Major allies of the United States in Europe have agreed to join the Beijing-led Asian Infrastructure Investment Bank after China offered to forgo veto power in the proposed institution that will rival the International Monetary Fund.
The offer proved critical in getting first the United Kingdom and then France, Germany and Italy to break with Washington and line up as founding members of the new development bank, the Wall Street Journal reported, citing Chinese and European officials involved in the negotiations to establish the bank.
By proposing that no single country dictate decision-making at the new bank, Beijing is making a sharp departure from the long-standing practice at the IMF, where the US exerts substantial influence despite holding less than 20 percent of the voting shares.
In fact, it is this structure that has drawn complaints from other members for years.
Negotiations are still taking place over how the bank will be run and how its board will be structured, the newspaper said.
But despite having no veto power, Beijing is likely to have substantial influence over major decisions at the bank, sources involved in the discussions told the Journal.
And that is likely to fuel concerns—expressed by the US and India, among other countries—that the bank will ultimately be a tool of Chinese foreign policy.
Beijing, however, continues to address concerns about the institution’s transparency and governance.
Jin Liqun, a Chinese official picked by Beijing to set up the bank, has been lining up retired World Bank staffers in Washington to help them work out governance issues and to build up the new bank’s credibility with Western countries, the report said.
Jin, interim chief of the new bank, has said more than 35 countries, including staunch US allies like South Korea and Australia, will join the bank as founding members by the end of this month.
The bank is on track to reach its target of US$100 billion in registered capital, up from the initial US$50 billion that China has promised to provide, the report said, citing Chinese and Western officials.
Chinese President Xi Jinping proposed the new bank in late 2013 to finance infrastructure projects in Asia, where the need far outstrips funds provided by the IMF, the World Bank and the Asian Development Bank.
Beijing estimates that between now and 2020 about US$730 billion would be needed annually to fund infrastructure spending in the region.
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