(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R000400870001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: January 12, 2017
• Document Release Date: May 18, 2011
• Sequence Number: 1
• Publication Date: March 17, 1983
• Content Type: MEMO

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Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
17 March 1983
China and the Asian Development Bank
Summary
China's recent decision to request membership in the Asian
Development Bank--and to demand Taiwan's expulsion--injects
another note of contention into US-China relations. Beijing
appears in no mood to compromise. Indeed, by publicly scoring
the US stand on the issue, the Chinese seem intent on pressing
the United States and other ADB members to demonstrate their
adherence to a one China policy.
Taiwan will not withdraw from the bank voluntarily. It has
even indicated it is willing to remain a member if Beijing
joins--the first time Taipei has acceded, even in principle, to
dual membership in any international political or finanacial
institution. If that ploy fails, Taiwan is likely to invoke the
Taiwan Relations Act increasingly to induce the United States to
support its position against China.
Japan and other bank members, meanwhile, are temporizing.
Although they have told Beijing they will support China's bid for
ADB membership, we believe they hope the United States will
devise a means for Taiwan to remain in the bank. If Beijing
rejects a reasonable US compromise proposal, we believe some bank
This memorandum was prepared by
the China Division and the Northeast
Asia Division of the Office of East Asian Analysis.
EA M 83-10051
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members might reduce or drop their support for Beijing's
membership.
Background
The ADB was established in 1966 to provide financial and
technical assistance to the developing countries of the Asian and
Pacific region. Korea, Pakistan, and the ASEAN countries have
been the bank's major borrowers. There are now 31 regional and
14 non-Asian member states (see annex). The bank is set up like
the World Bank to provide both hard and soft loans. A subsidary,
the Asian Development Fund (ADF), for example, provides 40-year
loans to the region's poorest countries with a service charge of
only 1 percent. The bank's ordinary loans are currently offered
at an 11 percent interest rate. As of 31 December 1982 the
bank's authorized capital was $8 billion while the fund had $3.6
billion in cumulative resources. Since its founding the bank has
provided $8 billion in hard loans and $3.5 billion in soft
loans. The US contribution to the bank last year was $134
Taiwan is a founding member of the bank and last borrowed
from it in 1971. In fact, it currently owes the bank only $42
million and last year contributed $2 million to the ADF. Unlike
its previous membership in,the UN and the World Bank, Taipei's
membership, capital share, vote, and loans at the ADB are based
generally on Taiwan's economy and population, rather than all of
Why China Wants to Join
Beijing initially sought ADB membership to gain access to
additional international financing and to remove Taiwan from the
bank. We believe it thought it could simply replace Taiwan as it
had in the World Bank. When it became clear by January, however,
that Taiwan would fight to retain its seat and that other ADB
members were not in favor of Taiwan's expulsion, the matter took
on increased political importance for Beijing. Indeed, we
believe the Chinese now view their quest for membership primarily
as a way of forcing the United States and other key ADB members
to demonstrate their commitment to a one-China policy. To win
support and allay concern that China could become a drain on the
bank's resources, Beijing has begun to reassure some bank members
that it will take the ADB's limited assets into account in
applying for loans.
China's inability to obtain adequate World Bank assistance
influenced its original decision to join the ADB. Beijing joined
the World Bank in 1980, too late to take advantage of the last
replenishment of the bank's soft loan subsidiary--the
International Development Association (IDA). As a result, it has
obtained only $460 million in World Bank loans so far.
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China's growing rivalry with India for international
development loans also played a pabroke a gentlemen's agreement
F_ I
with the ADB not to seek ADB funds.
To avoid the problems it encountered at the World Bank,
Beijing decided to apply for ADB membership before the bank
approved its next general capital increase for the 1983-87
period. As a result, China began sounding out ADB members last
fall and on the basis of a generally favorable reaction made
formal demarches to bank members in November. In January, when
the United States and Japan expressed only qualified support for
China's position--i.e., refused to support explicitly China's
demand for Taiwan's ouster--and Taiwan began to campaign for
support, Beijing. demanded Taiwan's expulsion as a precondition
for China's joining the bank.
In early February, Chinese officials told Secretary Shultz
that they were disappointed with the United States for not
issuing a clear unequiviocal statement of support for China's
membership and Taiwan's explusion. On 8 March China went further
and for the first time publicly criticized the United States
position as being inconsistent with the Sino-US communiques of
1978 and 1982. The Chinese Foreign Ministry's press spokesman
accused the US of "laying obstacles" to China's admission.
Several days later, a Foreign Ministry official used a meeting
with US embassy officials on another topic to underscore Chinese
unhappiness with the US position.
In late February, China formally notified the ADB of its
plans to join the bank and requested the bank take immediate
action to terminate Taiwan's membership. Chinese officials have
indicated that they would like to begin consultations with the
bank, but have suggested that the ADB initiate this move. The
ADB's president indicated that he would have to seek the guidance
of the bank's board of directors. The board is scheduled to meet
informally with its general counsel on 22 March to discuss the
issue before possibly taking up the request at its annual meeting
in early May.
Taiwan's Gamble
The ADB is the only remaining international financial or
political organization of which Taiwan is a member.
Taiwan has raised no objections to China joining the
ADB, presumably banking on a Chinese refusal to accept joint
membership. At the same time, Taipei is trying to enlist US
support, arguing that the Taiwan Relations Act precludes US
recognition of Beijing from being used as a basis for expelling
Taiwan from any international organization.
Thus far, officials in Taiwan have refused to entertain
other compromise solutions, such as changing its name in the ADB
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to "China, Taipei," as it did. in order to remain a member of the
International Olympics Committee. In late January, following an
emergency Taiwan cabinet meeting, Taiwan officials also told US
representatives in Taipei that Taiwan would not accept unofficial
association with the bank.
