BERLIN: Germany, France and Italy said on Tuesday they would join a new China-led Asian investment bank after close ally Britain defied US pressure to become a founder member of a venture seen in Washington as a rival to the World Bank.

The concerted move to participate in Beijing’s flagship economic outreach project was a diplomatic blow to the United States, reflecting European eagerness to partner with China’s fast-growing economy, the world’s second largest.

The announcement comes amid prickly trade negotiations between Brussels and Washington, and at a time when EU and Asian governments are frustrated that the US Congress has held up a reform of voting rights in the International Monetary Fund, due to give China and other emerging powers more say in global economic governance.

Know more: US attacks UK over China stance

German Finance Minister Wolfgang Schaeuble made the announcement at a joint news conference with visiting Chinese Vice Premier Ma Kai, at which no questions were allowed. He said Germany, Europe’s biggest economy and a major trade partner of Beijing, would be a founding member of the Asian Infrastructure Investment Bank (AIIB).

A statement by ministers of Germany, France and Italy says they will ensure that the new institution follows the best standards and practices

A joint statement by the foreign and finance ministers of Germany, France and Italy said they would work to ensure the new institution “follows the best standards and practices in terms of governance, safeguards, debt and procurement policies”.

The AIIB was launched in Beijing last year to spur investment in Asia in transportation, energy, telecommunications and other infrastructure. It was seen as a rival to the Western-dominated World Bank and the Asian Development Bank.

A spokeswoman for the executive European Commission endorsed member states’ participation in the AIIB as a way of tackling global investment needs and as an opportunity for EU companies.

Washington has questioned whether the AIIB will have high standards of governance and environmental and social safeguards.

The new bank is seen as a key vector to spread Chinese “soft power” in the region, possibly at the expense of the United States. The World Bank is traditionally run by a US nominee and Washington also has the most influence at the IMF.

US Treasury Secretary Jack Lew warned the Republican-dominated Congress that China and other rising powers were challenging American leadership in global financial institutions and he urged lawmakers to swiftly ratify stalled reform of the IMF to help preserve US influence.

The adjustment of shares and voting rights in the IMF was brokered by Britain at a Group of 20 summit in 2010. European countries ratified it long ago.

Mr Lew said the US delay “is causing other countries, including some of our allies, to question our commitment to the IMF and other multilateral institutions ... Our international credibility and influence are being threatened,” he said in prepared testimony.

China said earlier this year a total of 26 countries had been included as AIIB founder members, mostly from Asia and the Middle East. It plans to finalise the articles of agreement by the end of the year.

China’s state-owned Xinhua news agency said South Korea, Switzerland and Luxembourg were also considering joining.

Chinese foreign ministry spokesman Hong Lei would not comment on which countries had applied, and repeated that the bank would be “open, inclusive, transparent and responsible”.

Washington’s top diplomat for east Asia signalled on Tuesday that concerns about the AIIB remained, but the decision on whether to join was up to individual nations.

Published in Dawn March 18th , 2015

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