Recently, the news about AIIB frequently occupies the headlines of the media at home and abroad, from the financial and investment fields to all walks of life, from the heads of state to the ordinary people, the attention of "AIIB" has become the most hot topic at present. March 31 is the deadline for applications for prospective founding members of the AIIB. On this day, three countries, Kyrgyzstan, Norway and Sweden, announced their formal application to join the AIIB as prospective founding members. The latest information shows that the total number of countries applying to join the AIIB as prospective founding members has reached 50, among which 30 countries have become formal prospective founding members. Substantive progress has been made in the establishment of the Asian Infrastructure Investment Bank. Here's what makes the world join the China-led Asian Infrastructure Investment Bank (AIIB).
The origin of
The AIIB grew out of an initiative put forward by President Xi Jinping and Premier Li Keqiang during their visit to Southeast Asia in October 2013. The memorandum of understanding on the establishment of the Asian Infrastructure Investment Bank (AIIB) was signed in Beijing on October 24, 2014. According to the Memorandum on the Establishment of the AIIB, the bank's legal capital is $100 billion, and China's initial capital contribution target is about $50 billion. China will contribute 50% of the total capital and become the largest shareholder. Prospective founding members agreed to use their economic weight, as measured by gross domestic product, as the basis for each country's share allocation. The bank's headquarters is in Beijing. According to the plan of the AIIB, the AIIB will be an inter-governmental multilateral development institution in Asia after its operation. It will operate in accordance with the model and principles of multilateral development banks and focus on supporting infrastructure construction in Asia.
The birth and development of AIIB
On October 2, 2013, President Xi Jinping proposed the establishment of the AIIB.
On October 24, 2014, the first batch of 21 prospective founding members signed an agreement in Beijing and jointly decided to establish the AIIB.
On March 12, 2015, the UK formally applied to join the AIIB.
On March 17, 2015, Germany, France and Italy jointly announced their accession to the AIIB.
At the end of March 2015, Australia, Denmark, Finland, the Republic of Korea, Egypt, Russia and other countries applied to join the AIIB
March 31, 2015, Founding Member Confirmation Deadline. Forty-four countries have joined the AIIB
Why the AIIB?
Financing for infrastructure projects
As the name implies, the AIIB was created for the financing of infrastructure development in Asia, and there are many countries that have joined the organization and have great aspirations for it.
Among them, the largest group is some emerging economies (such as India, Indonesia, Maldives, Malaysia, Philippines, Vietnam, etc.) and less developed economies (such as Bangladesh, Cambodia, Laos) from Southeast Asia and South Asia.
Asia, the highland of global growth, is in voracious demand for infrastructure. The IMF forecast earlier this year that emerging Asia would grow 6.4 per cent this year and 6.2 per cent next.
One widely cited statistic claims that Asia's infrastructure funding gap will be nearly $10 trillion by 2020, with the World Bank and ADB providing only a fraction of what is available.
"Many emerging Asian countries, such as Myanmar and Indonesia, are currently setting off a boom in infrastructure investment, but they are all facing financial constraints, lack of internal motivation and are in urgent need of external support," Tang Qifang, an associate research fellow at the China Institute of International Studies, said earlier.
Myanmar President Thein Sein has said there are challenges in connecting Myanmar with border countries. For example, in terms of interconnection and reciprocity with Yunnan Province of China, there is a lack of maintenance cost and financial support, and AIIB can just provide sufficient support.
Accelerate economic transformation
Infrastructure construction is often referred to as the pioneer and accelerator of economic growth. It is not only a necessary condition for the initial economic take-off of a country, but also a necessary meaning for economic transformation and optimization. The latter point is of great significance to some resource-based countries. Now that the commodity boom cycle has ended, accelerating economic restructuring has become a priority for governments in countries such as Indonesia and Kazakhstan.
After his election as president last year, Mr. Joko, a businessman, launched an ambitious plan to invest $6 billion to expand port facilities and turn Indonesia into a global maritime hub, making ports and maritime transport key to the country's economic growth.
