The United States on Friday expressed ‘concern’ following the launch in Beijing of a new infrastructure bank which aims to provide project loans to developing countries.
The $50 billion Asian Infrastructure Investment Bank (AIIB) is backed by the cash-rich Chinese government and is seen as a challenge to institutions such as the World Bank and Asian Development Bank (ADB), both of which rely on western governments for funding.
AIIB was launched at a glittering ceremony in the Chinese capital attended by the country’s finance minister Lou Jiwei and delegates from 21 countries including India, Thailand, Malaysia and Sri Lanka.
Several notable invitees, including Washington allies Australia and South Korea snubbed the ceremony.
According to some media reports, Australia stayed away from the AIIB at the behest of U.S. Secretary of State John Kerry.
However, a US government spokesperson denied the report.
“Secretary Kerry has made clear directly to the Chinese as well as to other partners that we welcome the idea of an infrastructure bank for Asia but we strongly urge that it meet international standards of governance and transparency”, Jen Psaki said.
“We have concerns about the ambiguous nature of the AIIB proposal as it currently stands, that we have also expressed publicly”, Psaki added.
In a speech to delegates after the inauguration, Chinese President Xi Jinping said the new bank would use the best practices of the World Bank and the Asian Development Bank.
“For the AIIB, its operation needs to follow multilateral rules and procedures,” Xi said.
“We have also to learn from the World Bank and the Asian Development Bank and other existing multilateral development institutions in their good practices and useful experiences.”
China, which is keen to extend its influence and soft power in the region, has limited voting rights in these existing banks despite being the world’s second-largest economy.
The AIIB is expected to begin operations in 2015 with senior Chinese banker Jin Liqun, ex-chairman of investment bank China International Capital Corp, expected to take a leading role.
The memorandum of understanding signed on Friday said authorised capital of the bank would be $100 billion – 50% of which will be held by China – and that the AIIB would be formally established by the end of 2015 with its headquarters in Beijing, state news agency Xinhua said.
Takehiko Nakao, the president of the Manila-based Asian Development Bank (ADB), said the AIIB should function in line with international governance, labour and environmental standards.
“I hope the new bank will adhere to these standards,” Nakao told Reuters.
The ADB, created in 1966, offers grants and below-market interest rates on loans to lower to middle-income countries.
At the end of 2013, its lending amounted to $21.02 billion, including co-financing with other development partners.
China has a 6.5 percent stake in the ADB, while the United States and Japan have about 15.6 percent each.