In October 2013 Xi Jinping travelled to the annual Asia-Pacific Economic Cooperation summit to formally announce a long-held ambition: an Eastern counterpart to the World Bank and the IMF, the international development banks that underwrite American diplomacy and cement the power of the dollar.
US diplomats had tried to persuade other countries to refrain from signing up to the Asian Infrastructure Investment Bank (AIIB), and were shocked when their closest ally, the UK, became the first G7 economy to join as a founding member. A senior US diplomat told the Financial Times that the Obama administration was “wary about a trend toward constant accommodation of China”, but Britain under David Cameron was busy making new friends; Chinese investment would help the country to recover from austerity. Over a pint with Xi, Cameron declared a new “golden era” in UK-China relations.
Beyond the Brexit vote, Cameron and his circle retained close ties to China. Danny Alexander, who had been chief secretary to the Treasury under Cameron, became a vice-president of the AIIB; Cameron himself became vice-president of a £1bn China-UK investment fund.
But China’s answer to the World Bank was far from an impartial development bank, according to the AIIB’s former global communications director, Bob Pickard, who resigned in June alleging that the institution was “dominated by Communist Party members”. When he was first approached, Pickard, a Canadian with two decades’ experience of working in Asia, was concerned about working for the AIIB. The bank “wooed” him, he told me, “saying, look, Bob we have all of these Western countries as members… We have all these letterhead names, people like Danny Alexander, and there’s a whole group of well-compensated, feather-nested expats on the website. And I was one of them, eventually.”
At first things went well. Pickard’s budget doubled, his team grew and he was moved to an office adjacent to the bank’s president, Jin Liqun, on the top floor of its headquarters in Beijing (offices in China often reflect corporate hierarchies). Over several months, however, Pickard’s concern grew that the AIIB was not a multilateral organisation but a top-down structure in which political interests held the true power. He was assigned a PA who, he says, was a Communist Party member who reported his team’s activities to a senior party official at the bank. “This to me indicated the presence, throughout the bank, of a subterranean system of intelligence gathering, directed to the president’s office.”
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Pickard described Danny Alexander as “the foreign face. He’s the ribbon cutter. He’s the guy in the window… the powdered-wig grandee.”
In time, he was warned not to get in the way of party members, whom he describes as “an elite inside the bank”, or to secure the support of political appointees if he wanted to win permission or investment for new projects. He knew, of course, how many party members there were in China, and he was aware that Jin himself was a former vice-minister of finance and had been a Red Guard as a student during the Cultural Revolution the 1960s. China remains the largest holder of voting shares in the bank, followed by India and Russia. As Pickard continued to work on the bank’s international image, he said, he saw firsthand how “the loan book of the AIIB serves Chinese interests”, advancing investment that complemented the projects of the Belt and Road Initiative, China’s transnational infrastructure programme.
Cameron has more recently been implicated in helping other countries to accept these often controversial developments, such as the Colombo Port City project in Sri Lanka. These projects can tie developing countries into expensive, long-term debts to China that can only be reduced by making political concessions. Sri Lanka had to hand over control of Colombo Port City three years after work was begun on it because it could not keep up with repayments. A Sri Lankan minister told Politico that the decision to involve Cameron in the Colombo project had come from China, not Sri Lanka.
“They may fund a new high-speed railway in Laos,” Pickard said, “and then saddle that country with a massive amount of debt.” The AIIB wouldn’t directly underwrite the railway, he told me, but the government of Laos might know that if they accepted the railway, the AIIB would finance a road-building project at the same time. “So the AIIB would, through its lending, lend a certain respectability to [Chinese state]-led capital mobilisation.”
Despite the promises made for it by Cameron, Alexander and others, the bank has become, he claims, “basically a hundred billion additional dollars funded by Western countries, including the UK, that buys China geopolitical credit”.
This shows the value of British politicians to China, he claimed, and explains why there has in his view been “a focus by [China] on the UK”. Canada has since suspended its involvement in the AIIB, but the bank denies Pickard’s claims and conducted an internal report which it says refutes them.
In July parliament’s Intelligence and Security Committee reported that it was possible the appointments of Cameron and Alexander to positions supporting Chinese finance “were in some part engineered by the Chinese state to lend credibility to Chinese investment”. Pickard said the appointment yesterday of Cameron, whom he calls a “poster boy for elite capture by Beijing”, as UK Foreign Secretary was a sign of Britain’s diminished position: lobbyist to the world.
[See also: John Gray on the return of David Cameron]
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