In another step into the future, China has joined with thirty other countries to open the Asian Infrastructure Investment Bank (AIIB). The new AIIB president, Jin Liqun, told attendees at the Saturday, January 16th launch ceremony that the bank has already acquired “a good pipeline” of financing projects, including stand-alone projects and (with other international banks) co-financed projects around the region. Stating a simple truth, Chinese Premier Li Keqiang, commented that a stronger infrastructure would be necessary for China and Asia to continue as the world’s most dynamic region for global development and growth.
Despite American opposition, many western countries were among the launch partners, including Australia, Germany, Britain, Italy, South Korea and the Philippines. Their participation indicates a recognition of China’s current and future place in the world’s economy as a leader and a producer of high-quality goods.
Wealthier nations may be eying the new bank as another opportunity to grow their current investments in the continent. Luxembourg’s finance minister Pierre Gramegna commented that its establishment indicated a “rebalancing” of the world’s economy. Peter Drysdale, an emeritus economics professor at Australian National University said that, for countries like Australia that are already heavily invested in Asia, the new bank offers opportunities to invest in the success of those partners.
The British Foreign Secretary Philip Hammond noted that, as a founding member, Britain can offer its experience and expertise in international financial institution regulation. He was commenting on how the international community would have the opportunity to help shape and develop the new bank’s activities and obligations.
Russia’s deputy director of the Institute of World Economy and International Relations at the Russian Academy of Sciences, Vasily Mikheyev, emphasised how the opportunity opened doors for Chinese investors to invest in their own economy and also creates demand by international buyers for Chinese goods.
Emerging economies in the area are also enthused by the new financial entity. Many Asian countries already have well-developed manufacturing and production industrial sectors, but the surrounding infrastructure to support them is weak or, in some place, non-existant. Modern factories are staffed by employees who have no access to hygienic water or sewer services in their homes or communities. Nepal’s Baikuntha Aryal, the joint secretary of that country’s Ministry of Finance, is looking to find funding to build roads, hydropower and urban development projects. Thailand’s deputy finance minister, Wisudhi Srisuphan, commented on the increased connectivity and reduction of unnecessary costs that occurs when there is appropriate financial support for infrastructure development.
In Viet Nam, Tran Viet Thai, deputy director of the Institute for Foreign Policy and Strategic Studies at the Ministry of Foreign Affairs Diplomatic Academy, expressed that nation’s hope that the bank will operate away from political forces, and adopt international banking standards that are transparent and fair to all lenders. As a founding member of the Bank, Viet Nam plans to further its policy of multi-lateralization, diversification and integration with other economic partners.
Chinese President Xi underscored the value of the financial entity to its name constituents – Asian countries: “Asia’s financing needs for basic infrastructure are enormous.” The thirty founding countries have ratified the AIIB agreement; among them, they hold 74 percent of the new bank’s shares. Remaining countries that have agreed to participate have until the end of this year to complete that process.
Next week, I’ll talk about how the new institution might act as a competitor to the World Bank and its International Monetary Fund.
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