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Heresy! China Won't Stick To IMF, World Bank Lending "Religion" With AIIB
Back in April, China was flying high. The stock market had reached dizzying heights on the back of an unprecedented surge in margin debt, creating billions in paper profits for millions of farmers and housewives turned day traders. Around the same time, Beijing had accidentally pulled off a major diplomatic coup. The China-led Asian Infrastructure Investment bank had just wrapped up a wildly successful membership drive after a surprise decision by the UK to back the new venture opened the floodgates and emboldened other US allies who, despite Washington’s best efforts to convince them otherwise, decided to join up.
The effort to recruit members was in fact so successful, that Beijing went out of its way to dispel the notion that the new bank represented an attempt on China’s part to usher in a new era of yuan hegemony and rewrite the rules of the post-War global economic order.
Despite the Politburo’s best efforts to toe the line between acknowledging the bank’s early success and unnerving Western members who, although happy to participate, are still acutely aware that a dying hegemon is still a hegemon and therefore would prefer it if Beijing didn’t rub the whole thing in Washington’s face, it was abundantly clear to everyone involved that the AIIB represented no less than a changing of the guard and a revolution against the US-dominated multilateral institutions that many emerging countries believe have failed to respond to seismic shifts in the global economy.
Unfortunately for China, the AIIB was forced to take a back seat in terms of media coverage to the country’s dramatic equity market meltdown and, subsequently, to the devaluation of the yuan which, you’re reminded, will play an outsized role in any financing extended by the new lender. But as the carnage in financial markets grabs the headlines, the AIIB is quietly making preparations to officially commence operations and as Reuters notes, China is set to “rewrite the unwritten rules of global development finance” by doing away with certain conditionalities required by Western multilateral lenders. Here’s Reuters with the story:
The Asian Infrastructure Investment Bank (AIIB) will require projects to be legally transparent and protect social and environmental interests, but will not ask borrowers to privatize or deregulate businesses for loans, four sources with knowledge of the matter said.
By not insisting on some free market economic policies recommended by the World Bank, the AIIB is likely to avoid criticism leveled against its rivals, who some say impose unreasonable demands on borrowers.
It could also help Beijing stamp its mark on a bank regarded by some in the government as a political as much as an economic project, and reflects scepticism in China about the virtues of free market policies advocated in the West.
"Privatization will not become a conditionality for loans," said a source familiar with internal AIIB discussions, but who declined to be named because he is not authorized to speak publicly on the matter.
"Deregulation is also not likely to be a condition," he added. "The AIIB will follow the local conditions of each country. It will not force others to do this and do that from the outside."
A reduced focus on the free market could give the AIIB greater freedom to run projects, said a banker at a development bank who declined to be named.
For example, development banks that finance a water treatment plant may require the price of treated water to be raised to recoup costs, even if local conditions are not conducive to higher prices.
The AIIB, on the other hand, could avoid hiking prices and rely instead on other sources of financing, such as government subsidies, to defray costs, he said.
A successful AIIB that sets itself apart from the World Bank would be a diplomatic triumph for China, which opposes a global financial order it says is dominated by the United States and under-represented by developing nations.
Criticism of international development lending is not new, said Susan Engel, a professor at Australia's University of Wollongong who has studied the impact on the World Bank of free market ideas often referred to as the Washington Consensus.
"It's a religion - this commitment to the involvement of the private sector even in sectors where, in fact, their involvement is shown to do harm," Engel said of the U.S.-based lender.
By not insisting on privatization for funds - which has recently manifested itself in the auctioning of Greek state assets in exchange for loans from Brussels and ultimately, from the IMF - the AIIB will give borrowers a choice, which will in turn allow them to select the financing option that they believe best fits their particular circumstances. This echoes comments made by Nomura's Rich Koo in July. Recall:
Until now the IMF was the only choice for countries in need of financial assistance, which meant they had no choice but to accept the economic and fiscal reforms it demanded.
But if the IMF has competition, countries in need of help will most likely shop around for the institution offering the easiest terms.
