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LOU Jiwei delivered a speech at the luncheon session for the BFA seminar on Infrastructure Connectivity in Asia: The Financing Challenge

Time:2014-07-04 08:18:44    Views:2218830    Origin:Boao Forum for Asia

LOU Jiwei delivered a speech at the luncheon session for the BFA seminar on Infrastructure Connectivity in Asia: The Financing Challenge

On June 29, 2014, Chinese Financial Minister Lou Jiwei attended the luncheon for the seminar on Infrastructure Connectivity in Asia: The Financing Challenge and gave a speech.

According to Lou Jiwei, the current global economy is suffering from a lack of investment. If the US is to maintain its existing infrastructure capability, it needs about two trillion USD of investment. The same is true with Europe. The less developed countries need even greater investment in infrastructure. At present, with private investors showing no strong drive to invest, infrastructure investment is all the more important. With the major developed countries adopting quantitative easing (QE) and  ultra-low interest rate, Asia and the whole world lack no capital but the capability and mechanism of channeling the capital towards infrastructure. Against such background, during their separate visits to Southeast Asia in October 2013, Chinese President Xi Jinping and Premier Li Keqiang suggested the establishment of the Asian Infrastructure Investment Bank (AIIB). Such a suggestion has especially important realistic meaning.

Lou Jiwei pointed out that the establishment of AIIB is a move to achieve winning results for all the parties involved. First, it helps to support the global economic recovery. This year, Australia as the chair nation of the G20 suggests that all member nations achieve an extra 2% economic growth during the coming five years. This is to be fulfilled mainly by investment. The proposed AIIB will invest in infrastructure construction in Asia, which is good for enlarging the total demand of the world and supporting the world economic recovery. Second, Asian infrastructure is relatively weak and needs a large amount of investment. Located in the center of Asia, China is in a good position to promote infrastructure connectivity in Asia. Third, stronger connectivity with neighboring countries will boost the economic development of China’s underdeveloped regions in its northwest, northeast, and southwest. Fourth, China adheres to its diplomatic principle of “befriending the neighbors and treating neighbors as partners” and believes that the economic development in neighboring countries will create a good environment for its development.

As for the relationship between AIIB and the existing multilateral development banks such as the World Bank and the Asian Development Bank, Lou Jiwei said that they are supplementary and cooperative with each other. The World Bank and the Asian Development Bank lay greater stress on poverty alleviation while AIIB puts emphasis on infrastructure construction. In fact, infrastructure construction is also indirectly good for poverty alleviation. In the future, AIIB can strengthen cooperation with the World Bank and the Asian Development Bank through joint financing.

As for the equity structure of AIIB, Lou Jiwei said that China can contribute up to 50% of the total investment in AIIB, which demonstrates its resolution to promote AIIB. Of course, the final investment by China is not necessarily to reach 50%. If more countries are involved, the proportion of Chinese investment can be lowered accordingly. However, based on economic weight calculation, China will remain the largest investor.

As for AIIB’s membership, Lou Jiwei said that China will promote the construction of AIIB based on the open regionalism and the principle of adopting the countries within the region before those outside the region. China has already had several multilateral and bilateral discussions with some African countries. Meanwhile, it also maintains communication with Japan, the US, and some relevant European countries, welcoming them to take part in the preparations for the building of AIIB. According to the current work plan, the countries in Asia will sign an intergovernmental framework memorandum for the construction of AIIB by this autumn. Then, countries outside Asia will be gradually involved. China’s proposal of building AIIB has received active responses from many Asian countries. Now, China is holding active discussion with some relevant countries for deciding on the founding nations. Next, AIIB’s basic framework and articles of association will be worked out, allowing it to be put into operation as soon as possible.

According to Lou Jiwei, AIIB is oriented to carry out quasi-commercial operation. At its initial stage, AIIB will mainly offer sovereign loans to the infrastructure projects of sovereign countries. Later, it will consider the establishment of the trust fund and introduce public-private partnership mode (PPP) for the projects that cannot offer sovereign credit guarantee. AIIB and the government of the hosting country will make investment and reasonably share risks and rewards with the private sector. The sovereign wealth fund, annuity, and more social capital from the private sector will be channeled to the infrastructure construction of Asian developing countries.

As for AIIB’s governance structure and guarantee policy, Lou Jiwei pointed out that AIIB will be an intergovernmental multilateral development bank and will be run in the mode and based on the principles designed for multilateral development banks. The multilateral development organizations such as the World Bank and the Asian Development Bank are under constant reform, a proof that there is only the “good practice” instead of the so-called “best practice.” Comparatively speaking, the operation mode of the European Development Bank boasts higher decision-making efficiency, less bureaucracy, better safety guarantee polices, and far larger business scale than other multilateral development banks. AIIB will adopt and learn from the existing multilateral development banks’  good practices in governance structure and guarantee policy, paying attention to issues such as environment and emigration. However, AIIB should not become a gaming institution between countries and should not allow its operation to be politicized. It is natural that different countries may hold different opinions about AIIB. We can have thorough communication about this. AIIB is an open and accommodating organization. China welcomes the involvement of more countries and is willing to work with them to make joint contribution to the economic development in Asia and the whole world. 

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