SEOUL - South Korea announced Thursday it would seek membership of the Chinese-backed Asian Infrastructure Investment Bank (AIIB), despite US opposition to the new multinational lender which Washington sees as a threat to the World Bank.
Chinese Finance Minister Lou Jiwei (centre) attends a signing ceremony for the Asian Infrastructure Investment Bank at the Great Hall of the People in Beijing on Oct 24, 2014.
Joining the AIIB as a founder member would strengthen South Korea's influence in the international banking sector and help domestic firms participate in large-scale regional infrastructure projects, a South Korean Finance Ministry statement said.
The question of joining the bank had posed something of a quandary for Seoul, which had to balance competing pressure from its main military ally, the United States, and its largest trading partner, China.
The ministry said the decision to sign up as a founder member came after China had addressed a number of outstanding governance issues regarding the new lender.
China is expected to foot the bulk of the initial $50 billion needed to get the bank started, with donations from other members set to increase the size of the overall fund to more than $100 billion.
China touts the institution as a tool for financing regional development alongside other lenders such as the US-based World Bank and the Japan-led, Manila-based Asian Development Bank (ADB).
President Barack Obama's administration has been waging an intense but low-profile lobbying campaign against the new bank, with officials suggesting it would lower international development standards.
Critics say Washington's opposition is simply down to concerns that the AIIB will undermine the institutions over which it holds more sway.
The US wields a veto on major decisions made by both the IMF and the World Bank, and has a lock on selecting the president of the World Bank.
Whatever the motivation, the argument over the AIIB is one the United States appears to be losing.
South Korea's decision came a week after France, Germany and Italy all said they were planning to join Britain in seeking membership, and Australia is believed to be close to a similar decision.
The move by the European powers was seen as easing South Korea's decision to ignore Washington's urgings to spurn the new bank.
But there could be a silver-lining for the US, in that Seoul may feel that by siding with China over the AIIB, it can now agree to the proposed deployment of a US missile defence system in South Korea that Beijing opposes.
Washington insists the Terminal High-Altitude Area Defence (THAAD) system is a necessary deterrent to North Korea's ballistic missile ambitions, while China argues that its deployment will undermine stability on the divided Korean peninsula.
Meanwhile, former Taiwanese vice president Vincent Siew, in a meeting with Chinese President Xi Jinping on Saturday, is expected to express Taiwan's desire to join the AIIB, people close to Siew told Kyodo News on Thursday.
The expression of participation appears to be in accordance with the instruction of the administration of President Ma Ying-jeou. Given the complicated relations between China and Taiwan, Beijing has until now not clearly indicated whether it would allow Taiwan to join the AIIB, and so the Taiwan side is closely watching Xi's response during the talks.
Siew and Xi will meet on the sidelines of the Boao Forum for Asia annual conference, which opens Friday in Boao, a coastal town in China's southernmost island province of Hainan.
Last October, China, which will be the AIIB's biggest shareholder, and 20 other countries, including Cambodia, India, Laos and Thailand, formally decided to launch the new bank by the end of this year.
China has said March 31 is the deadline for accepting the AIIB's founding members.
Taiwan and China have been governed separately since Nationalist forces led by Chiang Kai-shek were defeated by the Communists under Mao Zedong and fled to Taiwan in 1949. Beijing has since regarded Taiwan as a renegade province awaiting reunification by force if necessary.