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A single tweet about alleged Communist Party meddling was enough for Canada to freeze relations with a China-led development bank this week. The question now is whether the United States and other allies will join Canada — and would Beijing even care?

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Dispute about Asian Infrastructure Investment Bank began on June 14, when Bob Pickard – its former global communications chief – said on Twitter that he was leaving his job because the lender was “controlled by members of the Communist Party and also has one of the most toxic cultures imaginable”. Within hours, Finance Minister Chrystia Freeland announced that Canada would suspend all activities with the bank while the government conducts a review.

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The AIIB quickly denied the claims, with vice president and company secretary Ludger Schuknecht telling Bloomberg that the bank welcomed Canada’s assessment because “We have nothing to hide.” China called the whole thing a “sensational publicity stunt and a complete lie”.

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Canada’s response appears to be more about current tensions with China than the substance of the allegations, according to Jeremy Mark, a senior fellow at the Atlantic Council’s Center for Geoeconomics and a former speechwriter at the International Monetary Fund. Canadian politics have been engulfed in recent weeks by the recent scandal surrounding allegations of Chinese meddling in domestic elections.

“Governments will hesitate to follow for no good reason at this point,” Mark said. “It will be interesting to see what happens down the road. But at this point I suspect we would not see anything like a mass exodus of governments from the AIIB.”

Either way, the rapid escalation of the incident shows how divided the world has become over China since the first major multilateral development bank was established in 2016. That’s when Canada and other US allies began signing up to participate in the bank, even as the US raised concerns — a sign of China’s expanding global economic power and increased influence under President Xi Jinping.

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The world has changed drastically since then, the administration of Donald Trump began a trade war with China which has morphed into a broader ideological struggle that is beginning to bifurcate the global economy. And international financial institutions are caught in the middle.

US Treasury Secretary Janet Yellen made it clear earlier this week that global institutions such as the International Monetary Fund and the World Bank should act as a “counterweight” to China’s growing influence in the developing world. Beijing hit back, with Foreign Ministry spokesman Wang Wenbin saying “the IMF and the World Bank of the United States are not named”.

Since its inception, the AIIB has sought to avoid being an overt tool of the Chinese government, and about 100 countries have joined the organization. While China is the AIIB’s largest shareholder with 26.6 percent of voting rights, its president Jin Liqun is the only Chinese national on the bank’s management team. Other members include former UK Treasury chief secretary Danny Alexander and former Reserve Bank of India governor Urjit Patel – both citizens of countries with strained ties to Beijing.

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Chinese nationals make up about 35 percent of the bank’s total workforce, the AIIB told Bloomberg. But the bank has struggled to recruit foreign candidates as people have become increasingly reluctant to move to China, according to a current AIIB employee who asked not to be identified because they were not authorized to speak publicly.

A separate former senior bank employee, who also asked not to be identified, said he did not see CCP members dominating decision-making in the organization. The work environment at the AIIB was no different from other multinational development banks, said another former AIIB official who now works for another lender.

Schuknecht, the bank’s vice president, said he “does not tolerate any influence from one member country, much less from a political party from one member country.”

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“I wouldn’t even know who is a member of the Communist Party,” he added. The AIIB did not respond to a request for comment on its ability to accept foreign candidates.

India, which has clashed frequently with Beijing since a deadly clash on their shared Himalayan border in 2020, has been the bank’s biggest beneficiary, according to Schuknecht. AIIB approved 43 projects approved in the country with a total value of US$9.94 billion.

Stephanie Segal, a senior fellow at the Center for Strategic and International Studies, said there had always been skepticism about the bank’s relationship with the Communist Party. China’s ruling party has about 96 million people on its accounts, many of whom hold top positions in large firms.

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Despite that, the AIIB has gone “very far” since its inception to establish itself as a multilateral institution free from undue influence from the Chinese government, added Segal, a former US Treasury official and IMF economist.

Canada represents one percent of the bank’s total contributions, or $995 million. In an interview with Bloomberg, Pickard said Jin told him it was “no big deal” if his home nation left — a statement the AIIB called “false,” saying all countries are valued.

So far, no other members have publicly accepted Canada’s position. China has recently hosted leaders from places like the Middle East, Africa and Southeast Asia seeking to strengthen financial ties with Beijing.

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Countries from the so-called Global South are more aware of how the institutions created after World War II “no longer represent this new world order,” said Karin Vazquez, non-resident director of the Center for China and Globalization think tank. .

“It’s an Asian bank – the Asian Infrastructure Investment Bank,” she said. “You may or may not agree with the way things are done. But in the end it is the countries that own the bank.

— With help from Ramsey Al-Rikabi, Colum Murphy, Kari Lindberg, James Mayger and Muneeza Naqvi.

Bloomberg.com

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