reforms giving developing nations a greater say in the IMF.

Beijing will be by far the largest AIIB shareholder at about 30 percent, the articles of association posted on the website of China's finance ministry showed. India is the second biggest at 8.4 percent with Russia third on 6.5 percent.

The voting structure gives smaller members a slightly disproportionately larger voice, and a statement accompanying the articles said China will have 26 percent of the votes.

That is not enough to give Beijing a formal veto over all the bank's decision-making, but it will still have an outsized say and a block on some votes which require a 75 percent majority -- including the choice of the bank's president, suspensions of members, and changes to the rules.

"China's shareholding and its voting power at the establishment of the AIIB is a natural result led by the rules decided by all members," said Shi Yaobin, a vice finance minister, according to the official Xinhua news agency.

"China is not deliberately pursuing the veto power," he added, saying share percentages could be diluted by future new admissions.

Chinese President Xi Jinping (R) speaks to Swiss Economy Minister Johann

 Schneider-Ammann (L) as he meets with the delegates attending the signing

 ceremony for the Articles of Agreement of the AIIB in Beijing on June 29, 2015

 (AFP Photo/Wang Zhao)

Among non-Asian participants, Germany is the largest shareholder with 4.5 percent, followed by France with 3.4 percent and Brazil on 3.2 percent.

The AIIB is expected to go into operation later this year and its headquarters will be in Beijing, despite calls from Indonesia that it be based in Jakarta, further cementing China's prominence in the institution.

But all financial terms in the agreement are in US dollars, rather than China's currency, the renminbi, and the bank's working language will be English.

Transparency concerns

Only 50 of the 57 countries that have applied for founding membership signed up in Beijing on Monday, and the finance ministry said the remainder -- Denmark, Kuwait, Malaysia, Philippines, Poland, South Africa and Thailand -- have yet to ratify the necessary agreements.

Washington sought to dissuade its allies from taking part but European countries including Britain, France and Germany have rushed to sign up as they seek to bolster ties with the world's second-largest economy.

There are some concerns over transparency of the lender, which will fund infrastructure in Asia, as well as worries that a resurgent Beijing will use it to push its own geopolitical and economic interests.

The articles of association promise the bank will "be guided by sound banking principles in its operations" and ensure its operations comply with "policies addressing environmental and social impacts".

Russia's Deputy Finance Minister Sergei Storchak leaves after signing an article

 of association to help set up the AIIB during a ceremony at the Great Hall of the

 People in Beijing on June 29, 2015 (AFP Photo/Wang Zhao)

But equally vague statements in the past have done little to soothe critics.

Supporters say fears over undue Chinese influence are overblown, and that the participation by more than 50 countries will dilute Beijing's power.

The articles of association specify that the bank's president must come from the Asian region and will serve a maximum of two consecutive five-year terms.

Shi, a vice finance minister, said that China will "recommend a strong and powerful candidate" for the position, Xinhua reported.

In Tokyo, Japan's Chief Cabinet Secretary Yoshihide Suga said: "We hope the AIIB will play a role as a financial institution that contributes to Asia's development while meeting standards of international institutions, including for its governance.

"We'd like to watch it closely, including its actual operations."

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