Tuesday, May 13, 2014

China-led Asia Bank Project Shuns Japan, India

Japan and India have been left out in the discussions about China-led project Asian Infrastructure Investment Bank (AIIB), which was held on the first night of the Asian Development Bank's yearly meeting which was held in Kazakhstan this month.

Chinese Finance Minister Lou Jiwei headed the discussions for the new $50-billion Asian lender. Regional competitors Japan and India, and the US, were not invited in this meeting, according to Bloomberg.

Officials and diplomats internally view China's initiative as a way to take on the regional role of Manila-based multilateral lender ADB, which is mostly led by Japan and the US.

They also think this is China's way of expanding its influence in the continent, aside from bringing up a "mega free-trade region" in Asia and President Xi Jinping's upcoming hosting of a regional security summit with 14 government leaders.

China is striving to gain more power internationally as it disputes with its neighbors Japan and the Philippines over maritime territory. It has also recently gone through a rough patch with Vietnam after boats from both countries collided at a contested area near a Chinese exploration rig.

The AIIB will begin as a bank about a third of ADB's size. A 2013 report pegged the latter's total capital at $174 billion.

During the May 4 gathering of ADB members, Lou said Asia badly needs infrastructure investment because ADB does not have enough resources for it. He also said China Development Bank's commercial infrastructure loans are a lot bigger than the combined businesses of ADB and World Bank.

According to Finance Minister Taro Aso, China has not opened the bank project to Japan. India, which also has a territorial dispute with China, has also been left out, Finance Minister Palaniappan Chidambaram said.

Based on a statement posted on the official site of China's Ministry of Finance, the delegates in the AIIB dinner meeting included Pakistan, Kazakhstan, South Korea, Sri Lanka, and Mongolia.

Japan and the US hold the biggest combined stake ADB, with each holding 15.7% and 15.6% respectively. The bank's website says their combined voting power is 26%, while China only has 5.47%.

AIIB's main difference from ADB will be its focus on building infrastructure rather than alleviating poverty, Lou said.

Zhao Jianglin, a researcher at the National Institute of International Strategy in Beijing, said AIIB will most likely not include political conditions to its loans because Beijing has a policy that prohibits them from meddling in internal affairs of other countries.

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