China-backed multilateral bank took concrete shape this week
By Brenda Goh and Koh Gui Qing | Original Source
China’s President Xi Jinping (front C) poses for photos with guests at the Asian Infrastructure Investment Bank launch ceremony at the Great Hall of the People in Beijing October 24, 2014. REUTERS/Takaki Yajima/Pool
SHANGHAI/BEIJING (Reuters) – One of China’s biggest ever foreign policy successes took concrete shape on Monday when delegates from 57 countries signed an agreement on the Asian Infrastructure Investment Bank (AIIB) in Beijing.
The founding members of the China-backed AIIB signed articles of agreement that decided 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 U.S. 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 percent of the bank while European and other nations will own the remainder. Each Asian member will then be allotted a share of that 75 percent 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 percent stake, while India will be the second-biggest shareholder with a possible 10-15 percent, delegates at a meeting to finalize the new bank’s articles of agreement told Reuters in May.
Germany plans to take a 4.1 percent 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 A$930 million ($719.36 million) over five years to become the institution’s sixth largest shareholder.
Indonesia will be the eighth-largest shareholder in the AIIB with an investment of $672.1 million over five years, its finance ministry said on Sunday.
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.
($1 = 1.2928 Australian dollars)
(Additional reporting by Ben Blanchard in Beijing; Gayatri Suroyo and Fransiska Nangoy in Jakarta; Editing by Raju Gopalakrishnan)
Framework for China-led international bank signed
By Benjamin Haas | Original Source
Supporters of the Asian Infrastructure Investment Bank say fears over undue Chinese influence are overblown, and that the participation by more than 50 countries will dilute Beijing’s power (AFP Photo/Wang Zhao)
Beijing (AFP) – Countries from five continents formally signed up Monday to the China-led Asian Infrastructure Investment Bank — a potential rival to the Washington-based World Bank — as Beijing steps up its global diplomatic and economic role.
Australia was the first country to sign the articles of association creating the AIIB’s legal framework at a ceremony in Beijing’s Great Hall of the People, an AFP journalist saw, followed by 49 other founding members.
Seven more are expected to do so by the end of the year.
The bank will have a share capital of $100 billion, with $20 billion paid in initially, the document showed.
The signing “is an embodiment of the concrete action and efforts made by all countries in the spirit of solidarity, openness, inclusion and cooperation”, Chinese President Xi Jinping said after the ceremony.
Signalling China’s central role at the bank, he added: “Now we are willing to listen to your views and proposals.”
Australia’s Treasurer Joe Hockey (C) holds up his pen as he becomes the first to sign an articles of association to help set up the Asian Infrastructure Investment Bank during a ceremony at the Great Hall of the People in Beijing on June 29, 2015 (AFP Photo/Wang Zhao)
The AIIB has been viewed by some as a rival to the World Bank and Asian Development Bank, and the United States and Japan — the world’s largest and third-largest economies, respectively — have notably declined to join.
Earlier this month, former Federal Reserve Chairman Ben Bernanke rebuked US lawmakers for effectively encouraging the AIIB’s formation by blocking reforms giving developing nations a greater say in the IMF.
Beijing will be by far the largest AIIB shareholder at about 30 percent, the articles of association posted on the website of China’s finance ministry showed. India is the second biggest at 8.4 percent with Russia third on 6.5 percent.
The voting structure gives smaller members a slightly disproportionately larger voice, and a statement accompanying the articles said China will have 26 percent of the votes.
That is not enough to give Beijing a formal veto over all the bank’s decision-making, but it will still have an outsized say and a block on some votes which require a 75 percent majority — including the choice of the bank’s president, suspensions of members, and changes to the rules.
Chinese President Xi Jinping (R) speaks to Swiss Economy Minister Johann Schneider-Ammann (L) as he meets with the delegates attending the signing ceremony for the Articles of Agreement of the AIIB in Beijing on June 29, 2015 (AFP Photo/Wang Zhao)
“China’s shareholding and its voting power at the establishment of the AIIB is a natural result led by the rules decided by all members,” said Shi Yaobin, a vice finance minister, according to the official Xinhua news agency.
“China is not deliberately pursuing the veto power,” he added, saying share percentages could be diluted by future new admissions.
Among non-Asian participants, Germany is the largest shareholder with 4.5 percent, followed by France with 3.4 percent and Brazil on 3.2 percent.
The AIIB is expected to go into operation later this year and its headquarters will be in Beijing, despite calls from Indonesia that it be based in Jakarta, further cementing China’s prominence in the institution.
But all financial terms in the agreement are in US dollars, rather than China’s currency, the renminbi, and the bank’s working language will be English.
