Tony Abbott to Barack Obama: China bank fits

Australia is expected to join China’s massive development bank as early as this week.

Australia is expected to join China’s massive development bank as early as this week, with Tony Abbott to personally ­explain the nation’s position to US President Barack Obama ­before a final decision is made.

Cabinet has moved closer to Australia joining the China-led Asian Infrastructure Investment Bank, despite US concerns about the Chinese using loans to ­extend their global influence and to cut across US-led lending ­policies limiting loans for clean-coal technology.

On Monday, cabinet further discussed Australia joining the bank with 35 other nations after the Prime Minister changed his position on the matter, no longer accepting warnings from the US about the dangers of China’s ­influence and “excessive accommodation of China”.

Cabinet concerns about joining the bank — and providing credit to be used to stimulate growth in Asia through infrastructure construction estimated to be worth $730 billion over the next four years — centred on governance and transparency ­issues, but these have now been addressed.

It is possible an announcement will be made this week, but that will depend on Mr Abbott being able to speak to US and regional leaders about Australia’s commitment, which could be ­between $300 million and $3bn.

US opposition to the bank — and attempts by the Obama ­administration to limit credit via the World Bank, International Monetary Fund and OECD for developing nations to use on new-generation coal-fired electricity generation — have caused friction among the countries wanting to join the bank, which is on target to double available credit to $100bn.

While Australia, Japan, South Korea and Britain have been cautious and aware of the US criticism, all are moving towards joining. Japanese industrialists keen to sell “ultra-super-critical coal-fired” electricity generators to India for more efficient use of brown coal are pushing for Tokyo to sign up.

Mr Obama’s administration has been tightening internat­ional funding for coal-fired ­generation but the Asia Infrastructure Investment Bank is likely to be more sympathetic to the pleas of developing nations.

The expansion of coal-fired power generation is a boon to Australia’s coal exporters and represents a boost to the flagging Japanese economy.

While the coal consideration has been not a major issue in the discussions so far, officials ­involved in the negotiations see it as “a silver lining” for Australia and Japan.

Australia has joined forces with Japan in international ­forums to resist the US campaign of limiting lending to developing nations seeking more efficient coal-fired generation. The technology offers the promise of cheaper power.

The moves follow Mr Obama’s climate change speech at the G20 summit in Brisbane last November. The US President’s remarks, which embarrassed Mr Abbott and angered his ministers, were seen as an ­attempt to push the administration’s climate change policies in Mr Obama’s final year in office.

Australia’s decision to join the Asian Infrastructure Investment Bank follows a reversal of policy, revealed in The Australian this month, based on strategic ­arguments about China. The change followed a reassessment within government and intense talks within the G7 group of ­finance ministers and central bank governors.

There has also been a dispute between the British government and the Obama administration about London’s decision to seek to become a foundation member of the bank.

Mr Abbott this month said: “The UK has indicated an intention to sign up for the negotiations, the New Zealanders before Christmas signed up for the negotiations, the Singaporeans likewise, the Indians likewise.

“We’re looking very carefully at this and we’ll make a decision in the next week or so. I would like to think that it is possible for this to be a genuinely multi­lateral institution and I think it could well be an important part of bringing China fully into the international community.”