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Canada defies U.S. and joins China’s new development bank

Canadian Prime Minister Justin Trudeau shakes hands with Chinese Premier Li Keqiang. (Credit: Government of Canada)

Score the point for China. Canada announced this week its plans to join the Asian Infrastructure Investment Bank (AIIB), a new development lending institution seen as a challenge to the Western-backed World Bank and International Monetary Fund.

Canada formally applied to join the bank during Prime Minister Justin Trudeau’s recent five-day visit to China. Trudeau met with various leaders in China to strengthen the relationship between the two countries. Joining the emerging bank, which already has 57 member countries, further linked Canada and China.

“Canada is always looking for ways to create hope and opportunity for our middle class as well as for people around the world,” said Canadian Finance Minister Bill Morneau in a statement. “Membership in the AIIB is an opportunity to do just that.”

Canada’s decision is in direct opposition to the U.S. recommendation that its allies not join the $100 billion AIIB. The U.S. expressed skepticism when the bank was initially announced. China has been accused of running substandard infrastructure programs in Africa and critics worried that the bank would put money behind similar projects. There are also concerns that loans would not come with the protections against human rights violations.

Those warnings fell on deaf ears. Australia, Britain, France, Germany, Italy and South Korea are founding members of the bank. Canada cited the ability to support “inclusive economic growth in Asia and beyond” as one of the main reasons for joining. The only other major hold-out is Japan.

The episode typifies the evolving relationship between the U.S. and China. Both the World Bank and IMF are based in the U.S. and represent a global power structure from the mid-20th century. The emergence of the Chinese economy has made it a major player. The AIIB would help China extend its reach and reshape global development.

The AIIB is expected to meet in early 2017 to accept new member countries, which must put up funds to becomes shareholders. Canada is expected to make a pledge similar to Australia’s $930 million over five years. Australia is the sixth-largest shareholder. Canadian officials argued that the money would be well-spent since it would support global development and build ties with China, its second-largest trade partner after the U.S.

“Canadians know that expanding trade and investment ‎with large and fast-growing markets is a key priority. We have a very meaningful economic relationship with China, as our second-largest trading partner. The AIIB’s infrastructure projects stand to produce sustainable economic growth and prosperity for the middle class – and Canada is pleased at the prospect of joining this work today,” said Chrystia Freeland, Canadian minister of international trade, in a statement.

The AIIB announced its first set of loans during its first meeting in June. More than $500 million was directed to projects in Bangladesh, Indonesia, Pakistan and Tajikistan. That is a small fraction of the $10 billion to $15 billion the bank expects to loan over the next five years. Canada’s decision to join is a vote of confidence for the bank, said Chinese Premier Li Keqiang welcoming the announcement.


About Author

Tom Murphy

Tom Murphy is a New Hampshire-based reporter for Humanosphere. Before joining Humanosphere, Tom founded and edited the aid blog A View From the Cave. His work has appeared in Foreign Policy, the Huffington Post, the Guardian, GlobalPost and Christian Science Monitor. He tweets at @viewfromthecave. Contact him at tmurphy[at]