Indonesia's economy grew 5 percent last year, its slowest pace since 2009, as continued weakness in international markets hurt the country's commodity exports.
Recently, Joko Joko visited China. Promoting Chinese investment in Indonesia and strengthening bilateral cooperation in infrastructure are the main topics of his visit.
Seek Export Orders
In addition to the emerging economies and less developed countries in Southeast Asia, South Asia and Central Asia, western developed countries led by the UK and Germany constitute another important part of the founding member list of AIIB. Their appeal for AIIB lies in commercial interests.
British Chancellor of the Exchequer George Osborne has overcome strong opposition from the Foreign Office in his controversial decision to join the Asian Infrastructure Investment Bank (AIIB), the Financial Times reported Wednesday. Mr Osborne has always emphasised a mercantilist foreign policy that puts trade at the heart of policymaking, and Mr Cameron has finally listened to him.
"The UK government has been committed to promoting economic and political engagement with the Asia-Pacific region, building ties between the UK and Asian economies and giving British businesses the best opportunities to invest in the world's fastest-growing regions," Mr Osborne said in a statement on his cabinet's website.
Peng Liqiang, director of the international department of the Global View Think Tank, said the current working mechanism of the AIIB has not been made public, but based on precedent, it is common for partners to reach a package agreement on project construction, and the country that contributes the funds will also get priority in project construction.
It has been said that South Korea has considered seeking to locate the AIIB's headquarters in Seoul, so as to play a leading role and expand South Korea's influence in the international arena. At the same time, South Korea also wants to use the AIIB as an opportunity to reverse the adverse situation facing its current economy.
Australian Treasurer Joe Hockey said, "We should help ensure that the AIIB has the right rules in place to promote infrastructure improvement and economic growth in the Asian region, which in turn will benefit Australia," ABC reported Tuesday.
Peng Liqiang said that for the long-term development between east and west depressions of a large country, the investment Banks and closely related with its "neighbourhood" all the way for them to expand the new development space and opportunities: resource rich countries will speed up development, manufacturing countries will be able to absorb capacity, advanced economies expand import and export markets. And for all the countries that want to enter the Asian market, a bigger economic pie in Asia is good for everyone.
Positioning and Functions of AIIB
● Positioning of AIIB
It focuses on supporting infrastructure development in Asia, and is committed to promoting regional cooperation and partnership to jointly address development challenges for countries at different levels of development. It is a win-win choice for countries both within and outside the region.
● The main functions of AIIB
1. Continue to promote further reform of the International Monetary Fund and the World Bank, while also supplementing the investment, financing and international assistance of the Asian Development Bank in the Asia-Pacific region.
2. To bridge the gap in Asian infrastructure investment from the existing world financial system.
3. Study how to turn Asia's high savings into high investment, give full play to market forces, and build a framework for diversified investment and financing cooperation.
How is the governance structure of the AIIB designed?
The AIIB's governance structure consists of three layers: the Board of Governors, the Board of Directors and the management. The Board of Governors is the highest authority of the Bank and may, in accordance with the Articles of Association of the AIIB, grant certain powers to the Board of Directors and the management. In the initial stage of operation, the AIIB had a non-resident board of directors, who held regular meetings every year to make decisions on major policies. The bank will also establish effective oversight mechanisms to enforce management accountability, and select its president and senior management based on an open, inclusive, transparent and merit-based process.
The relationship and difference between AIIB, World Bank and Asian Development Bank
The AIIB is a new member and partner in the field of international development. Given the huge demand for infrastructure financing in Asia, the AIIB and the existing multilateral development banks are complementary rather than competitive due to their different positioning and business priorities. The AIIB focuses on infrastructure construction, while the existing multilateral development banks, such as the World Bank and the Asian Development Bank, emphasize poverty reduction as the main purpose.
