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Paulson Downplays China’s New Infrastructure Bank

The Honorable Henry M. Paulson, Jr.

Politicians rarely agree, let alone three U.S. Treasury Secretaries.

Former U.S. Treasury Secretary Hank Paulson played down the significance of China’s new Asian Infrastructure Investment Bank during a talk in London, saying that it’s not a “cataclysmic event” for U.S. power in the world.

“This is not some huge watershed event that marks some turning point for China and the downfall of the west,” Mr. Paulson said Monday at the London School of Economics, where he discussed his new book, “Dealing With China: An Insider Unmasks the New Economic Superpower.”

His view contrasted with another former Treasury secretary, Larry Summers, who said in April that China’s push to create the new multilateral lender, and the U.S.’s failure to prevent allies including the U.K. from staying out of it, “may be remembered as the moment the United States lost its role as the underwriter of the global economic system.” Current Treasury Secretary Jacob Lew also criticized European support for the new bank.

The AIIB has proved a divisive issue between America and its allies. In March several key European countries publically rebuffed Washington’s desire to snub the new initiative. In late April President Barack Obama said: “Let me be very clear and dispel this notion that we were opposed or are opposed to other countries participating in the Asia infrastructure bank,” as long as the new venture incorporates “best practices.”

Mr. Paulson, also a former Goldman Sachs CEO, said that the U.S. should have joined the bank and that the U.K. was right to do so.

China, unlike the U.S., is already the leader in infrastructure financing, which the world needs more of, he said.

“China is not going to try and throw out – they couldn’t if they wanted to – the global financial infrastructure. They are going to want to participate in it; we need to make room for them; they are going to want to have some initiatives themselves and we need to participate with them,” he said. “If you want to pick a fight, you want to pick a fight that you can win, you know. That was clearly a losing fight.”

“The world needs better infrastructure funding and I don’t think the existing multilateral institutions do a great job,” Mr. Paulson said.

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