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Development Finance with Chinese Characteristics?

GENEVA – After a late flurry of additions to the founding membership of the Asian Infrastructure Investment Bank, attention now turns to setting the China-led AIIB’s rules and regulations. But important questions remain – most important, whether the AIIB is a potential rival or a welcome complement to existing multilateral financial institutions like the World Bank.

Since China and 20 mostly Asian countries signed the AIIB’s initial memorandum of understanding last October, 36 other countries – including Australia, Brazil, Egypt, Finland, France, Germany, Indonesia, Iran, Israel, Italy, Norway, Russia, Saudi Arabia, South Africa, South Korea, Sweden, Switzerland, Turkey, and the United Kingdom – have joined as founding members.

According to China’s finance ministry, the AIIB’s founding members are to complete negotiations on the Articles of Agreement before July, with operations to begin by the end of the year. China will serve as the standing chairman of the negotiators’ meetings, which will be co-chaired by the member country hosting the talks. The fourth chief negotiators’ meeting was completed in Beijing in late April, and the fifth will take place in Singapore in late May. The Chinese economist Jin Liqun has been selected to lead the AIIB’s Multilateral Interim Secretariat, charged with overseeing the bank’s establishment.

While GDP will be the basic criterion for share allocation among the founding members, the finance ministry suggested in October that China does not necessarily need the 50% stake that its GDP would imply. Moreover, although the AIIB will be based in Beijing, the ministry has said that regional offices and senior management appointments will be subject to further consultation and negotiation.