While that choice may, as Koo goes on to note, lead some countries to "delay necessary reforms," it may also allow everyone involved to avoid the type of mistakes that are inevitable when decisions are made unilaterally. That is, to the extent the IMF is fallible (and if they are anything, it's fallible), the existence of an alternative could prove invaluable in a crisis scenario. We go briefly back to Koo:
There is something to be said for the US argument that there should be only one refuge for economically troubled nations which takes responsibility for ensuring they carry out necessary reforms. However, that view is based on the underlying assumption that the US and the IMF will correctly diagnose the problems it encounters.
In reality, the US and the IMF completely misread the Asian currency crisis that began in 1997, and their errors caused tremendous damage to crisis-struck countries in the region.
The decision of many Asian countries to participate in the AIIB is probably due in part to a distrust of the US born during the currency crisis.
And with that, we will conclude with the following question: How ironic will it be when the first loans China makes through the AIIB are to the very same Asian countries who supported the new lender because of their negative experience with US-led institutions during the last Asian Financial Crisis, but whose descent into a replay of that crisis is the direct result of China's move to devlaue the yuan?
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The theory doesn't sound too bad, but practice is a different thing altogether.....
Venezuela is the best example of Beijing's lending program.
"...legally transparent...."
Wei No Fuk Yu!
China the savior of the world.
Cue up random explosion #4
Those explosions could be linked to "flakka" chemicals, and an effort to keep 'em outta the states,
or at least slow the flow till the CIA can get the upperhand in the revenue stream.
Since the IMF has the "free market" as a religion, the appearance of the AIIB must be manna to the IMF. Now there is some competition in the space.
It's all good, right?
This article is anti-semetic, because it does not hold the socialist jew bankster cartel in a good light......
Every time you see the word "privitization" written anywhere in any press article, insert the words "public private partnership" (PPP), which is characterized as a government enforced monopoly. This is NOT the free market at work to have third world countries grant a monopoly to the international corporations and it makes me want to puke when I read that.
The US and the IMF misread the Asian crisis? No way, that's not how the international banks work - they sow chaos to bring about order with more consolidation of power.
This is the Hegalian dialect in action. Don't like the IMF run by Western oligarchs? Try the AIIB run by Eastern oligarchs. It'll work out great! The tell is when they say "instead of privitization (there's that word again), we might rely in subsidies. Either way, the taxpayers are still getting f'ed!
Actually, if Lagarde were the last woman on earth I could probably be up for the challenge.
Full on self hate now.
Oh Tyler,
You made my otherwise shitty day shine. Those three pictures together are hillarious.
China doesn't actually want AIIB loans repaid, and doesn't really want to support viable projects. AIIB loan = purchase of country from corrupt elites. The money flows from Beijing to local officials to Vancouver real estate, and as the local officials board the plane to Canada they hand off the keys to the Chinese.
They learned that schtick from the IMF, except in the IMF case the newly enriched local officials escspe to buy R.E. in NYC or the Bay Area.
Read Confessions of An Economic Hit Man by John Perkins.
The theory that IMF conditionality revolves around privatization and competition is bullocks.
IMF conditionality exists 1) to provide investment protection and tax breaks for favored western oligarch interests, 2) to eliminate public sector competition for those western oligarch interests and 3) to eliminate private sector local competition for those western oligarch interests through borrowing cost differentials.
+1, but you are mixing in the role the World Bank has, aren't you?
and nevertheless the IMF has a wider, broader role as the kind doctor that saws off your rotten, gangrenous financial leg, which is still it's main role after it did it's shenigans
we'll see if the AIIB is kinder towards public sector competition
I went for a short list instead of a 1000-word post, so I took some liberties and it's less precise, but the two go hand in hand with UNDG and they all (at a minimum) informally collaborate on their diktats, which invariably favor large private commercial interests. The IMF occasionally includes sensible qualifiers in its working papers, like how tax holidays can be counter-productive, but they are taken about as seriously as the Federal Reserve's qualifiers about how Congress needs to control deficit spending. I might be more forgiving of the IMF if I wasn't so disgusted by the hypocritical juxtaposition of Greek demands and Ukrainian (non) demands, which makes the broader mission of the IMF appear to be nothing more than to advance US foreign policy with OPM (of the US taxpayer and foreign member States).
