In the second quarter of 2016 China will launch its own investment bank to finance projects in development countries all over the world. The lavish opening ceremony this week shows a lot of promise. The AIIB, or Asia Infrastructure Investment Bank, will rival with the IMF and World Bank. Even though the United States do not support this initiative, other big players such as the United Kingdom, India and Russia do, and it is a promising statement in a world where the United States rule the financial world of loans and grants.
Infrastructure in China
The growing economy of China is in need of infrastructure to support its growth. It has an enormous reserve of capital. This initiative is a logic step and will further develop the Chinese economy.
Balance in the world economy
The AIIB is further proof of the rebalancing of the world economy, and the fact that capital will be more evenly distributed over the world. It also is a diplomatic triumph, because it is a step away from the hegemony of the IMF and World Bank. The United States has always played an important role in development of underdeveloped countries. It does not (yet) support this initiative.
Projects looking for aid
One of the demands for the projects looking for financial aid is that they should be legally transparent and socially responsible. It doesn’t ask unreasonable demands like the IMF or World Bank does, and this sets this bank apart from the its western counterparts. The IMF has sometimes been criticised for having strict demands for countries to actually apply for financial aid. It has already been said that Russia will be the first to ask for financial support to build railways in the Arctic.
Investment of China
China has an initial subscription of $29.78 billion in authorised capital stock in the AIIB, out of a total of $100 billion. It invested another $50 million on Saturday. Are you interested in what this means for the market and your company? Contact us for more information.