Russia’s Deputy Finance Minister Sergei Storchak leaves after signing an article of association to help set up the AIIB during a ceremony at the Great Hall of the People in Beijing on June 29, 2015 (AFP Photo/Wang Zhao)
– Transparency concerns –
Only 50 of the 57 countries that have applied for founding membership signed up in Beijing on Monday, and the finance ministry said the remainder — Denmark, Kuwait, Malaysia, Philippines, Poland, South Africa and Thailand — have yet to ratify the necessary agreements.
Washington sought to dissuade its allies from taking part but European countries including Britain, France and Germany have rushed to sign up as they seek to bolster ties with the world’s second-largest economy.
There are some concerns over transparency of the lender, which will fund infrastructure in Asia, as well as worries that a resurgent Beijing will use it to push its own geopolitical and economic interests.
The articles of association promise the bank will “be guided by sound banking principles in its operations” and ensure its operations comply with “policies addressing environmental and social impacts”.
But equally vague statements in the past have done little to soothe critics.
Supporters say fears over undue Chinese influence are overblown, and that the participation by more than 50 countries will dilute Beijing’s power.
The articles of association specify that the bank’s president must come from the Asian region and will serve a maximum of two consecutive five-year terms.
Shi, a vice finance minister, said that China will “recommend a strong and powerful candidate” for the position, Xinhua reported.
In Tokyo, Japan’s Chief Cabinet Secretary Yoshihide Suga said: “We hope the AIIB will play a role as a financial institution that contributes to Asia’s development while meeting standards of international institutions, including for its governance.
“We’d like to watch it closely, including its actual operations.”
Governments sign pact to create Chinese-led Asian bank
Chinese President Xi Jinping, ninth from right, poses for a group photo with Swiss Economy Minister Johann Schneider-Ammann, ninth from left, and delegates attending the signing ceremony for the Articles of Agreement of the Asian Infrastructure Investment Bank (AIIB) at the Great Hall of the People in Beijing Monday, June 29, 2015. Envoys of governments that plan to join the Chinese-led Asian bank endorsed a structure Monday that gives Beijing the biggest voting stake at the start but no veto power. The Beijing-based bank is part of China’s efforts to gain a bigger voice in global financial regulation that is dominated by the United States and Europe. (Wang Zhao/Pool Photo via AP)
BEIJING (AP) — Envoys of governments that plan to join a Chinese-led Asian bank endorsed a structure Monday that gives Beijing the biggest voting stake at the start but no veto power.
Each member of the Asian Infrastructure Investment Bank will receive voting shares in line with its contribution to the bank’s planned $100 billion in capital, under the proposed structure. As the biggest donor, Beijing would get 26 percent of votes, with India in second-place with 7.5 percent and Russia third with 5.9 percent.
Beijing’s proposal for the AIIB attracted unexpectedly wide support from U.S. allies including Britain, New Zealand, France, Australia and South Korea despite U.S. opposition. Washington and its ally Japan have refrained from seeking membership.
The Beijing-based bank is part of China’s efforts to gain a bigger voice in global financial regulation that is dominated by the United States and Europe.
The bank is intended to finance investments in railways, cargo ports and other trade links. The U.S. government had objected that the bank would undercut existing institutions such as the World Bank and might allow looser lending standards.
Some 57 governments have expressed interest in joining the AIIB, but not all signed Monday’s agreement. The Philippines said it and six other countries including Thailand and South Africa would not sign immediately and had until December to make a final decision.
Chinese President Xi Jinping, right, speaks to Swiss Economy Minister Johann Schneider-Ammann as he meets with delegates attending the signing ceremony for the Articles of Agreement of the Asian Infrastructure Investment Bank (AIIB) at the Great Hall of the People in Beijing Monday, June 29, 2015. Envoys of governments that plan to join the Chinese-led Asian bank endorsed a structure Monday that gives Beijing the biggest voting stake at the start but no veto power. The Beijing-based bank is part of China’s efforts to gain a bigger voice in global financial regulation that is dominated by the United States and Europe. (Wang Zhao/Pool Photo via AP)
“This proposal was designed to meet Asia’s infrastructure development and promote Asia’s connectivity and also deepen regional cooperation for the sake of development,” said Chinese President Xi Jinping during a meeting with the foreign envoys in the Great Hall of the People in central Beijing.
“The very fact that representatives from the 57 prospective founding members are gathering in this room today is testimony to this spirit of solidarity, cooperation, openness and inclusiveness.”
China’s voting share may be diluted as more members join, Vice Finance Minister Shi Yaobin told the official Xinhua News Agency.
“China is not deliberately seeking a veto power,” said Shi, according to Xinhua.
The bank will be led by a president with a five-year term that can be extended once. Its working language will be English.
In Washington, State Department spokesman Mark Toner said the new bank was a “positive sign” that China wants to play a bigger role in infrastructure investment, but reiterated U.S. concerns over governance standards.
“There’s clearly a need for that kind of investment in Asia but we want to see obviously the AIIB live up to the standards of other financial institutions,” he told reporters.