China's President Xi Jinping (4th R) meets with the guests at the Asian Infrastructure Investment Bank (AIIB) launch ceremony at the Great Hall of the People in Beijing in this October 24, 2014. Britain said it has sought to become a founding member of the AIIB, making it the first Western nation to embrace the China-backed institution. [Photo/Agencies]
The United Kingdom has sought to join the Asia Infrastructure Investment Bank as a founding member, with France, Germany and Italy planning to follow in its footsteps.
Their plans to join the China-proposed regional investment bank with an initial capital of $50 billion have come as shock to the United States, because they are long-time US partners and G7 members. Little wonder then that the AIIB has been widely interpreted as a potential rival to the World Bank, headquartered in Washington, and the Japan-led Asian Development Bank.
But unlike the wild speculations, the establishment of the AIIB is neither an affront to the US-led global financial order nor a move intended to challenge established global institutions such as the World Bank, the International Monetary Fund and the ADB.
At best, the establishment of the AIIB is a logical step for China to lead its Silk Road Economic Belt and 21st Maritime Silk Road initiatives to success and aimed at boosting regional development.
The AIIB is based in China and focused on infrastructure development, which many Asian countries are badly in need of. Given the existing global financial system, which is being driven by Asian economies, one of the most valuable gifts that a rising China can offer to the Asian community is its four decades' expertise in infrastructure building.
The ADB has estimated that to maintain its economic growth in the next decade, the East Asia region will need infrastructure investment of at least $8 trillion, which means there is a huge financial gap that needs to be filled. Unfortunately, none of the major lending institutions, including the World Bank and the ADB, will be able to fill this gap because of, for instance, the World Bank's restrictive lending policies targeted at poorer countries.