In the process of the preparation of investment Banks and future operations, China will actively promote the investment bank and the world bank, Asian development bank and other multilateral development Banks existing in knowledge sharing and capacity building, personnel exchanges and cooperation in aspects of project financing, improve the level of the region's infrastructure financing together, promote economic and social development in the region.
As an important shareholder of the World Bank and the Asian Development Bank, China will, as always, support the existing multilateral development banks in making positive contributions to global poverty reduction and development.
The role of the AIIB
One is the "area" strategy behind the investment Banks are building for the first time in human history story type of infrastructure construction, almost to the earth as a big construction site, party a in the first time in human history, the participants had to put in front of the great prospect of overall interests a number of relatively cannot compete with the dispute and struggle, and onto the road of cooperation;
Second, with the deepening implementation of the "One Belt And One Road" strategy, Asia and the world are increasingly interconnected, which will directly promote the integration of civilizations, intersecting interests, cultural exchanges and political and business interactions around the world, and fundamentally lay the foundation for peace based on mutual understanding and mutual respect among countries.
Three is the investment bank will be conducive to the international economic and financial order of fair and efficiency, and effectively improve adhere to peaceful development route, including China, the country's overall strength and international voice, at the same time help contain not conducive to world peace and development even to upset the world to seek personal gain a few negative events;
Four is synchronization with the growth of the investment bank's global technology progress and the new round characterized by self-organization to center of the wave of globalization has been deepening, and the positive efforts of investment Banks in the development of the world grow up together, momentum, and give, including the founder members, participating countries, construction, benefits increasing around the world, can be expected is the "area" strategy if the smooth implementation is likely to bring the world more than 20 years of accelerated growth opportunity, which is to support the fundamental factors to world peace.
What impact will the AIIB have on the international financial order?
The AIIB is seen as a key part of China's efforts to rebuild its voice in the international financial system. At present, the world's two most core international financial organizations -- the World Bank and the International Monetary Fund (IMF) are controlled by the United States and Europe. In recent years, China has sought to increase its voice in both organizations, but with little progress.
According to the analysis of Overseas Net, the current global economic governance system, which was mainly established after World War II, has the following characteristics: the United States is the superpower and the leading country. The United States, the United Kingdom, France, Germany, Japan, Italy, and Canada, often referred to as the "G7," served as the coordinating platform, and later Russia joined them as the G-8, which met to talk about fixing things for the ordinary people of the world. The International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO), the three pillars, are the "legs" under the G7/G8 coordination platform and are responsible for organizing the implementation of relevant decisions.
This governance structure has not changed since World War II. Other countries have to abide by it. After 2008, due to the impact of the global financial crisis, the "club of rich countries" represented by the G7/G8 found that it was not enough to rely on their own strength, and they should pull China and other emerging economies together to pay the bill for the global crisis. Therefore, they called for the convening of the G20 meeting to contribute money and efforts together. However, the reality is that the international economic governance system has not undergone fundamental changes. It is still the US that calls the shots and refuses to make adjustments and changes, or even implement what has already been agreed.
Is the most typical, for example, the G20 agreed to reform the fund at the end of 2010, decided to developed countries to emerging market countries more than 6% of the share, in order to improve the emerging market countries voting rights, transfer to developing countries in Europe at the same time two executive director seats, promotion of developing countries represented by China influence in the global financial system. But in the end, the U.S. Congress refused to approve the reform package, and the reform went nowhere.
In 1944, representatives of major Western countries established the postwar financial system at the United Nations International Monetary and Financial Conference, later known as the Bretton Woods System. The system broke up in 1973, but institutions such as the World Bank and the International Monetary Fund operate to this day.
"Therefore, it has become an important consensus of emerging economies to speed up the establishment of international financial institutions that can reflect their own interests and aspirations, and they have no choice but to do so. According to the analysis of the article on Overseas Online, China's initiative to set up the AIIB is not only a very depressing international economic governance system that has forced China to find a new way out, but also a good business that will greatly benefit China's economic development.