Chinese President Xi Jinping launched a new international development bank Asian Infrastructure Investment Bank (AIIB) seen as a rival to the U.S.-led World Bank.
Despite opposition from Washington, U.S. allies including Australia, Britain, German, Italy, the Philippines and South Korea have agreed to join the Asian Infrastructure Investment Bank (AIIB) in recognition of China’s growing economic clout.
China is the bank’s largest shareholder(30.34%).China, India and Russia are the three largest shareholders, taking a 30.34 per cent, 8.52 per cent, 6.66 per cent stake respectively in the newly-formed bank.
The AIIB is expected to lend $10 billion-$15 billion a year for the first five or six years and will start operations in the second quarter of 2016.
Thirty founding countries that hold over 74 percent of shares in the bank have ratified the AIIB agreement and the remaining countries have until the end of the year to complete the membership process.
Asian Infrastructure development bank:
The Asian Infrastructure Investment Bank (AIIB) is an international financial institution that aims to support the building of infrastructure in the Asia-Pacific region.
The bank was proposed as an initiative by the government of China.
The capital of the bank is $100 billion, equivalent to 2⁄3 of the capital of theAsian Development Bank and about half that of the World Bank.
China has elected its former finance minister Jin Liqun as the first President.
Major economies that did not become PFM( Prospective Founding Members) include the US, Japan (which dominated the ADB) and Canada.
What lead to the formation of AIIB?
The Chinese government has been frustrated with what it regards as the slow pace of reforms and governance, and wants greater input in global established institutions like the IMF, World Bank and Asian Development Bank which it claims are dominated by American, European and Japanese interests.
China in the ADB has only 5.47 percent voting right, while Japan and US have a combined 26 percent voting right (13 percent each) with a share in subscribed capital of 15.7 percent and 15.6 percent, respectively. Dominance by both countries and slow reforms underlie China’s wish to establish the AIIB, while both countries worry about China’s increasing influence.
Shares:
The Authorized Capital Stock of the bank is 100 billion US Dollars, divided into 1 million shares of 100 000 dollars each.
Twenty percent are paid-in shares (and thus have to be transferred to the bank), and 80 % are callable shares.
Voting:
Three categories of votes exist:
1.Basic votes 2.share votes and 3.Founding Member votes.
The basic votes are equal for all members and constitute 12% of the total votes, while the share votes are equal to the number of shares.
Each Founding Member furthermore gets 600 votes. An overview of the shares, assuming when all 57 Prospective Founding Members have become Founding Members is shown below (values in bold do not depend on the number of members):
Vote Type | % of Total Votes | Total Votes | Vote per Member | China(Largest PFM) | Maldives(Smallest PFM) |
|---|---|---|---|---|---|
Basic votes | 12 | 138,510 | 2,430 | 2,430 | 2,430 |
Share votes | 85 | 981,514 | Varies | 297,804 | 72 |
Founding Member votes | 3 | 34,200 | 600 | 600 | 600 |
Total | 100 | 1,154,224 | varies | 300,834 (26.1%) | 3,102 (0.3%) |
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