Moving beyond the construction of rivalry between the two Asian giants, India has emerged as the second largest shareholder in the China-led Asian Infrastructure Investment Bank (AIIB), which is expected to provide development finance to Asia’s third largest economy which needs at least $1 trillion to bolster its infrastructure.
The delegates from 50 member countries gathered at the majestic Great Hall of the People in Beijing on June 29 to sign an agreement, providing the legal framework for the China-led Asian Infrastructure Investment Bank (AIIB), which is seen as a rival to the world’s major financial institutions, including the World Bank and Asian Development Bank.
Seven more countries are due to sign by the end of the year. For India, its ambassador to China Ashok Kantha signed the document.
The 60-article agreement specifies structure and policy-making mechanism, as well as its member’s shares in the bank. The AIIB will have authorized capital of $100 billion, with Asian countries contributing up to 75 per cent of the total capital.
China, India and Russia are the major stakeholders in the bank, with Beijing contributing 30.34 per cent, followed by New Delhi and Moscow with 8.52 and 6.66 per cent stake respectively. China will enjoy maximum voting right in this financial institution with 26.06 percent, which will give it a veto in the bank’s major financial decisions.
Headquartered in Beijing, the AIIB is designed to fund Asian energy, transport and major infrastructure projects across the continents. It is expected to become operational by the end of this year. This will be the first multilateral bank China will be hosting after the BRICS-led New Development Bank, which is expected to be operational by April 2016.
The idea of establishing the AIIB was first proposed by China’s President Xi Jinping in October 2013, which was agreed by 21 Asian countries including India, Malaysia, Singapore and Pakistan in 2014.
The AIIB, along with BRICS-led NDB, are seen as attempts by emerging economies to recast the global development finance infrastructure. Institutions such as these will hopefully pressure the West which remains deaf to repeated appeals of emerging countries to fast-track IMF quota reforms which will provide greater say for developing countries in this Bretton Woods institution.
Apart from China and India, other countries including Australia, Bangladesh, Brazil, Cambodia, Finland, France, Germany, Italy, Jordan, Nepal, Netherlands, New Zealand, Norway, Pakistan, Portugal, Republic of Korea, Russia, Saudi Arabia, Singapore, Spain, Sri Lanka, Sweden, Switzerland, and the U.K.
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