17
Sep
China is understood to have won the support of about 20 countries for the bank, which would be started with $50 billion in capital from founding members. Finance ministry officials met representatives from a further 14 countries last week, which have all expressed interest in joining the so-called Asian Infrastructure Investment Bank (AIIB) without making a final commitment. That group is understood to include Australia.
One source said China’s Finance Ministry hoped to announce a memorandum of understanding on the new bank in October. President Xi Jinping is expected to urge Indian Prime Minister Narendra Modi to join the bank when the pair meet this week, following on from their co-operation in setting up the separate BRICS development bank .
Treasurer Joe Hockey is considering the Chinese proposal after being lobbied by Finance Minister Lou Jiwei and NDRC chairman Xu Shaoshi in Beijing in June, and Australian officials are understood to have been surprised at how the BRICS bank and the infrastructure bank ideas have gained momentum.
Infrastructure development is a key item on the agenda of this weekend’s Group of 20 nations finance ministers meeting in Cairns, but China is not expected to push the bank during the formal meetings.
The Business 20 infrastructure group, led by Telstra chief executive David Thodey, has been briefed on the AIIB by China but has decided to retain its focus on encouraging G20 leaders to make more infrastructure projects investment-ready rather than create new institutions.
He Fan, of China’s National Economic Research Institute, who was involved in early planning of the bank, says China wants to play a greater role in international economic institutions but is suspicious of existing bodies such as the IMF due to the reluctance to give developing countries a greater say in management.
Mr He said China is also increasingly aware it will need to invest more of its $4 trillion in international reserves offshore and wants to establish a commercially oriented new infrastructure bank to smooth that process.
Mr He said China needed to explain its objectives for a bank that would sit between a normal commercial bank and a traditional development bank more clearly, so that it could attract the required broad regional support.
Australian government officials are considering whether the proposed AIIB will undermine the existing Asian Development Bank, and are sounding out more sceptical countries, including the US and Japan.
Mr Hockey has argued since being lobbied by China that it should be open and transparent about its intentions to avoid prompting suspicions about the purpose of the AIIB.
Former senior Australian regional economic official Andrew Elek, now an academic, says it’s best to be in on the ground floor in new bodies to shape the rules; he said while there is plenty of capital for infrastructure investment there is a need for a catalytic institution. “It fits in well with what’s needed in the region and fits into building the [trade] infrastructure China needs,” he said.
The BRICS Bank, which was launched at the BRICS summit in Brazil in July, will be based in Shanghai and operated by Brazil, Russia, India, China, and South Africa as a potential alternative development lending facility to the IMF and World Bank.
Both new institutions are aimed at addressing the multitrillion-dollar infrastructure deficit across Asia. They also signal China’s ambitions to play a greater role in global institutions.
Australian think tank the Global Foundation has been advising China’s Finance Ministry on the establishment of the new bank, particularly around the creation of public-private partnerships.
Source: http://www.afr.com/p/special_reports/opportunityasia/china_steps_up_pressure_for_infrastructure_QiThrgbn7j521HjYL6TlrN