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China's Global Ambitions Take Shape As AIIB Structure Revealed, Germany Pledges Full Support

Tyler Durden's picture




 

China is working diligently to expand its global economic and political footprint. Two critical pieces of the puzzle for Beijing are the $40 billion Silk Road Fund and the $50 billion AIIB. 

As a refresher, The Silk Road Fund is backed by China’s FX reserves, the Export-Import Bank of China, and China Development Bank and seeks to increase ROIC for Chinese SOEs by investing in infrastructure projects across the developing world, while the AIIB is funded by 57 founding member countries (the US and Japan have not joined) and will serve to upend traditionally dominant multilateral institutions which have failed to respond to the rising influence and economic clout of their EM membership. This failure has been exemplified of late by Washington’s steadfast refusal to reform the IMF in order to ensure the Fund reflects the economic clout of its members. Although the failure falls largely at the feet of Congress — US lawmakers’ utter inability to legislate has left reform measures stalled — it recently manifested itself at the Presidential level when President Obama had an opportunity to change the structure of the IMF (for the better) without congressional approval but chose not to do so. Importantly, Obama’s decision not to act was not made out of reverence for Congress. Rather, The White House believed that supporting the reform agenda would have jeopardized the US veto, which US officials at all levels view as sacrosanct. 

As China builds its own multilateral institutions, Beijing has been keen to dispel the notion that it seeks to supplant the Bretton Woods order with its own brand of Eastern hegemony and although one can certainly question the degree to which China’s aims are rooted purely in an inclination to be benevolent towards nations in need of fixed asset investment, Beijing is making an effort to distance itself from the way the US governs the institutions under its control. WSJ has more on the structure of the AIIB:

The bank’s voting structure means that China will retain the upper hand as the largest shareholder, according to its articles of incorporation and people close to the bank. China has offered to forgo outright veto power in day-to-day operations, which helped win over some key founding members.

 

The articles, agreed to at a meeting of the bank’s 57 founding member countries last month, call for the Asian Infrastructure Investment Bank to be overseen by an unpaid, nonresident board of directors, unlike the World Bank and the Asian Development Bank. The new bank, which will be based in Beijing and use English as its operating language, will open bidding for projects to all, unlike the ADB, which restricts contracts to member countries, according to a copy of the articles reviewed by The Wall Street Journal.

 


 

The new Asian bank also gives a bigger voice to developing nations—a turnaround from the International Monetary Fund and World Bank, which China lobbied for years for greater representation.

 

“China benefited a lot from existing multilateral organizations, but it was also frustrated in a lot of ways that they didn’t increase the weight of China and other developing markets, that they are often slow and bureaucratic,” said David Dollar, a senior fellow at Brookings Institution and former World Bank and U.S. Treasury official in China who has done unpaid consulting for the new bank...

 

Voting shares are apportioned according to a complex formula that factors in each member’s capital contribution, the size of its economy, basic votes each member receives equally plus another 600 votes allocated to each founding member.

 

At least 75% of share votes are reserved for members located in the Asia-Pacific region, giving smaller Asian countries a greater say than they have in other global organizations.

 

“They will try and increase the efficiency of investment compared to other development banks with long approval procedures,” said Cui Fan, a professor with Beijing’s University of International Business and Economics.

 

The bank is expected to maintain a lean staff, according to analysts and those close to the bank, compared with the World Bank, which has over 12,000 staff and consultants. Doing without a resident board of directors should save the bank money and friction in decision-making.

 

Mr. Dollar, of Brookings, said the resident board costs the World Bank some $70 million annually. When he worked at the bank, “There was often a certain tension between the management and the board members whose resident staff wanted to find out about projects at an early stage.”

Germany, one of the European nations which signed on after the UK spurned Washington and opened the AIIB membership floodgates by pledging to join the bank, will become the fourth largest shareholder, demonstrating the degree to which Western powers believe the new institution will be far more influential than some US commentators have led the world to believe. 

Via Reuters:

Germany plans to take a 4.1 percent stake in the new China-led Asian Infrastructure Investment Bank (AIIB), making it the fourth-biggest member, according to a finance ministry draft document seen by Reuters on Tuesday.

 

A total of 57 countries, including Britain, France and Iran, have joined the AIIB, which is seen as a rival to the Western-dominated World Bank and a major plank in spreading China's "soft power".

 

It was launched in Beijing last year to support investment in Asia in transport, energy, telecommunications and other infrastructure. The articles of agreement are expected to be ready for signing at the end of June.

 

Germany will be the fourth-biggest shareholder in the $100 billion lender after China, India and Russia. It plans to contribute around $900 million in the period 2016-2019 and take on $3.6 billion in guarantees from 2016, according to the document.

