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AIIB: Taiwan out in the cold

AIIB: Taiwan out in the cold
Published 14 Apr 2015 

Don't read too much into China's rejection of Taiwan's application to join the AIIB.

Like more than 40 others, Taiwan had applied to be a founding member of the Beiing-led Asian Infrastructure Investment Bank. China yesterday rejected this but says discussions are ongoing about Taiwan's membership of the Bank under 'an appropriate name', meaning 'Taipei, China' or 'Chinese Taipei', not 'the Republic of China' or 'Taiwan'. The question of Taiwan's name is always fraught in relation to its participation in international organisations and events. In the Asian Development Bank, Taiwan is referred to as 'Taipei, China', despite its ongoing protestations. And it is 'Chinese Taipei' in APEC and the Olympics, for example.

Some commentators say this decision to reject Taiwan's membership of AIIB does not bode well for China's intentions for the Bank. There are concerns that China will run the bank based on its own political interests rather than as a professional financial institution, as China has claimed.

This is a valid concern, though with many countries now involved in the AIIB, China's ability to dominate the governance and decision-making procedures is greatly reduced. In fact, the popularity of the AIIB may turn out to be a burden for China in terms of any geopolitical ambitions it had for the bank. It is easier to exert influence over Cambodia and Laos than over the UK, Australia and South Korea.

The decision raises a larger question of how Taiwan will fit into the evolving regional architecture. Taiwan is currently excluded from key initiatives now being negotiated, such as the TPP, AIIB, and the ASEAN-led Regional Comprehensive Economic Partnership (RCEP). This will likely have long-term implications for economic integration in the region. Taiwan is a significant economy and would like to benefit from the emerging trade agreements and infrastructure financing. In this regard, it is promising for Taiwan that it can be involved in the 'Belt & Road' initiative being heavily promoted by the Chinese Government at the moment.

The full list of AIIB founding members will be released by China tomorrow. Let's hope a compromise can be found for Taiwan to join as a regular member down the track.

Photo by Flickr user Jennifer.

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