Olé...what happened to "cojones" ? (in inglisccch)
I deal with the IMF and WBG predominantly in countries that were former English or French colonies (asi no hablo, maid je parle parfois, ou lis)
The free and fair press in the West has always refused to report the truth about the IMF:
The IMF Itself Is a Criminal Organization
To understand this story, you have to reel back to the birth of the IMF. In 1944, the countries that were poised to win the Second World War gathered in a hotel in rural New Hampshire to divvy up the spoils. With a few honourable exceptions, like the great British economist John Maynard Keynes, the negotiators were determined to do one thing. They wanted to build a global financial system that ensured they received the lion's share of the planet's money and resources. They set up a series of institutions designed for that purpose – and so the IMF was delivered into the world.
The IMF’s official job sounds simple and attractive. It is supposedly there to ensure poor countries don’t fall into debt, and if they do, to lift them out with loans and economic expertise. It is presented as the poor world’s best friend and guardian. But beyond the rhetoric, the IMF was designed to be dominated by a handful of rich countries – and, more specifically, by their bankers and financial speculators. The IMF works in their interests, every step of the way.
http://www.realclearworld.com/2011/06/03/the_imf_itself_is_a_criminal_or...
Certainly at this point the western bankers are a criminal organisation, they must know they have lost if they would play by the rules they hold others to.
True colours coming through soon.
All these NGOs and other global organizations are all gangster outfits for wars, drug running and endless other money making criminal activities.
It reminds me of SPECTRE in the old James Bond movies. The joke is Bond is Mi6 aka a paid stooge and killer working for the Red Shield.
Exactly
The organisation takes over poor countries, promising it has medicine that will cure them – and then pours poison down their throats. Whenever I travel across the poor parts of the world I see the scars from IMF ‘structural adjustments’ everywhere, from Peru to Ethiopia. Whole countries have collapsed after being IMF-ed up – most famously Argentina and Thailand in the 1990s.
Look at some of the organisation’s greatest hits. In Kenya, the IMF insisted the government introduce fees to see the doctor – so the number of women seeking help or advice on STDs fell by 65 per cent, in one of the countries worst affected by AIDS in the world.
http://www.independent.co.uk/voices/commentators/johann-hari/johann-hari...
Insane Mother Fuckers
They aren't insane. They are Insidious Mo fos. And the AIIB's different "rule book" is just about grabbing market share. As soon as they manage to grab a majority of the business from the IMF, the rules will be changed.
just look what a magnamous benevolent endowment the IMF has bequeathed to the good people of Greece.
The IMF Itself [and the World Bank] Is a Criminal Organization . .
I thought this was pretty much common knowledge these days. The way this article is phrased it sounds like whoever wrote this just had an epiphany that told them that the IMF might not be working in the borrowing country's best interests all the time. NEWS FLASH - The IMF and World Bank were created to rape and pillage country's resources in 3rd world and emerging markets! If anyone has any doubts just how bad these organizations are read Confessions of An Economic Hit Man by John Perkins. . . . .
But how could we live without fresh bannanas in January?
Sorry to break it to you Dick, but for, approximately, 98% of the population this is not common knowledge.
Thus there is no limit for repetition of the facts for acusation.
Everything is going according to Beijing's plan. The "forced" deval to backstop its stock market was no such thing -- it was feint in order to get the yuan closer to "fully convertible" status without looking too suspect. Once the IMF certifies the yuan as such and includes the yuan in the special drawing rights basket along with the dollar, euro, yen, etc. the trap is set. The AIIB can then offer yuan loans to retire IMF dollar loans -- and what? The IMF says no? The IMF says yes? Either choice puts the dollar on the fast-track away from trusted reserve currency. This will take a good 5-10 yrs to unspool, in other words the day after tomorrow in China's scheme of thinking.
Isn't the entire point of establishing the AIIB to offer an alternative to the West and the dollar?
The West better hope - make that "ensure" - that this all comes down to a shooting war, else it's game, set, match for China.