In the AIIB, the US faces a far greater threat to its position in the global economic order than anyone in Washington dares to admit. The smear campaign (that's really the only way to cast it) aimed at painting the new bank as relatively small and meaningful only to the degree that it symbolizes China's global and regional ambitions is profoundly misleading.

This is not a pet project for Beijing and the founding members are not pledging hundreds of millions so they can play a part in petty Chinese theatrics. The bank is real. The sooner Washington recognizes and accepts this, the better off it will be in terms of helping to repair the reputational damage the IMF and ADB have suffered as a result of American and Japanese belligerence. 

 

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Wed, 06/10/2015 - 19:40 | 6184530 Kirk2NCC1701
Kirk2NCC1701's picture

It's a bubble 

-The Fed 

Wed, 06/10/2015 - 19:45 | 6184544 two hoots
two hoots's picture

Seems the "non-regional" (Germany, France, UK, Spain etc.) are hedging their bets.  At least they want a ear at the table.  

Wed, 06/10/2015 - 19:48 | 6184557 Publicus
Publicus's picture

China the savior of the Western World.

Wed, 06/10/2015 - 20:00 | 6184599 exartizo
exartizo's picture

hardly.

China grows stronger at the expense of western stupidity.

Wed, 06/10/2015 - 21:02 | 6184731 MonetaryApostate
MonetaryApostate's picture

Even if nobody does believe in the prophecies, I'm here to tell you guys that "The Kings of the East" are set to take over SOON!!!  (As in BRICS)

 

(In case you think the prophecies are nothing but lies....)

https://www.biblegateway.com/passage/?search=Isaiah%2017

(For the record Damascus was the oldest known standing city in history that has NEVER been destroyed..)

https://www.google.com/search?q=damascus&espv=2&biw=1672&bih=815&source=...

(Oh and btw, Egypt is next on the list...)

https://www.biblegateway.com/passage/?search=Isaiah%2019

Which they are already working on...

 

Wed, 06/10/2015 - 22:30 | 6185044 rickster
rickster's picture

Or maybe the (CRIBS).  Hey we've made our own beds and soon it will be time to LAY DOWN like DOGS w/FLEAS!  Man constantly looks for more and more creative ways to destroy itself.

Wed, 06/10/2015 - 22:45 | 6185097 rickster
rickster's picture

Many choose to not believe but that doesn't make Prophesies (so many have all ready come to pass) any less Truthful or Accurate.  Ignorance is no excuse to deny all these things are coming either.  PRO-Active is much wiser than RE-Active though it won't change what will eventually BE 'the new now'.

Wed, 06/10/2015 - 23:00 | 6185136 rickster
rickster's picture

So you're telling me that 'THE BIG BANG' isn't God and all Atheists and Science only try and have failed miserably ASS-U-ME-ING there is no God?  Oh! Say it ain't so! Guess we should save that one for another discussion.

Wed, 06/10/2015 - 20:59 | 6184745 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

China grows stronger at the expense of western stupidity.

The West grows weaker at the expense of American hypocricy, arrogance, and bullying.

Wed, 06/10/2015 - 21:04 | 6184758 MonetaryApostate
MonetaryApostate's picture

Correct, they were foolish, feeding a dragon (For cheap labor), and it will be the downfall of them...

Just ask any thief why they are in prison... "Because they got too greedy"

Wed, 06/10/2015 - 21:48 | 6184904 Cheduba
Cheduba's picture

Meet the New Bank, same as the Old Bank.

Wed, 06/10/2015 - 20:12 | 6184605 two hoots
two hoots's picture

Currently and why China has lost patients and will flex its economic influence:

Asian Development Bank:   Japan has twice the voting power as China

IMF:   China has limited sway.

 

The TPP rush for "Fast Track"  may be influenced by China's AIIB?   If so, the Obama administration is behind the curve.....again. 

 

 

Wed, 06/10/2015 - 19:50 | 6184568 knukles
knukles's picture

Bad choice of name for China's "Silk Road" fund.  There will be Guilt by Association for the Plebes

Thu, 06/11/2015 - 02:51 | 6185502 Flybyknight
Flybyknight's picture

The plebs wouldn't know about bitcoin and probably never heard about the historical silk road

Wed, 06/10/2015 - 21:05 | 6184759 Urtica ferox
Urtica ferox's picture

"non-regional" will become very much "regional" once the entire New Silk Road pan-Eurasian infrastructure is in place.

Wed, 06/10/2015 - 19:45 | 6184548 jaap
jaap's picture

Belgium chicken?

Wed, 06/10/2015 - 20:42 | 6184694 Freedumb
Freedumb's picture

All of Belgium's cash is tied up acting as a semi-secret buyer of US stawks.

