57 nations Pact with AIIB, China  

One of China’s biggest foreign policy successes is to take concrete shape today when delegates from 57 nations sign an agreement on the Asian Infrastructure Investment Bank (AIIB) in Beijing.

The founding members of the China-backed AIIB will sign articles of agreement that decide each member’s share and the bank’s initial capital.

Japan and the US are the most prominent nations not represented in the multilateral institution, seen as a rival to the Western-dominated World Bank and Asian Development Bank.

China has said it has left the door open for them to join.

‘It’s a huge diplomatic and strategic win for China, [but] the fact that so many have signed on will mean that the management of the AIIB will be quite complicated... The more countries you have on board, the more interests will be at play and [the] more each member will of course want the institution to serve their own interests,’ said Malcolm Cook, a senior fellow at the Institute of Southeast Asian Studies in Singapore.

One senior Western diplomat in Beijing said China had felt it had no choice but to set up its own bank after repeated attempts to reform existing institutions such as the IMF to take into account China’s role as the world’s second-largest economy were blocked in Washington.

‘The United States only has itself to blame,’ said the diplomat, from a nation which has signed up to the AIIB, speaking on condition of anonymity.

Asian nations are expected to own up to 75 per cent of the bank, while European and other nations will own the remainder. Each Asian member will then be allotted a share of that 75 per cent quota based on their economic size, two Japanese sources said.

The AIIB will begin with authorized capital of $50 billion, eventually to be raised to $100 billion.

China is likely to hold a 25 to 30 per cent stake, while India will be the second-biggest shareholder with a possible 10 to 15 per cent stake, delegates at a meeting to finalize the new bank’s articles of agreement said last month.

Germany plans to take a 4.1 per cent stake to become the fourth-biggest member after China, India and Russia, according to a finance ministry draft document seen earlier this month.

Australia said on Wednesday last week it would contribute A$930 million (US$719.36 million) over five years to become the institution’s sixth-largest shareholder.

China says it will not hold veto power within the AIIB, unlike the World Bank where the US holds a limited veto.

‘The AIIB has made a lot of progress so far in its preparatory work, but this is only the first step in a long road ahead,’ Chinese Minister of Finance Lou Jiwei said in a commentary published on the Web site of the People’s Daily newspaper on Thursday. ‘It will require a lot more effort to bring the AIIB up to the standards of global financial institutions.’

Apart from backing the AIIB, China has also pledged billions of dollars to the Silk Road fund and the ‘One Belt, One Road’ initiative, which are also aimed at funding infrastructure to increase trade and connectivity between Europe and Asia.