For China, AIIB is the superstar while the NDB is not shining

Within no time, two global institutions will start functioning in China’s Shanghai and Beijing. First is the BRICS managed New Development Bank (NDB). Second is the keenly watched development magnet that is attracting even advanced countries– the Asian Infrastructure Investment Bank (AIIB).

The NDB’s (or the previously announced BRICS Bank) President nominee, KV Kamath has told that the bank will start functioning from second half of 2015. If it happens, Shanghai will host the first international organization that China hosts.

But there is strong perception that China is more interested in the AIIB than the NDB. This is because of the probability of high Chinese share in the AIIB gives more power to China.

In the case of NDB, like other four members, China has just 20 per cent share. Equal share holding and the implied equal voting power will make the NDB less fascinating for the Chinese.

On the other hand, AIIB is the institution that represents Beijing’s economic size and thus is capable of executing its plans more strongly. Here, China clearly specified that 75% of the shares will be reserved for Asian countries. Chinese academician Jin Liqun, who made valiant effort to realize the AIIB is expected to head the Biejing based bank.

In the AIIB, China may hold 30 per cent share, leaving India as the second largest share holder with 10%. India is a founding member of the AIIB.

More than anything, the global appeal of AIIB is well above that of the NDB. There will be a number of European countries on the board of the AIIB. The higher the membership, the closer substitute will be the AIIB for Brettonwoods institutions like World Bank and IMF.

Here, a thirty percent voting power with large number of European countries board who were ex-fans of USA makes the AIIB more clout raising value for Beijing. Australia has just revealed its intention to join the AIIB surpassing its evergreen friends the US and Japan.

The AIIB’s charter that specifies the rights and responsibilities of the member countries is yet to be finalized. China has declared that seventy five percent of the AIIB shares will be left for Asian countries.

The Guardian newspaper of London has wrote that the new bank could allow Chinese capital to finance these projects and allow it a greater role to play in the economic development of the region commensurate with its growing economic and political clout.

AIIB in this respect enable Beijing to finance large scale Belt and Road projects in other countries. During the Boao Economic Conference, Chinese President XI has presented the AIIB and the ‘One Road One Belt’ policy as game changers in the near future.

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Tags : china aiib,ndb and india