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18 Apr, 2015

Asia to benefit from China’s planned Infrastructure Investment Bank

(Xinhua) 2015-04-04 HANOI — The establishment of the Asian Infrastructure Investment Bank (AIIB) initiated by China is expected to bring many advantages to the region, said a Vietnamese expert.

Tran Viet Thai, deputy director of the Institute for Foreign Policy and Strategic Studies, under Vietnam’s Ministry of Foreign Affairs’ Diplomatic Academy, made the remark in an interview with Xinhua on Thursday about the launch of the AIIB. The expert held an optimistic view over the establishment of the AIIB, saying that the bank has more advantages than other financial institutions.

“First of all, the Chinese government has showed a strong determination over the establishment of AIIB. Moreover, AIIB has an enormous financial potential. Initially, the bank can use US dollar as its currency. After becoming operationally stable, the bank’s loans may be in Chinese Renminbi. Thirdly, being born after the world’s other international financial institutions, the AIIB has a chance to learn from the experience of its forerunners. The last advantage is about huge domestic and overseas human resources joining the Chinese banking system,” Thai explained.

Forecast to be put into operation by the end of this year, the AIIB is expected to create more capital mobilization channels for countries in Asia in infrastructure development, especially developing countries in the Southeast, Central and Southern Asian regions, according to the expert.

In the past few days, the upcoming establishment of the AIIB has drawn a great deal of attention from experts and analysts worldwide. The number of countries applying to be founding members of the AIIB rose to around 50 by the March 31 deadline.

The AIIB is an international financial institution proposed by the Chinese government. The purpose of the multilateral development bank is to provide finance to infrastructure projects in the Asia region.

According to Thai, one reason that China decided to establish the AIIB is that the country’s foreign exchange reserve is at high level and it is ready for the AIIB’s development projects.

Thai quoted statistics as showing that as of the end of 2014, the total foreign exchange reserves of China reached around $4 trillion.

At the same time, interest rates of the US government bonds kept decreasing, so profit from buying US government bonds is not as much as it used to be.

While looking at the experience of the Asian Development Bank (ADB), Thai said the appearance of the AIIB lays the foundation to create competitiveness among the existing financial institutions, urging them to boost reforms and increase their operational efficiency.

“The AIIB brings irresistible soft power to many countries,” proffered Thai.

The establishment of the AIIB has raised debate all over the world recently. Many think that the launch of the AIIB poses a challenge to the world’s existing financial institutions which are under the influence of the United States and Europe.

Some analysts even think that the establishment of the AIIB can contribute to demolish the global economic order that has been maintained for the past 70 years.

Thai expressed his opinion over the debate, saying that: “Nowadays, world order is changing. Emerging countries like China, India, Russia, and South Africa are rising strongly. The G7 has turned into the G20. A new world order is evolving, including new world financial and monetary order. With such change, the countries’ reaction is normal.”

According to Thai, “Whether the establishment of the AIIB destroys the existing order or becomes a supplement to it, remains a question to be answered. In the near future, after the AIIB comes into operation, the answer to such a question will be found. However, the initial establishment of the AIIB will certainly bring advantages.”