AIIB to make substantial contribution to global economic governance

A Chinese worker installs signs on a giant rock in front of the headquarters building of the Asian Infrastructure Investment Bank (AIIB) in Beijing, January 12, 2016. [Photo/IC]

BEIJING - The China-proposed Asia Infrastructure Investment Bank (AIIB), formally established on Dec 25 last year, is set to begin operating following an inauguration ceremony on Saturday, showcasing the commitment of the world's second largest economy to making substantial contributions to renewed global economic governance.

In 2013, Chinese President Xi Jinping, who will address Saturday's ceremony, first proposed the global multilateral financial institution, which has now developed into a 57-member body in just two years, with further enlargement highly anticipated.

To Chen Fengying, research fellow at the China Institute of Contemporary International Relations, the opening of the AIIB marks China's "shift from a participant of the global governance system to a contributor of it," reflecting a shift in the country's ability to manage global economic issues.

David Aikman, chief representative officer in China and Greater China Member at the World Economic Forum, which holds annual meeting on the world economy in the Swiss town of Davos, said the launch of the AIIB shows China's increasing role in leading and innovating institutions to address the trillion-dollar infrastructure gap around the world.

Unlike the World Bank and the International Monetary Fund (IMF), which are predominantly controlled by developed countries, the AIIB was proposed by China -- one of the most robust emerging economies in the world -- and includes both developing and developed member states, thus making it a truly open and inclusive entity supplementing the existing global financial framework.

In response to suspicions expressed mainly by the United States and Japan that the AIIB will be more of a tool Beijing could use for its own good, Jin Liqun, the bank's president-designated, said China holds the highest voting stakes because of its GDP volume and capital contribution.

As new members join in, all founding members' shares and voting stakes will be "gradually diluted," Jin added.

"Although China still supports the existing global financial system, the new governance emerging from Asia, led by China, is a supplement and contribution," Ibrahim Yusuf, executive director of the Indonesia Council on World Affairs, told Xinhua in a recent interview, expressing his hope that the AIIB could serve as a new funding source for Indonesia as most western countries are suffering an economic slowdown.

To Chen Gang, senior research fellow with the East Asia Institute at National University of Singapore, the first and foremost problem of the current global finance order -- based on the US-led Bretton Woods system established after World War II -- is the many hurdles it sets for developing countries, thus impeding the timely allocation of funds of which there is a desperate need, especially on a large-scale.