BEIJING: Countries from five continents formally signed up Monday to the China-led Asian Infrastructure Investment Bank (AIIB)—a potential rival to the Washington-based World Bank—as Beijing steps up its global diplomatic and economic role.
Australia was the first country to sign the articles of association creating the AIIB’s legal framework at a ceremony in Beijing’s Great Hall of the People, an Agence France-Presse journalist saw, followed by 49 other founding members.
Seven more are expected to do so by the end of the year.
The bank will have a share capital of $100 billion, with $20 billion paid in initially, the document showed.
The signing “is an embodiment of the concrete action and efforts made by all countries in the spirit of solidarity, openness, inclusion and cooperation,” Chinese President Xi Jinping said after the ceremony.
Signalling China’s central role at the bank, he added: “Now we are willing to listen to your views and proposals.”
The AIIB has been viewed by some as a rival to the World Bank and Asian Development Bank, and the United States and Japan—the world’s largest and third-largest economies, respectively—have notably declined to join.
Earlier this month, former Federal Reserve Chairman Ben Bernanke rebuked US lawmakers for effectively encouraging the AIIB’s formation by blocking reforms giving developing nations a greater say in the IMF.
Beijing will be by far the largest AIIB shareholder at about 30 percent, the articles of association posted on the website of China’s finance ministry showed. India is the second biggest at 8.4 percent with Russia third on 6.5 percent.
The voting structure gives smaller members a slightly disproportionately larger voice, and a statement accompanying the articles said China will have 26 percent of the votes.
That is not enough to give Beijing a formal veto over all the bank’s decision-making, but it will still have an outsized say and a block on some votes which require a 75 percent majority—including the choice of the bank’s president, suspensions of members, and changes to the rules.
“China’s shareholding and its voting power at the establishment of the AIIB is a natural result led by the rules decided by all members,” said Shi Yaobin, a vice finance minister, according to the official Xinhua news agency.
“China is not deliberately pursuing the veto power,” he added, saying share percentages could be diluted by future new admissions.
Among non-Asian participants, Germany is the largest shareholder with 4.5 percent, followed by France with 3.4 percent and Brazil on 3.2 percent.
The AIIB is expected to go into operation later this year and its headquarters will be in Beijing, despite calls from Indonesia that it be based in Jakarta, further cementing China’s prominence in the institution.
But all financial terms in the agreement are in US dollars, rather than China’s currency, the renminbi, and the bank’s working language will be English.
Only 50 of the 57 countries that have applied for founding membership signed up in Beijing on Monday, and the finance ministry said the remainder—Denmark, Kuwait, Malaysia, Philippines, Poland, South Africa and Thailand—have yet to ratify the necessary agreements.
Washington sought to dissuade its allies from taking part but European countries including Britain, France and Germany have rushed to sign up as they seek to bolster ties with the world’s second-largest economy.
There are some concerns over transparency of the lender, which will fund infrastructure in Asia, as well as worries that a resurgent Beijing will use it to push its own geopolitical and economic interests.
The articles of association promise the bank will “be guided by sound banking principles in its operations” and ensure its operations comply with “policies addressing environmental and social impacts.”
But equally vague statements in the past have done little to soothe critics.
Supporters say fears over undue Chinese influence are overblown, and that the participation by more than 50 countries will dilute Beijing’s power.
The articles of association specify that the bank’s president must come from the Asian region and will serve a maximum of two consecutive five-year terms.
Shi, a vice finance minister, said that China will “recommend a strong and powerful candidate” for the position, Xinhua reported.
In Tokyo, Japan’s Chief Cabinet Secretary Yoshihide Suga said: “We hope the AIIB will play a role as a financial institution that contributes to Asia’s development while meeting standards of international institutions, including for its governance.
“We’d like to watch it closely, including its actual operations.”