Wed, 06/10/2015 - 23:35 | 6185238 The Rolling Thunder
The Rolling Thunder's picture

Make 5000 bucks every month... Start doing online computer-based work through our website and start getting that much needed extra income every month... You'll get trained by us, no prior experience needed... Find out more about it on following address... www.extra-salary24.com

Thu, 06/11/2015 - 08:28 | 6185854 Michigander
Michigander's picture

Only females need apply. Must have web cam and be able to twerk.

Wed, 06/10/2015 - 19:41 | 6184531 zorba THE GREEK
zorba THE GREEK's picture

The Chinese are so much more truthful and freedom loving than the U.S.

From the pan into the fire, so to speak.

Wed, 06/10/2015 - 19:44 | 6184533 0b1knob
0b1knob's picture

Oh my god it's the END OF THE WORLD!!!!

China has developed a BANK!!!!!!!!!!    And the bank's total capitalization excedes ONE MONTH"S QE!!!!

Wed, 06/10/2015 - 19:49 | 6184565 samjam7
samjam7's picture

Maybe compared to QE it doesn't seem like much. But it shows the folly of QE. If this money is put into good use aka. infrastructure in the region, the effects may be far better than what western QE has achieved with billions more of electronic digits created out of thin air!

Wed, 06/10/2015 - 19:53 | 6184582 knukles
knukles's picture

The US's QE was invested in infrastructure.  Haven't you seen all the McMansions built all over?

Wed, 06/10/2015 - 19:57 | 6184590 kowalli
kowalli's picture

i hasn't see

Wed, 06/10/2015 - 20:00 | 6184597 samjam7
samjam7's picture

+1 I'm really glad you can see the bright side of it!

Wed, 06/10/2015 - 21:06 | 6184763 TheFourthStooge-ing
TheFourthStooge-ing's picture

Alas, alas, three times alas, US citizenism QE was invested in infrared structure. Haven't you seen the country burning all over?

Wed, 06/10/2015 - 20:07 | 6184618 two hoots
two hoots's picture

Thinking the same.   They will see real positive effects where the World Bank includes stuff like gender equality etc.

Wed, 06/10/2015 - 20:01 | 6184601 NotApplicable
NotApplicable's picture

I too was humored by the mere $100B. Question is, what is their operating currency?

Wed, 06/10/2015 - 20:06 | 6184614 kaiserhoff
kaiserhoff's picture

You haven't heard?

Bitcoin, of course;)

Wed, 06/10/2015 - 19:49 | 6184562 ghostzapper
ghostzapper's picture

Yellen says that this will not be considered a real and legitimate banking presence or "prestigious Bank" if you will until it can print it's own counterfeit money to enrich its criminal Cabal members and perform "sophisticated financial transactions" such as using said printed counterfeit money to buy back from said members at 100% to par garbage, toxic debt that represents illegally pooled securities encompassing the "slicing and dicing" of mortgages pumped into the very same enslaved human population enslaved by as Yellen would say her "prestigious bank".   

Wed, 06/10/2015 - 19:52 | 6184576 knukles
knukles's picture

Mayhaps nobody should hold their breaths until said un-prestegious bank starts clearing, deposit taking and possibly (gasp!) "printing" electronic moolah. 

Wed, 06/10/2015 - 19:51 | 6184573 buzzsaw99
buzzsaw99's picture

the china bank. brought to you by the wal marts, the clintons, craapls, and usa maggots of every stripe.

Wed, 06/10/2015 - 19:56 | 6184585 knukles
knukles's picture

Now, if this were thw MIB (Muzzie Investment Bank) I'll betcha that the admin would be all in.

So that's racist2
Not supporting the Chinks and likely supporting the Muzzies.

Wed, 06/10/2015 - 20:06 | 6184611 nmewn
nmewn's picture

"Just what the world doesn't need, more crony-socialist central bankers. We've got that market already cornered!" - Mr.Yellen

Wed, 06/10/2015 - 20:22 | 6184647 rlouis
rlouis's picture

I can't help think that competition, even among crony-socialist central banks, is a good thing.  Competition was equivalent to original sin among oligarchs.

Wed, 06/10/2015 - 20:43 | 6184696 nmewn
nmewn's picture

Yeah well, there's nothing wrong with competition per se but this is a little different. When the prime directive of modern central banks is to destroy the very currency it distributes to the people for goods & services offered, no good will ever come from it.

"Look, although down fwom it inception, ouwa currency is holding its buying powa better than..." - Sum Ting Wong, Finance Minister, Peoples "Republic" of China ;-)

Wed, 06/10/2015 - 19:57 | 6184591 i_call_you_my_base
i_call_you_my_base's picture

Just another vehicle for debt and dominance. It'll just be from the Chinese.

While I hope the USs stupid financial system burns, I equally hope the Chinese equity-real-estate clusterfuck implodes too.

