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ADB "Boosts Firepower" As China-Led Bank Grabs Center Stage

Tyler Durden's picture




 

“I don’t think there will be major change to the world of development finance [because of the creation of the AIIB], although there can be interpretations as to the symbolic meaning of this.”

 — Takehiko Nakao, Japanese head of Asian Development Bank 

 

One can hardly blame Nakao for putting on a brave face. After all, the China-led Asian Infrastructure Investment Bank represents not only a major shift away from the multilateral institutions that have dominated the post-war global economic order, but also a move by Beijing to establish what we have described as a Sino-Monroe Doctrine. Speaking to the latter point, President Xi Jinping’s recent pledge to invest $46 billion in Pakistan (53% more than the US has invested in 13 years) as part of Beijing’s Silk Road initiative, gives us a window into what the future may hold in terms of China’s growing regional influence.

But as Washington learned in March, belittling China’s power grabs is a fool’s errand, especially when they are disguised as infrastructure development initiatives. In the end, resistance is futile, but old habits die hard, which is why it’s not surprising that the ADB is now beefing up its lending capacity while simultaneously paying lip service to the AIIB. 

Via Bloomberg:

The Japan-led Asian Development Bank unleashed measures that could help it hold its ground as a resource for regional economies, even as China’s Asian Infrastructure Investment Bank gains prominence.

 

The ADB overhauled a four-decade-old development fund to boost its annual lending and grant approvals by 50 percent, to as much as $20 billion, the bank said at its annual meeting in Baku, Azerbaijan that started May 2. It will also set aside money to support public-private partnership projects and work with the AIIB “for Asia,” the ADB said.

 

“Now that the China-led AIIB is becoming a reality, the Japan-led ADB wants to ensure that it will still remain a key funder for infrastructure programmes in less developed Asia,” said Wai Ho Leong, a 

 

Singapore-based economist at Barclays Plc. “Given the development needs across Asia, there is sufficient room for both players.”

 

For almost 50 years, Asian nations from India to Vietnam and Indonesia have benefited from funding from the ADB, which is dominated by Japan and the U.S. That relationship is set to change as the rise of the AIIB, the first major multilateral development bank in a generation, provides an avenue for China to strengthen its presence in the world’s fastest-growing region.

 

On its side, the ADB is boosting its own firepower.

 

In a move it described as “groundbreaking,” the lender said it will combine the lending operations of the bank’s Asian Development Fund with its ordinary capital resources balance sheet, with the merger taking effect in 2017. The fund was established in 1973 to provide concessional loans and grants to poorer countries, while OCR loans are provided to middle-income countries at market-based rates.

 

The initiative will increase ADB assistance to poor countries by as much as 70 percent, and together with cofinancing, enable the bank’s annual assistance to reach as high as $40 billion in the coming years from $23 billion in 2014, it said.

Clearly, this looks quite a bit like an institution trying to play catch up now that a competing player has entered the market. Similarly, The White House is now scrambling to correct the ‘misconception’ that Washington tried to demean the initiative and worked behind the scenes to discourage US allies from supporting Beijing. 

Via WSJ:

The U.S. never opposed a new China-led infrastructure bank, President Barack Obamasaid Tuesday, challenging a common narrative that Beijing out-maneuvered Washington by persuading key U.S. allies to sign up as founding members.

 

“We’re all for it” if the Asian Infrastructure Investment Bank incorporates strong financial, social and environmental safeguards, Mr. Obama said…

 

“Let me be very clear and dispel this notion that we were opposed or are opposed to other countries participating in the Asia infrastructure bank,” he said at a press conference with Japanese Prime Minister Shinzo Abe. “That is simply not true.”

With that in mind, we’ll leave you with the following quote provided to NY Times last October by a senior Treasury official:

“How would the new institution add value? How would the Asian Infrastructure Investment Bank be structured so that it doesn’t undercut the standards with a race to the bottom?” 

Doesn’t sound too much like an administration that was “all for it” to us. 

*  *  *

As a reminder, here are all of the countries that have signed on to participate in the China-led institution:

 

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Mon, 05/04/2015 - 16:56 | 6059787 HonkyShogun
HonkyShogun's picture

Uh oh. Looks like someone is in need of some Democracy.

Mon, 05/04/2015 - 17:06 | 6059811 Publicus
Publicus's picture

Free money for all policy will help the USA remain relevent. I will be the first to apply for my fair share of free money.

Mon, 05/04/2015 - 17:09 | 6059830 HonkyShogun
HonkyShogun's picture

*sigh* How I wish I were smart and Jewish.

Mon, 05/04/2015 - 17:21 | 6059869 macholatte
macholatte's picture

 

“How would the new institution add value? How would the Asian Infrastructure Investment Bank be structured so that it doesn’t undercut the standards with a race to the bottom?” 

