AIIB launched: Chinese President Xi Jinping launched its new international development bank on Saturday, as Beijing seeks to change the unwritten rules of global development finance. Despite opposition from Washington, U.S. allies including Australia, Britain, German, Italy, the Philippines and South Korea have agreed to join the Asian Infrastructure Investment Bank (AIIB) in recognition of China’s growing economic clout.
“Asia’s financing needs for basic infrastructure are absolutely enormous,” Xi said in a speech at the launch, adding the bank would aim to invest in projects that were “high-quality, low-cost.” In order for Asia to continue to be the most dynamic region for global growth, it needs to invest in infrastructure and connectivity, Premier Li Keqiang said, during the afternoon session of the opening ceremony.
Luxembourg Finance Minister Pierre Gramegna said the establishment of the AIIB was “further proof of the rebalancing of the world economy.”
China has an initial subscription of $29.78bn out of a total of $100bn in authorized capital stock and announced at the launch that it was investing a further $50m.The
AIIB is expected to lend $10-$15bn a year for the first five or six years and will start operations in the second quarter of 2016. The new development bank will only lend in US dollars, according to its president Jin Liqun.
“As a multilateral development institution and taking into account the existing international financial system, we use English as a working language and the US dollar as the currency of the institute. However, in order to attract capital from the international market, we assume obtaining investments in US dollars, euros, yuan and other currencies,” he said at the launch ceremony.
Baikuntha Aryal, joint secretary at Nepal’s Ministry of Finance, said the Himalayan country was hoping the AIIB would fund roads, hydropower and urban development projects. “The AIIB is specifically for infrastructure so we see it as a supplement to projects in Nepal funded by the ADB (Asian Development Bank) and World Bank,” he said.
The AIIB will require projects to be legally transparent and to protect social and environmental interests, but it will not force borrowers to adopt the kind of free-market practices favored by the IMF.
By not insisting on some free market economic policies recommended by the World Bank, the AIIB is likely to avoid the criticism leveled against its rivals, which some say impose unreasonable demands on borrowers. It could also help Beijing stamp its mark on a bank regarded by some in the government as a political as much as an economic project.
According to Reuters, a successful AIIB that sets itself apart from the World Bank and the International Monetary Fund (IMF) would be a diplomatic triumph for China, which opposes a global financial order it says is dominated by the United States and does not adequately represent developing nations.