The world is rushing to join the new Asian Infrastructure Investment Bank, which is China’s alternative to the U.S.-influenced World Bank.
The Shanghai-based bank would raise $50 billion to invest in Asian infrastructure projects, such as dams, airports and electric power plants.
Only founding members are entitled to a vote. Reuters reported that voting will be weighted so that Asian members have 75 percent. China will announce the names of the founding members on Wednesday (April 15). The Economist explained:
The AIIB is but one of a number of new institutions launched by China, apparently in frustration at the failure of the existing international order to accommodate its astonishing rise.
Efforts to reform the International Monetary Fund are stalled in the American Congress. America retains its traditional grip on the management of the World Bank. The Manila-based Asian Development Bank (ADB) is always directed by a Japanese official. [snip]
China, flush with the world’s biggest foreign-exchange reserves and anxious to convert them into “soft power”, is building an alternative architecture.
It has proposed not just the AIIB, but a New Development Bank with its “BRICS” partners—Brazil, Russia, India and South Africa—and a Silk Road development fund to boost “connectivity” with its Central Asian neighbors.
Nobody questions Asia’s almost inexhaustible appetite for investment in infrastructure. An oft-cited study by the ADB in 2009 put a number on it: $8 trillion between 2010 and 2020, of which 68 percent would be for new capacity. As for how it is spent, 51 percent would be for electricity, 29 percent for roads and 13 percent for telecommunications.
Among these are many projects that China sees as in its own national interest, and certainly those of its contractors: high-speed railways linking Yunnan province to South-East Asia; ports in Indonesia, Pakistan and Sri Lanka; a new Silk Road across Central Asia to Europe.
via The Economist.
The fact that so many countries want to join the bank shows they are more interested in being in the good graces of China than in the good graces of the United States.
How powerful the bank will be remains to be seen. The World Bank, headquartered in Washington, has 188 members and $223 billion in capital. The Asian Development Bank has 67 members, including the USA, and $160 billion in capital. If Asia has $8 trilli0n in infrastructure needs, this means there is room for 150 banks the size of the new AIIB.
It’s like a lot of things being announced by China these days. They could be turning points of history, and they could be nothing at all.
The main significance of the AIIB is that countries in Asia and maybe elsewhere will have some choice between borrowing money from a Chinese-backed bank and a US-backed bank, rather than having to take or leave the terms offered by US-backed banks.
The power of the new Chinese investment bank by Richard Javed Heydarian for Al Jazeera.
Japan tiptoes closer to joining China’s AIIB by Asia Times.
China’s influence over AIIB a concern ahead of founders’ meeting by Izumi Nakagawa and Mamoj Kumar for Reuters.
Pessimistic Views of China’s Economy Are Unconvincing by Jim O’Neill, former chair of Goldman Sachs Asset Management and the coiner of the BRICS acronym.
China Seeks Gateway to Europe With Greek Port by Alexander Smotzczyk for Der Spiegel.