China pushed ahead with the creation of its proposed $50 billion Asia regional bank by signing a memorandum today with 21 countries, which didn’t include South Korea, Australia and Indonesia.
The proposed Asian Infrastructure Investment Bank (AIIB), first put forward by Chinese President Xi Jinping in October last year, is a key component of China’s efforts to expand its regional influence. The bank, a potential rival to institutions such as the Asian Development Bank, has been opposed by the U.S., which has asked its allies not to participate, the New York Times reported earlier this month.
The 21 “prospective founding member countries” at the signing ceremony included India, Vietnam, Singapore, Qatar, Thailand, Mongolia and Myanmar, according to a pool report of the event. Xi told delegates from the countries that all Asian nations “understand the importance of seeking strength through unity” and the AIIB will welcome participation by all countries either from within or outside of Asia.
“With or without support from the U.S. and its allies, China will continue to push ahead with new institutions, including the AIIB,” said Jin Canrong, a professor at the School of International Studies at Renmin University in Beijing. “It would be better to get Australia and South Korea on board, but it won’t hurt too much without them -- and the door is still open to them.”
World Bank, IMF
China, with $4 trillion in foreign exchange reserves, is adopting a “two-leg approach” to grow its own multilateral bodies, including the AIIB, the BRICS Bank and a bank for the Shanghai Cooperation Organization, while seeking to strengthen its voice at the World Bank and the International Monetary Fund, said Jin at Renmin University.
South Korea and Australia attended preparatory talks for the regional bank last month, according to a photo of a meeting on the Chinese Ministry of Finance’s website. U.S. Secretary of State John Kerry requested at a meeting with Australian Prime Minister Tony Abbott in Jakarta this week that Australia not join the bank, the Australian Financial Review reported.
China has held at least five rounds of discussions with interested countries on setting up the lender, according to the China’s finance ministry’s website. At a press conference closing an Asia-Pacific Economic Cooperation finance ministers’ meeting in Beijing this week, Chinese Finance Minister Lou Jiwei said the AIIB’s focus on infrastructure development in the region will supplement existing agencies, including the ADB and the World Bank, which lean toward poverty reduction.
ADB President Takehiko Nakao said establishing the AIIB was “understandable” given Asia’s huge infrastructure funding needs, and that the ADB would be ready to consider collaboration. Japan has held the presidency of the ADB since the institution was founded in 1966.
“It is vitally important that AIIB adopt international best practices in procurement and environmental and social safeguard standards on its projects and programs,” Nakao said in a statement on the ADB’s website.
At the ADB, Japan and the U.S. are the two largest shareholders, with 15.7 percent and 15.6 percent, respectively. Those two countries have combined voting power of almost 26 percent, compared with China’s 5.47 percent, according to the bank’s website.
Xi said at today’s ceremony that the AIIB will “learn from” good practices at the World Bank and the ADB to become “an inclusive, highly-effective and well-connected economic cooperation platform.”