China wields veto powers, enjoys 26% voting rights
China's role as the largest shareholder with significant voting rights in the Asian Infrastructure Investment Bank (AIIB) will make the country shoulder more responsibility in turning the bank into a high-quality financial institution to complement existing multilateral development banks, experts said Monday.
A total of 50 prospective founding members of the AIIB on Monday signed the bank's articles of agreement (AOA) in Beijing, which outlines the bank's objectives, operating principles, governance structure and decision-making mechanisms.
Seven members, including Denmark, Thailand and the Philippines, failed to sign the AOA on Monday. China's Ministry of Finance said they can sign the agreement anytime this year.
"The signing of the AOA is a milestone in the establishment of the bank," Vice Minister of Finance Zhu Guangyao told the Global Times Monday on the sidelines of a forum in Beijing.
The bank was proposed by President Xi Jinping in 2013 during his visit to Indonesia.
Xi said on Monday that China's development would not have been possible without Asia and the world.
"As China grows stronger, we are willing to make our due contribution to world development," he said.
Zhu said the AIIB's establishment process has outpaced other multilateral development banks, and its objectives have won support from members within and outside Asia.
"We hope AIIB members' legislatures will approve their AOA membership as soon as possible and get the bank's operations going by the end of the year," he added.
Voting shares
The AIIB will have an authorized capital of $100 billion, and Asian members are required to contribute up to 75 percent of the total capital, leaving the rest to non-Asian members, according to the AOA.
China is the bank's largest shareholder with a 30.34 percent stake. This gives China 26.06 percent of the voting shares, also the largest, within the multilateral financial institution.
"It is within expectations given China's huge economy, and it also means China needs to shoulder more responsibility in building the AIIB into a high-quality bank," Ruan Zongze, vice president of the China Institute of International Studies, told the Global Times Monday.
According to the AOA decision-making mechanism, China has effective veto powers over major decisions because it has voting shares of over 25 percent.
China does not seek veto powers in the AIIB, Vice Finance Minister Shi Yaobin told the Xinhua News Agency Monday. He said the country's stake and voting shares in the initial stage are natural results of current rules, and may be diluted as more members join.
"Being a major Asian economy, Japan's entry will dilute China's stake and voting shares more than any other country, but so far we have not seen such a sign," Ruan said.
He said he believes the AIIB is not likely to approve a large number of new members in its initial stage. Instead, it will focus on rolling out investment projects.
Owning veto powers does not mean that China will use these powers in AIIB's future operation, Jia Qingguo, dean of the School of International Studies at Peking University, told the Global Times Monday.
Jia said China might use the powers only if the projects would seriously hurt China's interests or are not in keeping with the bank's objectives, adding that the possibility for such conditions is low.
After the signing of the AOA, the bank's senior management will be appointed before it starts operations.
The bank's headquarters will be located in Beijing, and its president will be selected through an open, transparent and merit-based process, according to the AOA.
The AIIB's future investments will focus on Asian infrastructure projects in the energy, power, transport and agricultural sectors that also meet environmentally friendly and energy-saving standards, Jin Liqun, secretary-general of the AIIB's interim multilateral secretariat, said at a forum held in Beijing over the weekend.
The Asian Development Bank said it believes Asia would need infrastructure investments worth over $8 trillion between 2010 and 2020.
"The AIIB will complement existing multilateral development banks to promote sustained and stable growth in Asia," Zhu said.
World Bank President Jim Yong Kim welcomed the signing of the AOA.
"More funding for infrastructure will help the poor, and we are pleased to be working with China and others to help the AIIB hit the ground running," he said in a statement on Monday.
