(Tokyo Shimbun: March 18, 2015 – p. 9)
By Toru Shiraishi in Beijing
Preparations to set up the Asian Infrastructure Investment Bank (AIIB) spearheaded by China are proceeding rapidly. With the deadline to become a founding member with certain “privileges” set for the end of March, Germany, France, and Italy have signed up, following the UK’s example. This came as a shock to Japan and the U.S. In order for the AIIB to be regarded as an “international financial institution,” China has focused on the European countries in its final persuasion efforts.
On the other hand, the Asian Development Bank (ADB), funded mostly by Japan and the U.S., has existed for half a century.
These two banks share the same goal of building infrastructure in the developing countries in Asia and the Pacific to promote growth. They are expected to compete in some cases and the financial order in Asia is about to experience some changes.
Vice Premier Ma Kai and Minister of Commerce Gao Hucheng were busy touring the Middle East even though the National People’s Congress (China’s parliament) was in session (adjourned on Mar. 15).
Gao met with Finance Minister Ibrahim Assaf of Saudi Arabia, which had announced its participation in the AIIB, on March 15. He presented concrete development plans and told Assaf: “China is promoting a silk road strategy at present. We hope that Saudi Arabia will participate in the development of the countries along this road.” With the founding of the AIIB now a certainty, China has begun to plan for the future.
During the signing ceremony of the memorandum on the establishment of the AIIB last October, President Xi Jinping told the representatives of the member states: “To become rich, you need to build roads first,” quoting a Chinese saying. In less than a year after China advocated the establishment of the AIIB, it had succeeded in invited the representatives of 20 nations (not counting China) to Beijing, so Xi was very pleased.
China’s goal in creating the AIIB is obvious. It wants to build railways, roads, and ports connecting it to the Middle East through Central Asia for the “Silk Road Economic Belt” over land and sea. It intends to back up foreign ventures of state-owned companies through AIIB loans to export its stockpile of steel and other construction materials. It also wants to make good use of its 460 trillion yen foreign currency reserves, which are now three times those of Japan.
The ADB sees many faults in the AIIB scheme. It is concerned that the AIIB will be used for political purposes and doubts its ability to screen loan applications. An increase in the number of loans for projects with no regard for human rights and local communities or that destroy the environment may result in an upsurge of social contradictions even if economic growth can be achieved. The competition to provide loans in the Asia-Pacific region may develop into a regional security issue.