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9 Mar, 2014

China Exclusive: Wheels in motion for new US$50 billion Asian investment bank

BEIJING, March 7 (Xinhua) — China has begun the practical work to establish an Asian Infrastructure Investment Bank (AIIB) that would offer financial support to boost regional infrastructure, said China’s Finance Minister on Friday.

“China has just established the Working Group for the AIIB preparation in a bid to accelerate the process,” said Lou Jiwei in an exclusive interview with Xinhua News Agency on Friday.

With a preliminary capital scale of 50 billion U.S. dollars, the new multilateral institution is expected to be funded by its members.

According to Lou, the first multilateral consultation meeting on establishing the AIIB ended on Jan. 24 and saw discussion of the framework plan for the bank. Some participating countries declared their intention of being the AIIB’s founding members. Bilateral discussions are under way.

“China welcomes more countries to join the AIIB as founding members and hopes that an inter-governmental memorandum of understanding (MOU) on establishing the bank can be signed in the coming fall,” he said.

Immediately after the MOU is signed, member countries of the AIIB will start negotiation on legal documents about the bank, so as to put it into real operation as early as possible, the minister added.

The creation of the bank was put forward by Chinese leaders, including Chinese President Xi Jinping and Premier Li Keqiang, during their visits to southeastern Asian countries in October 2013.

Asia’s economy has been growing relatively fast with deepening regional economic and trade cooperation, but it is also facing many challenges, especially as new markets and developing countries are suffering from backward infrastructure, Lou noted.

Funds in the current multilateral development banks are limited and saving rates are relatively high in many countries in Asia, so it is necessary to consider establishing a new regional platform for investment and fund-raising to channel more funds into infrastructure, he said.

According to Lou, the AIIB will be a multilateral development institution in Asia and simulate other Multilateral Development Banks (MDBs) in operational modalities and principles.

The fundamental mandate of the AIIB is to promote Asian economic development and regional economic cooperation by providing financing in infrastructure and other productive areas in Asian countries.

“If conditions become ripe, it may also expand its business beyond the region,” Lou said.

He explained that AIIB’s authorized capital will be paid by its members in installments and may grow following future business expansion, while “the final capital sizes and shares of various parties shall be settled by the AIIB founding members through consultation and negotiations.”

In addition, as a new regional MDB, the AIIB has different priorities and focuses compared to the existing MDBs.

“The AIIB will mainly focus on infrastructure construction in Asia to promote regional connectivity and economic cooperation. The existing MDBs, such as the World Bank and the Asian Development Bank, meanwhile put their priorities more on poverty reduction,” Lou said.

In view of the huge financing gap in the infrastructure sector, due to differentiated mandates and priorities, the relationship between the AIIB and existing MDBs will be complementary and cooperative rather than competitive, the minister added.

Lou said China will promote cooperation between the AIIB and the existing MDBs so as to jointly advance the sustainable and stable development of Asian economies.

“We believe that with the joint efforts of all the founding members, the AIIB will grow into a professional and highly efficient platform of infrastructure financing and into an MDB that fully represents the cooperative willingness of all counties in the region. It should meet the development needs of regional economies better and promote regional economic cooperation remarkably well,” Lou said.