China will hold over a quarter of the votes in the new Asian Infrastructure Investment Bank (AIIB), its finance ministry said yesterday, giving it a veto in some key decisions despite Beijing insisting it will not have such powers.
Delegates from 57 countries gathered in Beijing to witness the signing of the articles of agreement for the Chinese-led development bank, which is expected to rival institutions such as the World Bank and the Asian Development Bank.
Fifty countries signed the agreement, the ministry said in a statement on its website, among them Iran, Australia, Georgia and Britain. Seven – Denmark, Kuwait, Malaysia, Philippines, Holland and South Africa and Thailand – refrained from signing as they had not yet won domestic approval and are likely to do so later in the year.
The ministry said China would have 26.06 per cent of the voting rights in the bank. This would effectively give the country a veto on votes requiring a “super majority”, which need to be approved by 75 per cent of votes and two-thirds of all member countries.
A super majority vote is needed to choose the president of the bank, provide funding outside the region and allocating the bank’s income, among other decisions.
The US, which initially cautioned nations against joining the AIIB, has expressed concern over how much influence China will wield in the new institution. China has maintained it will not have veto powers, unlike the World Bank where Washington has a limited veto.
Xinhua news agency quoted China’s vice finance minister Shi Yaobin as saying that China did not seek a veto in the bank, describing its stake and voting share in the initial stage as a “natural result” of current rules.
The bank is slated to start operations by the end of the year
The ministry added that the initial stakes and voting rights of China and other founding members would be gradually diluted as other members joined.
The AIIB, first proposed by President Xi Jinping less than two years ago, has become one of China’s biggest foreign policy successes.
Despite the opposition of Washington, almost all major US allies – Australia, Britain, German, Italy, the Philippines and South Korea – have joined.
The major holdouts in the bank are Japan, the US and Canada.
“This proposal was designed to meet Asia’s infrastructure development and promote Asia’s connectivity and also deepen regional cooperation for the sake of development,” Xi told delegates at the signing ceremony.
“In a relatively short period of time we have been able to reach agreement on the articles of agreement of the AIIB...This testifies to the solemn commitment of all the AIIB’s countries to setting up the bank.”
The bank is slated to start operations by the end of the year. It will be headquartered in Beijing and English will be the working language.
Like the World Bank and the Asian Development Bank, the bank’s officers will get tax-free salaries.
China’s finance ministry said China would be the bank’s biggest shareholder by subscribed capital with a 30.34 per cent stake, followed by India, Russia, Germany and South Korea. The AIIB’s authorised capital will be $100 billion.
Countries defined as “within the region” will hold a 75 per cent stake in the bank, the ministry said.