Regional Reactions
Japan and most other ADB members have told Beijing that they
will support China's request for admission, despite their concern
that China could become a drain on the bank's resources.
/ Most bank members appear to
be hoping the United States will be able to devise a compromise
that would allow Taiwan to remain in the bank.
Japan, which is the ADB's leading contributor, faces an
especially uncomfortable dilemma. In our opinion, Tokyo does not
want to damage its recently improved relations with Beijing,
which soured briefly last year during the textbook controversy.
But neither,does it want to anger Taiwan, with which Japan has
lucrative trading ties, or upset the pro-Taiwan lobby in the
Diet.P
Korea, Australia, and Canada also have expressed their
support for China's membership in the bank to Beijing but they
would like to see Taiwan continue to play a role if that can be
arranged. Korea has assured Taiwan of its support but added it
will not lobby other ADB members on Taiwan's behalf. Like Japan,
Australia has avoided taking a position on Taiwan's expulsion.
Canada has suggested that it might work out a joint approach with
the United States to handle China's admission.
Is Compromise Possible?.
The current atmosphere in US-China and US-Taiwan-'relations
makes the working out of any compromise more difficult than in
the past. Beijing is convinced that the United States is only
paying lip-service to a one China policy, while Taipei is more
confident of US support than it has been in years. Having turned
the ADB issue into yet another test of US policy, therefore, the
Chinese are unlikely to agree quickly to a compromise, if at
all. Nor will Taiwan easily accede to a downgrading of its
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status in the bank--the only way we can see for both to belong to
the ADB.
Still, a compromise may be possible. The Chinese have
stressed that their main concern is that the ADB--and especially
the United States--acknowledge that Beijing represents China.
Hence, they will almost certainly demand, at a minimum, that
Taipei lose its official voting status. Beijing might then be
more amenable to Taiwan's continued participation in the bank in
a noncountry status, similiar to Hong Kong. Although Taiwan has
publicly rejected such a solution, it has hinte
it might agree to an arrangement similiar to the one that
permitted Taiwan to remain in the IOC as "China, Taipei."
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SUBJECT: China and the Asian Development Bank
Distribution:
National Security Council
1 - Gaston Sigur, Senior Staff Member for Asia and Pacific
Department of State
1 - Honorable Paul Wolfowitz - Asst. Sec. for East Asian and
Pacific Affairs
1 - William F. Rope, Director, Office of Chinese Affairs, Bureau
of East Asian and Pacific Affairs
1 - Wever Gim, Director, Office of Analysis for East Asia and the
Pacific, Bureau of Intelligence and Research
1 - Donald Ferguson, Advisor, Taiwan Coordination Staff, EA/RA
Department of Treasury
1 - Doug Mulholland - Intelligence Liaison Office
1 - Patsy Haas, Office of East-West Policy
1 - Rob Cox - Office of Multilateral Development Banks
Department of Commerce
1 - David Peterson, Office of Intelligence Liaison
Office of the U.S. Trade Representative
1 - John E. Ray, Assistant U.S. Trade Representative
1 - William Triplett, Director, East-West Affairs
DIA
1 - Charles DeSaulnier - DIO - DIA
Central Intelligence Agency
DDI
NIO/EA
Chief, China DDO
D/NIC
PDB
FBIS/Analysis Group/China
FBIS/Near East, Asia, Africa Division/China
Economy Branch
OCR/EA
D/OEA
Chief/China Division
OEA/CH/DEV
OEA/CH/DOM
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1 - OEA/CH/FOR
1 - OEA/CH/DEF
5 - OCO/IMB/CB
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ADB Subscriptions and Voting Power by Country
REGIONAL
Country
Subscribed
Shares
Percent of
Total Voting
Po
wer
Afghanistan
1,195
0
578
Australia
49,937
.
6
024
Bangladesh
8,812
.
1.429
Bhutan
110
0
457
Burma
4,700
.
0
969
Cambodia
875
.
0.542
China, Republic of
9,400
1
494
Cook Islands
23
.
0
447
Fiji
587
.
0
510
Hong Kong
4,708
.
0
969
India
54,637
.
6
549
Indonesia
47,000
.
5
696
Japan
117,500
.
13
573
Kiribati
35
.
0
448
Korea, Republic of
43,475
.
5
302
Laos
246
.
0
472
Malaysia
23,500
.
3
070
Maldives
35
.
0
448
Nepal
1,269
.
0
586
New Zealand
13,254
.
1
926
Pakistan
18,800
.
2
545
Papua New Guinea
810
.
0
535
Philippines
20,562
.
2
742
Singapore
2,937
.
0
773
Solomon Islands
58
.
0
451
Sri Lanka
5,005
.
1
003
Thai land
11,750
.
1
757
Tongo
35
.
0
448
Vanuatu
58
.
0
451
Viet Nam
6,038
.
119
1
Western Samoa
58
.
0.451
TOTAL REGIONAL
447,401
63.764
NON-REGIONAL
United
States
117,500
13
573
Austria
2,937
.
0.773
Belgium
2,937
0
773
Canada
45,143
.
5
488
Denmark
2,937
.
0
773
Finland
1,175
.
0
576
France
14,687
.
2.085
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Country
Germany, Fed. Pep. of
Italy
Netherlands
Norway
Sweden
Switzerland
United Kingdom
TOTAL NON-REGIONA(.
TOTAL
Subscribed
Shares
Percent of
Total Voting
Power
37,334
4.615
11,750
1.757
6,46?
1.166
2,937
0.773
1,175
0.576
4,037
0.895
17 )625
2.413
268,636
36.236
716,037
100.000
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