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October 25, 2014

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President pledges opening-up strategy

TWENTY-ONE Asian nations signed on to a China-driven initiative yesterday to create a new international bank as President Xi Jinping looks forward to better global financial governance.

Countries signing yesterday’s memorandum of understanding at Beijing’s Great Hall of the People ranged from regional giant India to small countries such as Laos and wealthier states including Singapore and Qatar. Absent were close US allies Japan, South Korea and Australia.

The new lender aims to fund the construction of roads, railways, power plants and telecommunications networks that global finance officials say are needed to keep the region’s economies humming along.

The memorandum specifies that the authorized capital of the Asian Infrastructure Investment Bank is US$100 billion and the initial capital is expected to be around US$50 billion. As agreed, Beijing will be the host city for the AIIB’s headquarters.

It is expected that the prospective founding members will complete the signing and ratification of the Articles of Agreement in 2015 and the AIIB will be formally established by the end of 2015.

“In China we have a folk saying. If you would like to get rich, build roads first, and I believe that is a very vivid description of the very importance of infrastructure to economic development,” Xi told participants after the signing ceremony.

The Chinese president proposed the bank a year ago at a gathering of Asia-Pacific nations.

China has said it will provide most if not all of the initial US$50 billion in capital. Private institutional lenders are expected to provide another US$50 billion.

“(The establishment of the AIIB) will help to improve global financial governance, which is very meaningful,” Xi said, adding that he hopes all sides concerned will make concerted efforts to make the AIIB a financing platform of infrastructure construction featuring equality, inclusiveness and high efficiency, and multilateral development bank that meets the demand of all countries in the region.

He said the AIIB should focus on boosting interconnectivity of infrastructure and economic cooperation in the region to inject new driving forces into the economic development in Asia.

Xi stressed inclusiveness and multilateralism in the development of the AIIB, saying that all countries with interest are welcome to join the bank and that the AIIB should work together with other multilateral development organizations to promote prosperity in Asia as well as the world at large.

 

The president said China will firmly stick to the opening-up strategy for win-win reciprocity.

“We will make further efforts to make China’s development more beneficial for countries in Asia as well as the whole world,” he added.

Singapore’s Finance Minister Tharman Shanmugaratnam said countries involved hoped to finalize the bank’s articles of agreement by mid-2015 so that it can start lending “as soon as possible.”

China also is backing another US$50 billion-lending institution, the New Development Bank, sponsored by the so-called BRICS countries that also include Russia, India, Brazil and South Africa.

Zhao Kejin, an expert on international organizations at Beijing’s Tsinghua University, said China was open to the US, Japan and other major economies contributing capital to the bank, but expected them to hold off for now.

World Bank President Jim Yong Kim has welcomed the new institution, saying the developing world’s need for about US$1 trillion per year in infrastructure financing far outstrips the private sector’s ability to fund it.

ADB President Takehiko Nakao has also welcomed the new bank, saying it would substantially boost the funding available while forcing his red tape-laden institution to reform.

The ADB estimates developing Asian countries will need to invest US$8 trillion in infrastructure from 2010 to 2020 just to keep their economies moving forward, only a tiny fraction of which can be provided by the ADB.




 

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