Britain shrugs off US anxiety over move to join China-backed bank, says in 'national interest'

LONDON (Reuters) - Britain said on Friday it believed its decision to become a founding member of the China-backed Asian Infrastructure Investment Bank (AIIB) was in its own national interest, shrugging off United States anxiety about the move.

"There will be times when we take a different approach (to the United States)," a spokesman for Prime Minister David Cameron told reporters, referring to the decision to join the bank. "We think that it's in the UK's national interest."

Britain had previously said it had sought to become a founding member of the AIIB, making it the first Western nation to embrace the China-backed institution, but the United States reacted frostily to the development.

Mr Cameron's spokesman said the British leader did not think the episode would damage London's ties with Washington and that finance minister George Osborne had discussed the matter with his US counterpart beforehand.

The AIIB would play "a complementary role" to other funding institutions, he said, and would help fill a genuine niche to provide additional investment to lower income countries in the Asia-Pacific region.

Britain would help ensure it upheld high standards of governance, he added, denying that London's decision to join the bank was part of a pattern of cosying up to Beijing too much.

The president of the World Bank said on Friday he welcomed the setting up of the AIIB, a day after Britain became the first Western nation to embrace the institution.

With US interest rates likely to rise later this year, capital flows to emerging markets and low-income countries will face greater challenges over time, Mr Jim Yong Kim told a news conference. "From the perspective simply of the need for more infrastructure spending, there's no doubt that from our perspective, we welcome the entry of the Asian Infrastructure Investment Bank," he said.

The AIIB was launched in Beijing last year and was seen as a rival to the Western-dominated World Bank and Asian Development Bank. The United States has questioned whether it will have sufficiently high standards on governance and environmental and social safeguards.

Mr Kim's remarks came after Britain said it has sought to become a founding member of the AIIB. "As the UK just announced today in their statement, they were very clear in saying that they were going to insist that the standards of any new bank that they are part of would be equal to the World Bank and the Asian Development Bank," Mr Kim said.

All of the multilateral development banks together contribute only about 5 per cent to 10 per cent of the overall annual spending in infrastructure, he added.

The AIIB was launched in Beijing last year to spur investment in Asia in transportation, energy, telecommunications and other infrastructure.

China said earlier this year a total of 26 countries are founder members, mostly from Asia and the Middle East.

"Generally speaking, the international reaction has been positive," Chinese Foreign Ministry spokesman Hong Lei said in Beijing. "The AIIB will abide by the principles of openness, inclusivity, transparency, responsibility and equality... and fully reference the good practices of multilateral banks to avoid some of the detours they have taken."

While Mr Hong did not respond directly to US concerns about the bank, China's official Xinhua news agency took a stronger line. "The response of the U.S. government exhibited nothing but a childish paranoia towards China," it said in an English-language commentary, slamming what it called "reflective scepticism".

Japan, Australia and South Korea are the notable countries in the region missing from among the AIIB's founders. Japan, China's main regional rival, has the highest shareholding in the Asian Development Bank along with the United States, while Australian media said Washington put pressure on Canberra to stay out.

Vice-Finance Minister Joo Hyung Hwan told reporters on Thursday that South Korea was still in discussions with China and other countries about its possible participation.

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