China Moves Forward On Financing Mechanism For New Silk Roads
April 28, 2014 • 7:51AM

China is moving forward on the proposal of President Xi Jinping last year at the APEC forum in Bali, to create a new financing mechanism, an Asia Infrastructure Investment Bank (AIIB) for developing the Silk Road Economic Belt and the Maritime Silk Road. This will be the second major multilateral lender on the drawing board in which China will play a major part (the other is the BRICS Development Bank).

Researchers say that the bank will be headed by a Chinese official but will be headquartered in another country. Jin Liqun, chairman of China International Capital Corporation (CICC) and a former vice-minister of finance, is heading a team preparing to set up the bank. China has received positive responses from most of the regional powers to this proposal in the recent discussions during the Boao Forum this year. The bank will issue low-interest rate credit for major infrastructure projects. It would work with the Asia Development Bank in some cases, but would be independent of the Manila-based institution, where Japan plays a major role.

The details of how this bank will function are still not clear. Many voices are being raised to make it operate on ``commercial principles,'' a decision that would condemn it from the beginning. Even Chinese Finance Minister Lou Jiwei has said that while the bank ``will focus on building infrastructure in Asia,'' it will be ``more of a commercial entity than an inter-government entity.''