On October 24th in Beijing, 21 countries, including China, India and Singapore, signed a bill to formally recognize the establishment of the Asian Infrastructure Investment Bank (AIIB). Some in the West view this new institution as a threat to the strength and operations of the existing multilateral financial institutions. But as has been pointed out by Chinese Finance Minister Lou Jiwei, the AIIB will mainly focus on Asian countries and their infrastructure development, and it will work to complement and cooperate with the Asian Development Bank (ADB) and the World Bank (WB). In other words, on the world economic stage, as a newcomer, the AIIB will be complementary to rather than in competition with existing financial institutions.
The AIIB is headquartered in Beijing, with a registered capital of 100 billion dollars, four-sevenths of ADB's 175-billion-dollar investment scale. The subscribed capital of the bank is around 50 billion dollars, and the paid-up capital amounts to twenty percent of the subscribed capital.
In fact, the WB, the ADB and numerous other multilateral financial institutions focus principally on worldwide poverty alleviation. Their funds for Asian infrastructure construction and development are very limited, and far from what is required by Asian countries. "So the founding of AIIB not only represents China's fulfilling its responsibilities as a major power, but also responds to a practical need for Asian development," said Jia Kang, the director and research fellow of the Institute for Fiscal Science Research under the State Ministry of Finance.
According to the Asian Bank's forecast, from 2010 to 2020, infrastructural Iinvestment in Asian economies will reach 80 trillion dollars, and regional infrastructure investment is likely to reach 300 billion dollars. However, the Asian Bank can provide new loans and projects of only 1.3 billion annually. Thus the establishment of the AIIB is an important new source of funding for Asian countries. It will help to make up the shortfalls in the world financial system for funding Asian infrastructure construction and development.
Though the establishment of the AIIB has been affirmed and supported by most Asian countries, some Asian giants have failed to join the bank as a result of lobbying by the United States. "The AIIB is dedicated to promoting the construction and development of better infrastructure among Asian countries. Not only does the United States refuse to join, it is adopting every possible means to deter others - its so called allies - from becoming sponsor nations of the bank. What it has done in politicizing economic issues runs counter to the aspirations and interests of the peoples of Asia," said Shi Jianxun, director of the Institution of Economics and Finance of Tongji University.The simple truth is that the United States is worried that China will dominate the AIIB in the future. Therefore, it seeks to question whether the AIIB can meet international standards in management and transparency.
As explained by Lou Jiwei, China will contribute fifty percent of the bank's capital, which shows China's determination to establish the bank: "As more member states join, China's share will drop accordingly. The AIIB is an open and inclusive institution. All countries that work to promote Asian and global economic development can apply for membership. As the organization develops, more and more countries and economies will become member states of the AIIB."
Sadly, some western media are describing the AIIB as a 'rival' to the IMF, the World Bank and other regional and international financial institutions.
"To be honest, China's plans to establish the AIIB are directed primarily to meeting the needs of the international economy and Asian infrastructure development. The bank is a mechanism to promote cooperation among Asian countries by means of taking on the responsibilities of a developed country. The AIIB is an open and inclusive institution, which will not replace any existing multilateral development bank. Instead, it will complement and cooperate with the WB and the ADB to satisfy the needs of Asian countries in infrastructure development and promote common progress and prosperity worldwide," said Hua Chunying, the Deputy Director of Foreign Ministry Information Department of the People's Republic of China.From the perspective of historical experience, there is no reason to believe that the founding of regional multilateral development banks such as the AIIB and the European Bank for Reconstruction and Development (EBRD) will weaken the influence of the WB and other multilateral development banks. On the contrary, they will helps to add strength to multilateral development finance and boost the global economic environment.