Wed, 06/10/2015 - 22:17 | 6184985 rickster
rickster's picture

Just think about how fast we citizens net worth will shrink with a West and East are printing Dollars and China's new Renminbi w/Merkel's Mug on the face of it!  Won't that be pretty? Sure now our individual worth will be squeeze down by a 2-World Banking System a few years before the 1-World Bank when one overtakes the other-COOL!

Wed, 06/10/2015 - 20:00 | 6184598 BrokusDickusMaximus
BrokusDickusMaximus's picture

I told you all before. Look back, I told you guys twice. Hide in plain sight.

Wed, 06/10/2015 - 20:01 | 6184600 22winmag
22winmag's picture

Git your gold while the gittin' is good.

 

Speaking of Germany, few countries have suffered from U.S. war crimes and interventionism the way Germany has.

 

Vietnam and Japan are runners up in that department.

Wed, 06/10/2015 - 20:05 | 6184612 Goldilocks
Goldilocks's picture

"building castles in the sky"
Doctor Evil rap... Just The Two Of Us HD no fake
http://www.youtube.com/watch?v=o1cRTW9AGVo (2:22)

Wed, 06/10/2015 - 20:14 | 6184630 WTFUD
WTFUD's picture

China should warn these fuckers now. Let these EU puppets know that if they support the USSofA in their attempts to destabilise ANY Brics & partners then they pull their investment and use counter sanctions.

Russia's military expertise is invaluable and China need Russia to turn the tide, which augurs very well for them. Not to mention they now don't need steenkin Sodomy Arabian oil.

Thu, 06/11/2015 - 23:26 | 6188938 johmack2
johmack2's picture

Agreed..somewhere down the line China and India will have to ask  germany uk italy  to choose between USA running rough shot over them or giving RUSSIA the tactical space it needs.

Wed, 06/10/2015 - 20:24 | 6184648 NeverForgetSilver
NeverForgetSilver's picture

I was told that China has crashed. How can it have ambition after it crashed and burnt. Who edits these articles here?

Wed, 06/10/2015 - 22:30 | 6185042 ozziindaus
ozziindaus's picture

Looks like the imperials have hooked china once more but rather than opium, this time it's the green. There's no getting out of these clasps with anything short of a Japanese style deflationary bust.

As for its reserve currency ambitions, that's suicide by nuclear attack. Nothing threatens the USD$ hegemony, NOTHING.

Wed, 06/10/2015 - 22:44 | 6185094 q99x2
q99x2's picture

I'll join. Do they have online?

Wed, 06/10/2015 - 23:06 | 6185163 VW Nerd
VW Nerd's picture

In 1944, Bretton Woods agreement established the US Dollar as the global reserve currency.  Since then, the US worker has been insulated from the global labor market, allowing them to enjoy a much higher wage base and, as a result, a very high capita standard of living.  Unfortunately, this privelige has been horribly abused to the point major competing economies have been given no choice but to develop their own monetary/banking system to clear multilateral trade of their goods and services.  Leading this transition is the AIIB.  I sense that as this banking system evolves (it will be fought tooth and nail by the western banking cartel) US workers will be caught in an economic vise, Having lost the dollar reserve monopoly, US workers will have to compete with low wage countries on the global labor market, but have to compete with the insulated, high paid public service workforce for domestic goods and services.  I think our rulers are aware of this, expecting growing civil discontent, and are planning accordingly.

Thu, 06/11/2015 - 00:24 | 6185326 onmail
onmail's picture

Bretton Woods == Move over Britain , now its our turn to suck the world dry, let the whole world go to hell , while we Americans enjoy great life in mansions with swimming pools & manicured lawns and a fleet of suv's. While the rest of the world will act like labor class , toiling & working for us (US) because we are now the lords.

ItsTimeToJunkTheDollarAndTheBackOfTheCarBornAmericanBustards

AndTheirCabalPuppetMasters

 

Thu, 06/11/2015 - 01:56 | 6185460 homebody
homebody's picture

American workers wil have to learn to make stuff and grow stuff - I am pretty good at growing vegetables using the bull shit that flows from above.

Thu, 06/11/2015 - 02:48 | 6185499 Flybyknight
Flybyknight's picture

Asian development Bank Spot the odd Asian country out. Hint. Its missing from the map.

Thu, 06/11/2015 - 06:07 | 6185653 Raul44
Raul44's picture

Looks good and I am glad europe participate in this project. That said I hope they come up with better system than single country reserve currency. It may sound beneficial, but its in fact bad for any country to be a reserve currency for various reasons. So for the US, in the long term it will be for the better if dollar drop that status.

Thu, 06/11/2015 - 23:22 | 6188922 johmack2
johmack2's picture

I suggest china be careful one of these members could end up being a trojan horse or poison pill that causes the bank a bit of heartache.

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