China, the new ‘World Bank’?

Yes, you read it right. I think China is becoming the new ‘World Bank’. Is it a good sign? I think for many, this is not a good thing, especially for the IMF and World Bank supporters. For me personally, yes I would love to see China rivalling both of them or even exceeding these world lenders of last resort. What has happened recently? Well, China and India are backing a 21 country US$100 billion Asian Infrastructure Investment Bank (AIIB). Three notable absentees include Australia, Indonesia and South Korea. No guessing on why they were absent. 🙂  This AIIB would be headquartered in Beijing and initial capital itself would already be US$50 Billion and the later to be increased to US$100 Billion. In other words, within a short period of time, AIIB would be two-thirds the size of Asian Development Bank. As the name implies, its focus would be in Asia and for Asia. Japan is the largest shareholder of Asian Development Bank (ADB) and thus is not expected to join AIIB and play second fiddle to China.

Now there are two avenues for Asian countries to go to whenever needed instead of one and this is definitely a positive sign. US officials said that they could not support this initiative because AIIB is unlikely to be like the IMF, World Bank or ADB which not only lends money but also promote good environmental, procurement and human rights standards. I think you know which country he is referring to. Well, no comments on this statement. Believe what you want from the different sources that you read. 🙂  Oh yeah, according to China’s Finance Minister, Lou Jiwei, AIIB will set high standards, safeguard policies and improve on the bureaucratic, unrealistic and irrelevant policies. Do you wonder whose policies are he referring to?

As the second largest economy in the world as well as a rising superpower, China has continuously played an important role in the world economy today. For example, Russia which is facing economic pressures with the sudden depreciation of Rouble has gotten assistance from China. Besides Russia, other countries which had asked and gotten help from China include Venezuela and Argentina. Besides that, China is increasingly promoting Yuan for bilateral trades and this would slowly put Yuan on the path towards full internatioanalisation. Backed by the world’s largest reserves by far, I think China would be a good ally to have. Many western reports have stated that if you do take money from China, you would have to do its bidding. I think, even if you take IMF’s money, you would also have to comply to its requirements which as usual is set by the country which is setting its direction. If you borrow money from the bank, you would also have to comply with its many requirements. Happy reading about these global financial dramas.

written on 28 Dec 2014

Next suggested article: US$, China, buying properties, what has it got to do with me?


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