China’s proposed infrastructure bank for Asia is intended to complement, not replace, existing lenders dominated by the U.S. and Japan, a senior Chinese official said Friday.
Vice Finance Minister Zhu Guangyao said after a meeting of the Group of 20 leading world economies that China has proposed the Asian Infrastructure Investment Bank, or AIIB, to help fill an estimated $8 trillion gap in infrastructure funding for the region over the next decade.
Fifty-seven countries have signed up, including 16 of the world’s 20 largest economies. Notable exceptions are the U.S. and Japan, which are the leading shareholders of the World Bank and Asian Development Bank and have expressed concerns over the new bank’s governance standards.
But China’s proposal has been a diplomatic coup, as Britain, France and Germany have broken with Washington and joined Asian governments in seeking membership.
The U.S. also faces growing criticism over the refusal by Congress to approve reforms to the International Monetary Fund that would increase the voting power of fast-emerging economies such as China, Brazil and India, and boost the Fund’s resources to help countries facing financial troubles.
Zhu said China supports and contributes to the IMF and World Bank – which held their annual spring meetings in Washington this weekend – and plays a constructive role in the current international financial system.
“We want to improve that and enhance that capacity rather than overthrow the current system,” he told the Atlantic Council think tank.
U.S. officials opposed creation of the AIIB, saying it might undercut institutions like the World Bank by extending credit without adequate environmental, labor and social safeguards. But Washington has taken a more positive tack in recent weeks, although it still doesn’t plan to join.
When Treasury Secretary Jacob Lew visited Beijing late last month, he urged the new bank to work in partnership with existing international institutions to ensure high standards in lending.
Japanese Finance Minister Taro Aso echoed that sentiment Friday, saying that if borrowers were to default on loan repayments to the new bank, it could affect other lenders, as well.
Zhu said China also wants high standards for the bank.
He said its founding members would meet later this month to discuss the bank’s mandate and he hoped those negotiations could be concluded within two to three months.