Chinese President Xi Jinping launched a new international development bank seen as a rival to the World Bank.
The Asian Infrastructure Investment Bank (AIIB) is an international financial institution that aims to support the building of infrastructure in the Asia-Pacific region.
The bank was proposed as an initiative by the government of China, supported by 37 regional and 20 non-regional Prospective Founding Members (PFM), all of which have signed the Articles of Agreement that form the legal basis for the proposed bank.
The United Nations has addressed the launch of AIIB as having potential for “scaling up financing for sustainable development” for the concern of global economic governance. The capital of the bank is $100 billion, equivalent to 2⁄3 of the capital of the Asian Development Bank and about half that of the World Bank.
Despite opposition from Washington, U.S. allies including Australia, Britain, German, Italy, the Philippines and South Korea have agreed to join the Asian Infrastructure Investment Bank (AIIB) in recognition of China’s growing economic clout.
In order for Asia to continue to be the most dynamic region for global growth, it needs to invest in infrastructure and connectivity, Premier Li Keqiang said, during the afternoon session of the opening ceremony.
The AIIB is expected to lend $10 billion-$15 billion a year for the first five or six years and will start operations in the second quarter of 2016.
Jin Liqun, AIIB president informed that while loans would be made in U.S. dollars, the bank may raise capital in other currencies including the euro and yuan.
A successful AIIB that sets itself apart from the World Bank and the International Monetary Fund (IMF) would be a diplomatic triumph for China, which opposes a global financial order it says is dominated by the United States and does not adequately represent developing nations.
The bank will have an internal department focused on compliance and integrity that reports directly to the bank’s board.
The AIIB will require projects to be legally transparent and protect social and environmental interests, but it will not force borrowers to adopt the kind of free-market practices favoured by the IMF.
Thirty founding countries that hold over 74 percent of shares in the bank have ratified the AIIB agreement and the remaining countries have until the end of the year to complete the membership process.
China has an initial subscription of $29.78 billion in authorised capital stock in the AIIB, out of a total of $100 billion. It invested another $50 million.