Standards. We don't need no stinking standards!

LMAO

Mon, 05/04/2015 - 17:32 | 6059898 Anusocracy
Anusocracy's picture

With each loan China will include a 65" 4k LED TV, and with their loans, Japan will throw in a custom made inflatable doll.

Mon, 05/04/2015 - 17:29 | 6059902 NoDebt
NoDebt's picture

I think this article was meant as humor.  Sure, Japan is going to start handing out money to other countries because they're clearly in a position to do so.  And the US "never opposed" the Asian (China) Infrastructure Bank.

I've grown very accustomed to BS the last few years, but this one is pegging the meter.

Mon, 05/04/2015 - 20:20 | 6060428 datura
datura's picture

Perhaps now is the time to wish to be smart and Chinese. I have a feeling that the Chinese want very much to play their own game and they dont give a damn about Jews. Why should they after all? If that is so, Jews have a big problem - they can't hide among the Chinese so easily as in the West, they will be too visible:-) Well, we will see. 

Mon, 05/04/2015 - 23:34 | 6060828 StychoKiller
StychoKiller's picture

 

 

[quote]

if the Asian Infrastructure Investment Bank incorporates strong financial, social and environmental safeguards, Mr. Obama said…

 [/quote]

If, if, if...whatcha goin' do if they don't have any social, financial or environmental safeguards?  What does this "jargon" even mean?

Mon, 05/04/2015 - 17:03 | 6059809 HowdyDoody
HowdyDoody's picture

The map appears to show that Israel, the US's most favored ally and bestest friend in the whole wide world, is a member.

Shurely shum mishtake?

Mon, 05/04/2015 - 20:07 | 6060390 datura
datura's picture

no mistake:-) but even more interesting: it appears AIIB will have "privileged" members who will have 75% of voting rights and the rest will be "unprivileged" members with 25% voting rights. Allegedly, Russia will be among the privileged and the Western countries will be among those unprivileged. I don't know where Israel will belong:-). China will announce the exact conditions and voting rights in the near future. It will be very interesting to see those exact conditions.

Mon, 05/04/2015 - 23:35 | 6060831 StychoKiller
StychoKiller's picture

Hmm, "The Golden Rule" springs to mind here!

Mon, 05/04/2015 - 17:03 | 6059812 AIIB
AIIB's picture

I represent a major shift away

Mon, 05/04/2015 - 17:04 | 6059816 Kaiser Sousa
Kaiser Sousa's picture

too late Mrs. Wantanabe...

theyve moved on Bitches.....

 

Mon, 05/04/2015 - 17:10 | 6059831 Urban Redneck
Urban Redneck's picture

If these two are going to get into a "free money war" for "development" perhaps I should pack up and go back to SE Asia and get me sum...

Mon, 05/04/2015 - 17:25 | 6059881 wmbz
wmbz's picture

The U.S. never opposed a new China-led infrastructure bank, President Barack Obamasaid Tuesday, challenging a common narrative that Beijing out-maneuvered Washington by persuading key U.S. allies to sign up as founding members. 

“We’re all for it” if the Asian Infrastructure Investment Bank incorporates strong financial, social and environmental safeguards, Mr. Obama said… 

“Let me be very clear and dispel this notion that we were opposed or are opposed to other countries participating in the Asia infrastructure bank,” he said at a press conference with Japanese Prime Minister Shinzo Abe. “That is simply not true.”

 

~ Obozo is one clueless bastard. I would gladly bet good money that he does not even know what the "China-led infrastructure bank" is or how it works!

Just keep reading the que cards, moron.

Mon, 05/04/2015 - 18:11 | 6060019 jtg
jtg's picture

Clueless and dishonest, in essence the face of the US Deep State.

Mon, 05/04/2015 - 17:51 | 6059968 Soul Glow
Soul Glow's picture

Unleashed measures?  All they got left in that quiver of arrows are promises to pay.  IOUs will never save the day.  Debt is what is killing the economy and the economy is saturated in it.

Mon, 05/04/2015 - 18:08 | 6060018 jtg
jtg's picture

ADB groundbreaking, like digging its own grave?

Tue, 05/05/2015 - 03:30 | 6061019 Element
Element's picture

I just want to point out that China is not up to its eyeballs in debt and it does not have a rampant monster debt to GDP and private debt issue, or the fastest debt growth in all of history for a major economy, and that therefore China is clearly a safe bet and will not suffer from the exact same debt collapse issues, as all the other debt-wrecked economies, and their corrupt financial ultra-bubbles. Yes you can believe the hype this time! If you invest in China your money will be completely safe, as its fiat is like totally fricken solid man! Spread the Gospel and good-tiddings, it's only round-eye economies that are like, totally rotten to the core, but China's is totally AWESOME man!

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