Apr. 13 – China has withheld approval for a multilateral development loan by the Asian Development Bank to India, the first time such a move has been taken. The situation is now worrying global leaders, concerned that an increase in China’s lobbying capabilities on an international basis will see a parallel increase in its veto powers being used for self interest, rather than global and regional purposes.

The loan was to have been used for projects in flood management, water supply and sanitation in the northeast region of Arunachal Pradesh, which China has territorial claims on. Although the area has never officially been part of China, the two countries fought a border war over the territory in 1962. China won that skirmish, but then pulled back its troops. China in recent times has however continued to claim the region as disputed and minor border incursions by China have not been uncommon. The area is agriculturally fertile. The other disputed border area China has with India is in the Himalayan plateau, on the border with Tibet. No recent conflicts have occurred in this location.

India was the biggest recipient of ADB loans last year, lending for projects worth close to US$3 billion. The ADB had never previously deferred a loan to the country.

The conflict raises concerns of future conflicts should China gain more concessions over voting rights and additional veto powers as part of its growing stature within the international community. Beijing is lobbying hard for a greater say within the IMF and other international organizations, and fears are if provided, China will use these to influence programs its sees impinge upon its national or political interests. China appears to be pursuing a path that could see it wield veto powers against projects or even rescue packages for countries that did not comply with China’s own political demands.