BEIJING – China and 21 other Asian nations signed on Friday to a new Beijing-backed international bank for Asia that Washington opposes as an unnecessary rival to established institutions such as the World Bank.
Representatives of the 22 nations signed a memorandum of understanding at the Great Hall of the People in the heart of Beijing to establish the Asian Infrastructure Investment Bank.
The new bank reflects both China’s desire to push investment in the region and its frustration with U.S., Japanese and European dominance of the World Bank, International Monetary Fund and Asian Development Bank.
The new lender would fund the construction of roads, railways, power plants and telecommunications networks in Asia that global finance officials say are needed to keep the region’s economies humming along.
Those taking part include regional economic power such as India along with smaller but economically vibrant nations such as Singapore, Vietnam, the Philippines and Mongolia. Absent are U.S. allies Japan, South Korea and Australia, whose membership was sought by China.
Chinese President Xi Jinping proposed the bank a year ago at a gathering of Asia-Pacific nations, and China has said it will provide most if not all of the initial $50 billion in capital.
Overseeing the signing ceremony, Chinese Finance Minister Lou Jiwei said the move marked a new stage in preparations for the bank’s formal establishment, the date for which hasn’t been given.
“We hope that through our joint efforts we can build the AIIB into a professional and efficient financing platform for infrastructure,” Lou said. He described the future bank as a “multi-national financial institution which is fair, just, open … with a good governance structure.”
In a nod to concerns the bank could undercut existing institutions, Lou said it would complement the existing multi-national financial institutions and “is committed to regional infrastructure and sustainable development.”
China also is backing another $50 billion-lending institution, the New Development Bank, sponsored by the so-called BRICS countries that also include Russia, India, Brazil and South Africa.
The planned capital of the Chinese-back development banks is relatively small compared with existing institutions. The World Bank’s capital is about $220 billion and the Asian Development Bank has $175 billion capital.
U.S. objections dwell mainly on worries the new infrastructure bank would work against existing multination lenders by offering laxer environmental, labour and other safeguards for loans that are intended to prevent abuses and protect vulnerable populations.
U.S. Treasury Secretary Jacob Lew expressed some of those concerns publicly at a conference in Washington earlier this month, although U.S. officials have mostly been pushing back against the bank’s establishment quietly, including with off-the-record briefings to media.
Also signing on to the bank are Bangladesh, Brunei, Cambodia, Kazakhstan, Kuwait, Laos, Malaysia, Myanmar, Nepal, Oman, Pakistan, Qatar, Sri Lanka, Thailand and Uzbekistan.