South Korea intends to join China's AIIB
KENTARO OGURA, Nikkei staff writer
SEOUL -- South Korea plans to join the Chinese-led Asian Infrastructure Investment Bank, becoming yet another U.S. ally to do so despite Washington's cautious stance.
Seoul hopes joining the bank, to be set up late this year, will boost South Korean companies' involvement in the infrastructure business, including construction, telecommunications and transit, the country's Strategy and Finance Ministry announced Thursday.
The government will make an official decision after receiving approval from its legislature and other AIIB members. Seoul aims to meet China's deadline of the end of March, which would let it become a founding member.
South Korea has been strengthening ties with China. But it had held off on a decision on AIIB membership despite being wooed by Beijing at summits and other settings. The bank is part of a tug of war between an international financial system guided by China and existing frameworks where the U.S., Japan and Europe hold sway, such as the World Bank and Asian Development Bank.
Beijing probably will wield considerable influence over the AIIB. It will contribute much of the bank's $100 billion in capital, and the first leader is expected to be a former Chinese vice finance minister.
Some also argue that the AIIB's organization and decision-making process lack transparency. South Korea had pushed China to make improvements in these areas. The finance ministry's announcement showed consideration toward the U.S. by noting that progress had been made recently, but it did not go into detail.
Seoul's foreign policy focuses on the U.S. for security and China for the economy, Kim Moo-sung, chairman of South Korea's ruling Saenuri Party, said at a lecture Tuesday. China is South Korea's largest trading partner, with trade volume between them twice as high as between South Korea and America.
The AIIB decision again highlights that South Korea, caught between two great powers, cannot defy China on economic matters.
Beijing also is pressuring Seoul on security issues, expressing concern over a missile defense system that Washington is considering installing in South Korea. Talks are slated to start Friday between Washington and Seoul, alongside a visit to South Korea by Martin Dempsey, chairman of the U.S. Joint Chiefs of Staff.
Major European countries are interested in joining the AIIB, likely because they are focused on expanding business in Asia and are less worried about China than are the U.S. and Japan. Many Japanese companies are concerned they could lose orders if Tokyo does not get on board. Japan plans to decide by late June, after the end-of-March deadline.