Chinese Development Bank Gains Members 2015-03-30

Development banking in Asia has been in the news lately. Last year, China proposed creation of a development bank called the Asian Infrastructure Investment Bank. Chinese officials say the institution would help finance infrastructure projects throughout Asia.

The area has a need for better roads and other infrastructure, including ports and power supplies. The Asian Development Bank, another organization, was set up to reduce poverty in Asia and the Pacific. It estimated last May that the Asia-Pacific area needs about $800 billion a year in infrastructure development.

China reports that more than 20 countries have agreed to be founding members of the Asia Infrastructure Investment Bank, or AIIB. Recently, some European powers added themselves to the list. U.S. allies Britain, Germany, France and Italy have joined up. So has South Korea. And Australia has agreed to move forward with negotiations.

The United States, however, has said it is concerned about the governance of the AIIB. It has urged countries to consider the bank's standards, its social and environmental policies, before joining.

Some observers say the United States should join the bank as a founding member. Asia expert Alejandro Reyes said the way the U.S. has dealt with the bank shows outdated thinking.

Yet other observers have said it is unlikely the U.S. will do so. The last day to become a founding member is March 31st.

Robert Kahn is a senior fellow at the Council on Foreign Relations. He said U.S. officials are concerned that the AIIB may be seeking to replace existing institutions, such as the World Bank and Asian Development Bank.

"In a world with the better politics, the United States would be joining this institution, but because of the environment on the Hill (in Washington),the United States is not only not in position where it could join this institution and get it approved by Congress, it cannot get even basic reform in the IMF through in a way that would make the existing institutions more attractive to the rising powers."

The U.S. Congress has failed to approve reforms of voting rights for the International Monetary Fund. The delay has led China and other countries to consider setting up their own institutions as a way to gain more influence in world economic governance.

Still, officials at the IMF, World Bank and Asian Development Bank say they are looking for ways to cooperate with the AIIB.

U.S. officials say they welcome new multi-lateral institutions that would observe high standards that the international community has built. China says it will uphold high standards. But most details will not become clear until the new bank is operational.

The bank is expected to start with $100 billion in capital, mostly from China.

Experts say it remains to be seen how China will take on a leadership position in the AIIB or whether it will work with existing organizations. Tom Wright is director of the Project of International Order and Strategy at the Brookings Institution in Washington, DC.

"This is not the end. It really is just beginning and especially the beginning of a new chapter for China. It set up this bank, it said it is going to take a leadership position, but huge questions still hang over how it is going to behave."

China considers itself in a good position to carry out infrastructure projects in Asia. However, it has depended on state-owned companies and labor when working overseas.

Using international labor standards rather than Chinese labor rules would be a step forward, says economist Liu Li-gang of the ANZ Banking Group. He says China should open up competition for bank-supported projects. He said this will reduce criticism from often linked to Chinese foreign investment.

I'm Mario Ritter.

VOA reporters Bill Ide and Colin Lovett prepared this story for VOANews.com. Marion Ritter wrote it for Learning English. George Grow was the editor.

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Words in This Story

founding- adj. a person or group which helps to create or establish something; a person who founds something

multi-lateral- adj. involving more than two groups or countries

standards- n. values; a level of quality that is considered acceptable or desirable

capital n. goods or possessions