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Finally, Details About China’s Infrastructure Bank Emerge

06/11/2015 17:12

By Valentin Schmid, Epoch Times | June 11, 2015Last Updated: June 11, 2015 11:14 am

Chinese President Xi Jinping, center, shows the way to guests who attended the signing ceremony of the Asian Infrastructure Investment Bank at the Great Hall of the People in Beijing. China, Oct. 24, 2014.  (AP Photo/Takaki Yajima)

Chinese President Xi Jinping, center, shows the way to guests who attended the signing ceremony of the Asian Infrastructure Investment Bank at the Great Hall of the People in Beijing. China, Oct. 24, 2014. (AP Photo/Takaki Yajima)

When China first tabled the idea of the Asian Infrastructure and Investment Bank (AIIB) in 2013, the entity didn’t even have a website.

Now it does have a website and after a series of secret meetings spanning six months, the public finally knows what China’s banking project is all about.

“The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank (MDB) conceived for the 21st century,” it says on the website. It will fund infrastructure projects primarily in Asia. And it will be China’s bank.

China is paying in the most money ($29.8 billion), the headquarters will be in Beijing, the general secretary is Chinese (Liqun Jin) and China will have a veto, although it says not on day to day operations, according to documents reviewed by the Wall Street Journal.

The bank is widely seen in the United States as a rival to the World Bank and the International Monetary Fund and China managed to get 57 countries onboard, including European allies.

Germany will be the biggest non-Asian contributor, with $4.5 billion in commitments. It ranks fourths behind China, India ($8.4 billion) and Russia ($6.5 billion).

Here are some key differences to the established institutions:

  • The board will be unpaid and is not-resident
  • No all-inclusive veto power for China
  • Non-member countries can apply for funding
  • Voting rights are distributed according to a formula and not strictly according to paid in capital

So it looks like China’s challenge to U.S. controlled institutions is well underway. But why did they go through the trouble of doing this? The easy answer is that China wanted more power at the IMF and World Bank and needed a credible threat to achieve that—despite of claims it is not trying to establish yuan hegemony.

However, talk is cheap and China is establishing all the institutions to emulate the Bretton Woods system

It remains to be seen what China’s ultimate goal is, but with the credible threat established, China will almost certainly get more influence at the IMF at the end of the year, whether the United States likes it or not.

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