China will have veto power in its $100 billion Asian Infrastructure Investment Bank. With 26.06% of voting rights in the Beijing-based lender, according to the articles of agreement released by the ministry of finance, China would be able to block major decisions that require three-quarters approval.
Representatives from 50 founding countries on Monday signed an agreement that provided the legal framework for the AIIB, PTI reported.
The delegates from 50 founding countries gathered at the Great Hall of the People for the signing ceremony. Australia was the first country to sign the agreement, followed by 49 other members. Seven more countries are due to sign by the end of the year.
The 60-article agreement specified each member's share as well as governance structure and policy-making mechanism of the bank, which is designed to finance infrastructure in Asia.
"China, India and Russia are the three largest shareholders, taking a 30.34%, 8.52% and 6.66% stake, respectively. Their voting shares are calculated at 26.06%, 7.5% and 5.92%." Germany and South Korea come in the fourth and fifth place.
The AIIB, seen as a rival to the World Bank and Asian Development Bank, gives China another platform to expand regional influence and augment its “New Silk Road” trade initiative. China’s companies will get fresh opportunities in countries from Indonesia to Kazakhstan to counter the impact of slowing growth at home and sluggish demand for exports in Europe.
Major decisions for which China can exercise veto power include electing AIIB’s president, increasing or decreasing the authorized capital stock, determining reserves, amending the agreement, and approving major operational and financial policies. Other matters will be decided by a simple majority.
Embodiment of Concrete Action
Fifty of the 57 founding members signed the agreement, while the remaining seven–Denmark, Kuwait, Malaysia, the Philippines, Poland, South Africa and Thailand–will do so by the end of the year, after they complete domestic evaluation procedures, according to Xinhua News Agency.
Chinese President Xi Jinping, who met representatives from the founding nations in the Great Hall of the People, said the signing was “an embodiment of the concrete action and efforts made by all countries in the spirit of solidarity, openness, inclusion and cooperation.”
The World Bank would work with China and others to help the new lender “hit the ground running,” World Bank Group President Jim Yong Kim said in e-mailed statement, adding that the two institutions share the important goal of ending poverty. The developing world’s infrastructure needs are too huge for any single institution to fulfill, Kim said.
The AIIB will be led by a president with a five-year term and one or more vice presidents. The president may be re-elected once. A board of governors will run the bank, while a 12-member board of directors will oversee operations, according to the document.
Asian Character
To keep the bank’s regional focus, the agreement stipulates that nine directors should come from Asia while the remaining three can be non-regional members. The president must come from a regional member country.
The articles didn’t say who would be president. Jin Liqun is secretary general of the Multilateral Interim Secretariat for establishing the AIIB.
While the bank’s headquarters will be in Beijing, it may establish offices elsewhere, according to the agreement.
The member countries also agreed to set up an oversight mechanism in line with the principles of transparency and openness, to address areas including audit, fraud and corruption.
The new lender will offer an alternative to bodies like the World Bank, International Monetary Fund and the Asian Development Bank in financing building of bridges or dams. The US and Japan aren’t among the founding members, citing concerns over standards among reasons for not joining.
