Canada suspends ties with China-based bank over claim of control by CCP

Canada has decided to halt its connections with a multinational lender headquartered in Beijing, which is often seen as Asia's equivalent of the World Bank. This decision has been made while a thorough investigation is conducted into allegations suggesting that the Chinese Communist Party has infiltrated the institution.

These allegations were raised by Bob Pickard, a Canadian citizen who recently stepped down from his position as the global head of communications at the Asian Infrastructure Investment Bank (AIIB), reported CNN.

3 things you need to know

• Canada announced Wednesday it would “immediately halt all government-led activity” with AIIB.
• AIIB is a development bank led by China that also counts G7 countries such as the UK, France & Germany as members.
• Canada has ordered the freeze — and an inquiry — after learning of Pickard’s resignation.

How did AIIB react?

Pickard announced his resignation on Wednesday, saying on Twitter that “as a patriotic Canadian, this was my only course”. “The bank is dominated by Communist Party members and also has one of the most toxic cultures imaginable,” he added. “I don’t believe that my country’s interests are served by its AIIB membership.”

In a statement, the AIIB called his comments “baseless and disappointing.”

“Throughout this time, the bank has supported and empowered him to perform his role,” it said.

How was AIIB formed?

In 2016, the Asian Infrastructure Investment Bank (AIIB) was established under the leadership of Chinese President Xi Jinping with the goal of financing infrastructure projects and regional networks. This initiative was driven by Beijing's dissatisfaction with its limited influence in established institutions like the World Bank in Washington, DC, and the Asian Development Bank, where Japan holds significant sway.

With reservations about the bank's governance and in an effort to diminish its effectiveness, the United States quietly discouraged its allies from joining the AIIB. However, the United Kingdom became the first to defy this stance and announced its intention to seek membership in 2015. It's worth noting that the United States itself is not a member of the AIIB.

How is Canada's relationship with AIIB?

According to the Asian Infrastructure Investment Bank (AIIB), Canada became a member of the organization in 2018. Since then, Canada has committed a total of $995.4 million in funding to the bank.

In her remarks Wednesday, Canadian Finance Minister Chrystia Freeland said the government review would be expedited, and that she was “not ruling out any outcome following its completion”.

She expressed that Canada would engage in discussions with its allies and partners who are also part of the bank to address the matter. In addition, Freeland offered her perspective on China's global role, emphasising that as the world's second-largest economy, China should actively contribute to addressing shared global challenges.

“However, as the world’s democracies work to de-risk our economies by limiting our strategic vulnerabilities to authoritarian regimes, we must likewise be clear about the means through which these regimes exercise their influence,” she continued.

Over the past few years, Western companies have faced increasing pressure to minimise business risks by diversifying their supply chains and operations beyond China. This trend has been motivated by several factors, one of which is the concern that Beijing might launch an attack on Taiwan due to ongoing tensions between Beijing and Washington. As a result, companies are seeking to reduce their dependence on China and explore alternative locations for their operations and sourcing to mitigate potential risks.

How did Beijing respond?

In an official statement released on Wednesday, the Chinese embassy in Canada referred to Bob Pickard's comments as "outright lies" and accused him of attempting to sensationalise his resignation.

According to a spokesperson from the Chinese embassy, China has "always followed multilateral rules and procedures". The spokesperson refuted the notion that there is a necessity to "de-risk" from China, suggesting that such concerns are unfounded.

"The true risks faced by the world are such practices as stoking bloc confrontation and brewing a new Cold War, wantonly interfering in other countries' internal affairs and causing regional turmoil and chaos, politicizing trade and sci-tech issues and destabilizing global industrial and supply chains, shifting domestic economic and financial risks overseas and reaping global wealth like a seasonal crop," said the statement.

What is the relationship between AIIB & World Bank?

Although initially viewed as a competitor to the World Bank, the Asian Infrastructure Investment Bank (AIIB) and the World Bank have formed partnerships and collaborated on numerous projects, reported CNN. They have jointly provided funding for several initiatives. In March, the President of AIIB, Jin Liqun, held discussions in Beijing with the newly appointed President of the World Bank, Ajay Banga, aiming to strengthen their ties.

China is the largest contributor to the AIIB, with a substantial pledge of $29.8 billion to the bank. In total, the organization has disclosed $100 billion in capital, with significant commitments from countries such as the United Kingdom, France, Germany, and others.