AIIB Open to All Countries, China President Xi Says

Chinese President Xi Jinping said the China-backed Asian Infrastructure Investment Bank (AIIB) is an open initiative and all countries are welcomed to join the effort.

During the annual conference of the Boao Forum for Asia (BFA) in Boao, China, President Xi said the Chinese government is committed to vigorously promoting a system of regional financial cooperation and exploring a platform for exchanges and cooperation among Asian financial institutions.

“We will … advance complementary and coordinated development between the Asian Infrastructure Investment Bank and such multilateral financial institutions as the Asian Development Bank and the World Bank,” Xi said.

“The ‘Belt and Road’ and the AIIB are both open initiatives. We welcome all countries along the routes and in Asia, as well as our friends and partners around the world, to take an active part in these endeavors,” he said, referring to the Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives.

The AIIB, proposed by China last year aims to support infrastructure projects in the region. The China-initiated instution, however, received criticism especially from the United States, which claimed that the AIIB is China’s way of stomping off other global financial institutions, such as the International Monetary Fund, the World Bank and the Asian Development Bank.

But ADB President Takehiko Nakao, IMF Managing Director Christine Lagarde and WB Managing Director Sri Mulyani Indrawati said Sunday their institutions are ready to cooperate with the AIIB.

Most of AIIB’s regional members joined last year and China earlier announced a 31 March deadline for those who want to join as founding members.

The AIIB, which is expected to begin operations by the end of 2015, is formed to provide infrastructure project loans to developing countries.

Twenty-one countries, including China, India and Singapore, signed a memorandum of understanding in Beijing in October 2014 to build the AIIB. Six other nations, including Indonesia and Saudi Arabia, joined the body until Feb. 9, 2015. As agreed, Beijing will be the host city for the headquarters.

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1 COMMENT

  1. *
    It is truly curious that, in the face of total defeat re the AIIB this last week, instead of conceding and announcing joining the AIIB, Washington instead had VOA Chinese (Cantonese) put out (on Friday) a hatchet job broadcast on how the RMB is simply not ready to become an international currency. The Chinese language broadcast asserted that:

    1. Despite an increase in use of the RMB for settlement of international payments for goods trade, most of the trades are still price quoted in U.S. Dollars. Therefore the Chinese traders are still substantially exposed to exchange rate risks.
    2. Unless capital controls are removed by Beijing, there is no way to eliminate the price discrepancies (vis A and B shares on the Mainland vs. Hong Kong) in capital assets, due to market inefficiencies. Moreover, Chinese entities will continue to fake trade in order to move assets offshore.

    3. China lacks a trustworthy government and system, one in which those aggrieved can use the law to challenge unjust conduct or policies. Therefore few foreigners are going to choose to own the RMB as a serious class of assets.

    I see the problem as more of a practical one. Overseas ownership is merely a function of what is available. U.S. dollar debts owed by parties outside the U.S. is about US$32 Trillion. It is chicken and egg thing. If China wants foreign circulation of the RMB, thereby internationalizing the RMB, Beijing has to first put a LOT of RMB in the hands of foreigners. The AIIB and infrastructure building, One Belt One Road, etc., all present PROFITABLE opportunities to make this happen. Expect to see Beijing put serious amounts of RMB into play (to dwarf the measly $3.8 Trillion in foreign currency reserves) – e.g., low interest lending of up to RMB 50 Trillion to all takers in the next 10 years, which in turn can be used to buy Chinese goods and services. Few will refuse a cheap loan. By putting the RMB in play internationally, Beijing also grants itself the same privilege America has, in the ability to create wealth (the RMB) that can be spent throughout the world, to buy resources and build relationships. Moreover, the more RMB there is outside China, the more China can export goods and services (as they are cost competitive in the first place, something not available to Western/Japanese exporters).

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