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International Business Canada lags as more countries join new China investment bank

China's Finance Minister Lou Jiwei (L) gives a speech, with the guests of the signing ceremony of the Asian Infrastructure Investment Bank at the Great Hall of the People in Beijing October 24, 2014.

Takaki Yajima/Reuters

Ottawa is laying the groundwork to miss an end-of-month deadline to become a founding member of China's new infrastructure bank, saying it has been assured Canada's participation "will be welcome at any time."

On Thursday, South Korea said it would seek membership in the Asian Infrastructure Investment Bank, despite misgivings from the U.S. Britain, France, Germany and Italy all announced plans to join this month and Australia has signalled it, too, plans to join – leaving Canada among a handful of industrialized countries that have not yet signed on. Asked about the matter during Question Period on Thursday, the parliamentary secretary to the Finance Minister said the government "continues to assess" whether it will become a member and would make a decision in Canada's national interest. "We've also been informed that Canada's participation will be welcome at any time," Andrew Saxton said.

Those urging Ottawa to sign up for the new bank now argue that Canada could have a greater role in shaping the new institution as its founding members hammer out the details of its governance and voting systems.

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The bank's purpose is to provide funding to low-income countries for infrastructure projects such as roads, but the multinational plan has triggered inevitable political friction. The United States and others have expressed concern over how much power China will wield and whether the new bank will meet the same standards as the World Bank or the Asian Development Bank.

Beijing has indicated that it has not sought veto power – addressing one of the key concerns from Western countries who were considering membership. Despite that assurance, observers say there is still no guarantee Beijing won't control the new institution by default.

"That's a big concern," said Yongjing Zhang, an expert on the Chinese economy who teaches at the University of Ottawa. "You don't want to give your money to someone and [have them] do business in their interest."

The debate over whether to join the new infrastructure bank is complicated by a long-standing divide in the Conservative government over how to engage with an increasingly influential China. While some cabinet members favour greater economic engagement, others are reticent about getting too close to an authoritarian regime with a problematic human-rights record.

One option for Ottawa is to remain on the outside of the institution for now – as the United States appears prepared to do – while expressing an interest in participating in some of the bank's infrastructure

However, joining as a founding member could give Ottawa a greater say in how the new bank will operate, said Eva Busza, from the Asia Pacific Foundation of Canada.

"If you're in an organization from the ground floor, you're able to help develop and influence [its governance] structures," she said in a recent interview. "All of the issues that have been discussed as points of concern are points that Canada has some expertise in, and if it's in the AIIB, it could play an important role in helping to shape those."

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David Mulroney, a former diplomat who recently published a book on Canada-China relations, said the new bank is an example of the kinds of challenges China's rise will increasingly pose for Ottawa.

He said there are legitimate reasons to stay away from the bank, citing China's recent record on human rights and free speech. And joining at the last minute – even if that's before the March 31 deadline for founding members – may not give Canada much more influence, since it would still be coming in after a parade of other countries had already signed up, he added.

The opposition NDP and the Liberals have both expressed support for the AIIB, saying it would help Canada to bolster its ties to China's growing economy.

"Everything that we see from an analytical point of view is that it's a very positive thing for Canada and it's a good way to strengthen our trade relationship with Asia," said Don Davies, the NDP's international trade critic.

Liberal foreign affairs critic Marc Garneau said it's important for Canada to take advantage of the fact that the world's economic centre of gravity is shifting toward Asia and China. "I think the smart thing for the government is to participate in the new initiatives that are coming from that country," he said.

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