Imagine if you had something you could dump into the water supply that would wake up the sheople.
Now, THAT would be beer and popcorn time!
China - a fiction.
US - a fiction.
Russia - a f....
.........................
Herd management is what all 'countries' are, nothing more.
http://thebricspost.com/brics-actively-pushing-for-imf-reforms-blocked-b...
Some of the shepherds want reform!
China has pretty much bombed themselves out of SDR.
I sure hope China and Russia get that SWIFT alternative "up & running" before year end.
I think China and Russia have realized there will never be a seat at the table for them!
The Zionists push diversity on stupid white people everywhere, but are there seats at the Zionist table for non jews?
An NWO Hermit Crab begins his vacation
https://www.youtube.com/watch?v=tsIszzDRWI8
AIIB is welcome within 60,000 light years off of the coast of Q99x2 but no closer. We have a vaporgaurd up. If banksters approach any closer they are vaporized, Corzined if you prefer.
Just what the heavily indebted world nations need.. another bank..wait...did I hear Greece knocking at the door... well come right in...are those nasty Germans hounding you to pay your bills..well we are the alternative bank ...and we listen to our customers..sign right here..we will pay off those deliquent euro loans with some yuan..
Instead of demanding the privatization of the borrowers infrastructure etc, the Chinese instead could demand that uneconomic or poorly run aspects of a borrower's economy be reformed. In other words exchange loans for enhanced productivity, transparency and accountability without the need to lose assets to the speculators and deep pocketed vultures.
For some reason it just always seems that the biggest crooks and viscious sociopaths end up running the show. I guess if one were to put it in religious terms one would have to conclude that the devil is in control of this planet.
Not having a conscience constitutes a real advantage in these matters.
Yeah well good ruck with that program.
Well USA has 45% of US Govt Debt owned by Foreigners, over $6 Trillion Dollars.
-
1. Total US Debt $58.7 Trillion
2. Total Household & Nonprofit Debt $14 Trillion
3. Total Credit Card Debt $617 Billion
4. Total Student Debt $1.36 Trillion
5. Total Auto Loans $972 Billion
6. Total Federal Debt $18 Trillion
7. Total Federal Transfer payments social programs $435 Billion
1. Household Savings $683
2. Household and Nonprofit Pension Entitlements $20.8 Trillion (assets)
1. Derivatives $1 Quadrillion, 14 times world GDP (Time mag Estimate)
2. Links in Credit between all the Biggest world Banks
1. Social Security Payments $897.5 Billion
2. Medicare/Medicaid Payments $1.16 Trillion
3. We spend $1.1 Trillion on Education K-12 (State & Fed)
All we know for sure is the money is mostly transferred to corporations except for Social Security.
But Private Banks make much more money than the Federal Government. And it is the US largest Banks that have the most power to create money. As Bill Bonner points out the number of commercial banks is shrinking and is down to 5,500 total.
698.3 + 57.8 + 141.4 = Social Security = 897.5
259 + 64.6 + 301.4 + 265.6 + 266.7 = Medicare/Medicaid = $1157.3
"Privatization will not become a conditionality for loans," said a source familiar with internal AIIB discussions, but who declined to be named because he is not authorized to BLATANTLY LIE publicly on the matter."
Maybe not the first round of loans.
Maybe not publicly.
Maybe later when the choice IS between such as the IMF/Troika/Goldman & The Vulture Funds..
Maybe Yu Pa Mei Nao!
The United States' hubris and arrogance in all matters is truly astounding. Everything this country has ever done will come home to roost at some point and there will be one hell of a price to be paid.
Death Before Disco!
kind of a rhetorical question since everything everyone has done in the region has been to avoid another 1997 raid on the currencies. china has been trying to set up some sort of currency collaboratrion with everyone in the region including japan besides setting up this bank and other yuan priced projects and buying gold.
the yuan has gone up a lot more in value than everyone else in the region so the crisis isn't as bad as 1997 but the dollar is sure out of whack so maybe it is more like 1987.
I'm not sure that the author understands that the IMF and the World Bank are two separate organizations. It seems like the AIIB is pitched as a competitor towards the World Bank rather than the IMF, if I read this correctly.
