In China Asian Infrastructure Investment Bank causing big ripples

China is all set to start Asian Infrastructure Investment Bank (AIIB) in January 2016 amid hesitations raised by countries like USA.

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Chinese President Xi Jinping with delegates at the signing ceremony of the Asian Infrastructure Investment Bank in Beijing in October 2014. play

Chinese President Xi Jinping with delegates at the signing ceremony of the Asian Infrastructure Investment Bank in Beijing in October 2014.

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China is all set to start Asian Infrastructure Investment Bank (AIIB) in January 2016 amid hesitations raised by countries like USA.

AIIB is the China-backed multilateral development institution which uses loans, equity investment, guarantees and other financing instruments to support economic growth and boost living conditions in Asia. While the US dollar will be used as the primary currency, the bank will also honor requests for other currencies. It is planning to lend $10 bn to $15 bn per year at the start.

This is being considered as the rival of world bank and countries like USA have hesitations whether AIIB would have appropriately high criteria on governance and environmental and social precautions.

The idea of creating such an institution was proposed by President Xi Jinping less than two years ago. Today, it is considered by many as one of China's biggest successes in foreign policy. The AIIB is set to be based in Beijing and it will be under the management of an unpaid, non-resident board of directors which, according to founders, would "save it money and friction in decision-making."

USA, which lauded the idea at the beginning began a rear-guard battle to minimise the bank’s influence. But the administration suffered a humiliating diplomatic defeat last spring when most of its closest allies, including Britain, Germany, Australia and South Korea, signed up for the bank in October 2014. 

While many countries had similar doubts as the United States, they figured they could shape the organization from the inside. The Chinese-led institution, the Asian Infrastructure Investment Bank, is picking its first projects. The choices, which are expected to be announced in the coming months, will provide critical insight into how China plans to wield its power.

China, with its vast wealth and resources, rivals the United States at the global economic table. It was a position confirmed this week when the International Monetary Fund blessed the Chinese renminbi as one of the world’s elite currencies, alongside the dollar, euro, pound and yen.

The administration of AIIB want t to take a faster approach than their counterparts at the World Bank, the International Monetary Fund and the Asian Development Bank.

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