Speed up formation of Asia investment bank: Xi Jinping tells officials

BEIJING: President Xi Jinping has ordered officials to speed up the formation of the China-sponsored Asian Infrastructure Investment Bank (AIIB) and finalise "concrete" schemes to utilise the USD 40 billion fund established by him to finance mega infrastructure projects in the region under his ambitious New Silk Road plan.

Xi told a government financial meeting here yesterday that AIIB's main mission will be to provide financial support for infrastructure projects in Asia and for those along the land- based Silk Road and Maritime Silk Road (MSR) economic belts.

The Silk Road Fund should be managed under market-driven principles Xi said as he also called for "concrete" investment projects which meant that funds would be released based on the viability and profitability of the projects.

India along with 22 other countries signed up as the founder members of the AIIB last year.

The plan specifies that the authorised capital of AIIB is USD 100 billion and the initial subscribed capital is expected to be around USD 50 billion while the paid-in ratio will be 20 per cent.

Voting rights are to be decided after consultations among the members over fixing the bench marks which were expected to be combination of GDP and Purchasing Power Parity (PPP).

Based on this formula, India will be the second-largest shareholder of the bank after China.

Chinese Finance Minister, Lou Jiwei said last year that China was expected to be a dominant member as it will contribute the largest portion of the registered capital, based on the rationale that China is the largest holder of foreign exchange reserves both in the grouping and in the world.

The issues of the structure, voting rights and all other issues would decided in subsequent meetings to be held this year to finalise a general framework in consultations with other member countries.

Lou said the bank will act as a key supplement to fund raising channels for infrastructure projects, adding that it should be set up as soon as possible.

Chinese officials say that the AIIB, coupled with USD 40 billion fund of the Silk Road as well as the BRICS Bank with USD 50 billion capital, could trigger massive investment in infrastructure projects specially in Asia.

While AIIB is to be headed by a Chinese official and headquartered in Beijing, the BRICS Bank is to be based in Shanghai and will be headed by an Indian to start with.

Both banks are expected to begin functioning this year.