But I have to laugh at the example of the water treatment plant that was offered...
So the evil westerners might want the price of water raised to where it can actually make the payments on the loan.
While the nice guys at Banco Oeste will let the government subsidize the price of the water out of its own tax coffers.
1) Gee, I wonder which loan terms any bankrupt government on the planet will prefer?
2) Gosh, is a non-self-amortizing loan that depends on external financial sources to make the payments likely to ever reach maturity without defaulting?
This scheme is nothng more than 80s style Japanese foreign aid: We'll provide development credits to you so long as you spend the money on Japanese products. The only way this stuff ever gets paid back is by getting another loan to roll the earlier boondoggle into.
http://thebricspost.com/brics-actively-pushing-for-imf-reforms-blocked-b...
dow at 7 times earnings
gold at 700
real estate whaaaaaaaaaaa
oil 30
35% unemployement
banks closed
party in the ghetto
dancin in the streets
prosperity in the new amerika
central planning delivers AGAIN.......
Here's my proposal for reforming the IMF, the World Bank, the AIIB, and any similar institution...
Make all such loans, grants, or whatever you want to call them subject to approval via referendum.
Is the Troika excluded from voting? ;-)
You have a good heart tarabel.
The IMF is fallible the same way the Mafia is fallible.
Note: The World Bank is strickly a USSA entity [it literally is a USA creature , created by 'Corporate' America'] that functions just like a, 'puppet-on-a-string'!
Note2: The IMF is just an extension of the Bretton Woods with the USSA & Japan the largest ?ShareHolder's?'&shapeshifter?' extraordinaire.
Note3: AIIB v. IMFWB is a no brainer. 'ASEAN/ TPP's JUMPING the SHARK!!!' If one jumps who will follow? Think,... Malaysia, ?Thailand?, and Vietnam [celebrating 70th anniversary this week like China]etel.,[?]
Ref: 'Our Economic problems require deeper thinking' [8/26/15 - Malaysia] http://www.freemalaysiatoday.com/category/highlight/2015/08/26/our-economic-problems-require-deeper-thinking/
'Vietnam's purged peg passage' [9/2/15 - Vietnam] http://atimes.com/2015/09/vietnams-purged-peg-passage/
With the exception of the last sentence, this item is an excellent analysis of the current situation in China's efforts to establish new international banking arrangements in the face of rejection by the Washington-based IMF and World Bank. Because of the inexperience of its regulatory institutions, China has experienced a stock market blowout similar to the 1929 experience in the US. But being a command economy, it has a better chance to overcome the effects of that event more quickly than the US did. Another drag on its efforts is the monetary instability of some of the "BRICS" countries. particularly Brazil. The IMF and the World Bank have only themselves to blame for the appearence of rivals. Their dual stubbornness in maintaining US hegemony and their ideological adhesion to neo-liberalism will be an indefinite limitation.
IMO, too much is being read into the recent devaluation of the yuan. The US dollar has risen by 17% against six other currencies, while the yuan was devalued against the dollar by only 4%, thereby making it still strong against the "basket."
With England (actually the City of London Corporation) being a member, you can bet that the AIIB may be separate from the IMF and the World Bank, but in appearance only. Just like two car dealerships in your city both saying that only they have the best deal ever, but upon further research, you find they're both controlled by the same entity.
Flesch-Kincaid Grade Lavel: 20.8 for the entire post and . . . God DAMN, that's an impressive third paragraph, Tylers!
Towards a multi-polar World. Destruction of hegemonies throws up opportunities in the global market spaces.
Concurrence in anything is always good thing. If AIIB will be worse it will simply fail, thats it. So if IMF complain anything it only show their own awareness of self-incompetence. And we know their track record, especially in GDP forecasts etc.
AIIB still will be giving loans in DOLLARS
that means it is no match to the IMF
What's wrong with a little competition? Let the cards fall, the cookie crumble. And by the way, do Lagarde and Boehner go to the same tanning salon - and is she a drunk, too?
Trump will save us from the IMF! He will stand up tall for American citizens!!!