Plans for China’s new development bank, one of Beijing’s biggest global policy successes, were almost shelved two years ago due to doubts among senior Chinese policymakers.
From worries it wouldn’t raise enough funds to concerns other nations wouldn’t back it, Beijing was plagued by self-doubt when it first considered setting up the Asian Infrastructure Investment Bank (AIIB) in early 2013, two sources with knowledge of internal discussions said.
But promises by some Middle East governments to stump up cash and the support of key European nations – to Beijing’s surprise and despite US opposition – became a turning point in China’s plans to alter the global financial architecture.
The overseas affirmation, combined with the endorsement of stalwart supporters, including a former Chinese vice premier and incoming AIIB President Jin Liqun, a former head of sovereign wealth fund China Investment Corp, enabled China to bring the bank from an idea to its imminent inception.
The bank’s successful establishment is likely to bolster Beijing’s confidence that it can play a leading role in supranational financial institutions, despite the economic headwinds it is facing at home.
“At the start, China wasn’t very confident,” one of the sources said in reference to Beijing’s AIIB plans.
“The worry was that there was no money for this.”
A Finance Ministry delegation that called on Southeast Asian nations to gauge interest in the AIIB was not encouraging, the source said. Governments backed the idea, but were too poor to contribute heavily to the bank’s funding.
But subsequent visits to the Middle East helped to win the day as regional governments informed China they needed new infrastructure and, crucially, were able to pay for it, a source said.
“They are all oil-producing countries, they have foreign currencies, they were very enthusiastic, and they could shell out the cash,” he said.
“That was when we thought ‘Ah, this can be done.’”
AIIB declined to comment for this story and referred questions to China’s finance ministry, which did not respond to a request for comment.
Poised to rival the World Bank and the Asian Development Bank (ADB), the AIIB, to which 57 nations have signed up to join, will amplify China’s influence on global development finance.
Around a seventh of the 50 countries that signed up in June to become a founding member of the AIIB were Middle Eastern, AIIB’s website showed, with Iran, Israel, Egypt, Jordan, Qatar, Saudi Arabia and the United Arab Emirates among the signatories.
Internal government debates about the AIIB lasted for at least six months from spring 2013 and included the Finance Ministry, the Ministry of Commerce and the China Center for International Economic Exchanges (CCIEE), a state think tank, sources said.
Government sceptics questioned China’s ability to run a multilateral bank given its inexperience and, fearing the AIIB might incur losses, suggested China set up its own state investment fund to finance foreign infrastructure deals, sources said.
Others challenged the need for China to start a new bank given it was already a member of the Brics development bank with Brazil, Russia, India and South Africa, and had held talks with Russia about jointly establishing another lender.
But the suggestion to start an investment fund was rejected on the basis that a unilateral effort by China could cause other governments to suspect its motives, one of the sources said.
AIIB proponents also argued that other members of the Brics bank were all jostling to lead the lender, and Russia was cool to the idea of starting a development bank with China.
Russia’s finance ministry declined to comment for this story.
Only the AIIB would give China the global stage to properly wield its financial influence, one of the sources said.
“The AIIB will allow China to get a hundred positive replies each time it makes a call,” he said.
While some officials, including Jin, AIIB’s incoming president, have over the years pitched for Beijing to start a new international development bank, the idea did not gain traction under previous Chinese governments, sources said.
But that changed when President Xi Jinping took office in spring 2013 and threw his weight behind China’s bold “One Belt, One Road” infrastructure and export strategy.
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