Analysts: US urged to not politicize bank

Updated: 2015-03-26 11:29

By Pu Zhendong in Beijing(China Daily USA)

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Resisting the China-led Asian Infrastructure Investment Bank (AIIB) and blocking reforms on existing global financial mechanisms will only isolate the United States from the trend of restructuring multilateral financial governance in the Asia-Pacific region, Chinese analysts said.

The US needs to understand that "China cannot and does not intend to rein in AIIB, especially after the joining of many US allies," said Pang Zhongying, a professor of international affairs at the Renmin University of China.

"AIIB is in nature an international public good, the same as the World Bank, with its capital only from public funds of the member states. It is not a private investment bank in a financial market that aims at profit-making," Pang said.

Washington last week reiterated its reservation about joining the AIIB, questioning the organization's ability to incorporate "the highest standards" that the international community has built.

Treasury Secretary Jack Lew also urged countries to make sure AIIB's "appropriate governance" before "lending their names" to the $50 billion initiative.

Peng said it is quite unfortunate that the AIIB is "overly politicized" before its full establishment, which will increase the risk of normal operation in the future.

However, despite the US warnings, a surge of its Asian and European allies have confirmed their application or showed great interests to the new financing platform.

Six major European financial powers, including the United Kingdom, Germany, France and Switzerland, have submitted their applications. Countries in the Asia-Pacific believed to be under tremendous US pressure, such as South Korea and Australia, also reversed their attitudes just before the deadline expires on March 31.

Chinese Foreign Ministry Hong Lei said the AIIB has won support from a wide variety of countries, which has showcased its vitality.

"We will design the governance structure and operation policy of the AIIB with high standards, draw upon the good practices of existing multilateral development banks, avoid taking detours," Hong said, adding that the "open and inclusive" bank will welcome any new partners.

Li Haidong, a professor of US studies at China Foreign Affairs University, said AIIB eyes to improve and upgrade the current Western-dominated international system on financial investment, instead of overturning it.

"The fact that AIIB gained wide popularity in a short time has indicated imperfections of the current system and an urgency to reform or establish complementary institutions," Li said.

"The AIIB will not seek to ameliorate economic conditions of a country through governmental intervention," he added.

Today, Washington and Tokyo are playing dominant influence over institutions such as the World Bank and Asian Development Bank (ADB). Yet, President Barack Obama still said the US, instead of China, should write the rules for trade in the Asia-Pacific region during the State of the Union address.

European Union and Asian governments have been frustrated by the US's delay in ratifying an IMF reform package that is supposed to hand more voting power to emerging markets such as the BRICS - Brazil, Russia, India, China and South Africa.

In 2013, China proposed the AIIB to finance construction of transport, energy, telecommunications and other infrastructure in the region. Twenty-one countries including China, India and Singapore signed a Memorandum of Understanding in Beijing in October. It plans to finalize the agreement by the end of the year.

"By proposing AIIB and urging IMF reforms, China is sending out a message that asks for more equal and reasonable treatment from the US. While Europe is known for advocating multi-lateralism, it is on China's side with AIIB," Peng said.

According to ADB, a vast gap between infrastructure demands and financing sources has pulled back economic growth of regional countries. Up to 2020, the region is estimated to require investments of $8 trillion in terms of national infrastructure.

"The enormous regional demand for infrastructure construction allows operation and competition of multiple international financial institutions," said Xiong Aizong, a researcher with the Institute of World Economics and Politics.

Reuters contributed to the story.