File Photo: China's President Xi Jinping with guests at the Asian Infrastructure Investment Bank launch ceremony in Beijing on October 24, 2014. (Reuters)
Shanghai:
One of China's biggest ever foreign policy successes will take concrete shape on Monday when delegates from 57 countries sign an agreement on the Asian Infrastructure Investment Bank (AIIB) in Beijing.
The founding members of the China-backed AIIB will sign articles of agreement that decide each member's share and the bank's initial capital.
The multilateral institution, seen as a rival to the Western-dominated World Bank and Asian Development Bank, was initially opposed by the United States but has attracted many prominent US allies including Britain, Germany, Australia and South Korea. Other founding members include most Asian nations and countries from the Middle East and South America.
Japan and the United States are the most prominent nations not represented in the bank. China has said it has left the door open for them to join.
"It's a huge diplomatic and strategic win for China," said Malcolm Cook, a senior fellow at the Institute of Southeast Asian Studies in Singapore, said of the AIIB.
"But the fact that so many have signed on will mean that the management of the AIIB will be quite complicated...The more countries you have on board, the more interests will be at play and more each member will of course want the institution to serve their own interests."
One senior Western diplomat in Beijing said China had felt it had no choice but to set up its own bank after repeated attempts to reform existing institutions like the International Monetary Fund to take into account China's role as the world's second-largest economy were blocked in Washington.
"The United States only has itself to blame," said the diplomat, from a country which has signed up to the AIIB, speaking on condition of anonymity.
Asian countries are expected to own up to 75 per cent of the bank while European and other nations will own the remainder. Each Asian member will then be allotted a share of that 75 per cent quota based on their economic size, two Japanese sources have said.
The AIIB will begin with authorized capital of $50 billion, eventually to be raised to $100 billion.
China is likely to hold a 25-30 per cent stake, while India will be the second-biggest shareholder with a possible 10-15 per cent, delegates at a meeting to finalise the new bank's articles of agreement told Reuters in May.
Germany plans to take a 4.1 per cent stake to become the fourth-biggest member after China, India and Russia, according to a finance ministry draft document seen by Reuters earlier this month.
Australia said last Wednesday it would contribute $719.36 million over five years to become the institution's sixth largest shareholder.
China says it will not hold veto power within the AIIB, unlike the World Bank where the United States holds a limited veto.
The AIIB is the brain child of influential Chinese think-tank China Center for International Economic Exchanges, or CCIEE, which is helmed by former vice premiers and ambassadors, among others. The think-tank had proposed the creation of the bank in 2013 as an institution that balances China's political and economic priorities, CCIEE officials said.
"The AIIB has made a lot of progress so far in its preparatory work,but this is only the first step in a long road ahead," Chinese Finance Minister Lou Jiwei said in a commentary published on the website of the official People's Daily newspaper on Thursday.
"It will require a lot more effort to bring the AIIB up to the standards of global financial institutions."
Apart from backing the AIIB, China has also pledged billions of dollars to the Silk Road fund and the "One Belt, One Road" initiative, which are also aimed at funding infrastructure to increase trade and connectivity between Europe and Asia.
The founding members of the China-backed AIIB will sign articles of agreement that decide each member's share and the bank's initial capital.
The multilateral institution, seen as a rival to the Western-dominated World Bank and Asian Development Bank, was initially opposed by the United States but has attracted many prominent US allies including Britain, Germany, Australia and South Korea. Other founding members include most Asian nations and countries from the Middle East and South America.
Japan and the United States are the most prominent nations not represented in the bank. China has said it has left the door open for them to join.
"It's a huge diplomatic and strategic win for China," said Malcolm Cook, a senior fellow at the Institute of Southeast Asian Studies in Singapore, said of the AIIB.
"But the fact that so many have signed on will mean that the management of the AIIB will be quite complicated...The more countries you have on board, the more interests will be at play and more each member will of course want the institution to serve their own interests."
One senior Western diplomat in Beijing said China had felt it had no choice but to set up its own bank after repeated attempts to reform existing institutions like the International Monetary Fund to take into account China's role as the world's second-largest economy were blocked in Washington.
"The United States only has itself to blame," said the diplomat, from a country which has signed up to the AIIB, speaking on condition of anonymity.
Asian countries are expected to own up to 75 per cent of the bank while European and other nations will own the remainder. Each Asian member will then be allotted a share of that 75 per cent quota based on their economic size, two Japanese sources have said.
The AIIB will begin with authorized capital of $50 billion, eventually to be raised to $100 billion.
China is likely to hold a 25-30 per cent stake, while India will be the second-biggest shareholder with a possible 10-15 per cent, delegates at a meeting to finalise the new bank's articles of agreement told Reuters in May.
Germany plans to take a 4.1 per cent stake to become the fourth-biggest member after China, India and Russia, according to a finance ministry draft document seen by Reuters earlier this month.
Australia said last Wednesday it would contribute $719.36 million over five years to become the institution's sixth largest shareholder.
China says it will not hold veto power within the AIIB, unlike the World Bank where the United States holds a limited veto.
The AIIB is the brain child of influential Chinese think-tank China Center for International Economic Exchanges, or CCIEE, which is helmed by former vice premiers and ambassadors, among others. The think-tank had proposed the creation of the bank in 2013 as an institution that balances China's political and economic priorities, CCIEE officials said.
"The AIIB has made a lot of progress so far in its preparatory work,but this is only the first step in a long road ahead," Chinese Finance Minister Lou Jiwei said in a commentary published on the website of the official People's Daily newspaper on Thursday.
"It will require a lot more effort to bring the AIIB up to the standards of global financial institutions."
Apart from backing the AIIB, China has also pledged billions of dollars to the Silk Road fund and the "One Belt, One Road" initiative, which are also aimed at funding infrastructure to increase trade and connectivity between Europe and Asia.
© Thomson Reuters 2015
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