The setting up of AIIB with such diverse membership has been a big diplomatic victory for China as Beijing has been successful in creating a big division in G-7 group. Among the G-7, only United States, Japan and Canada have refused to be members. Both US and Japan have cautioned other countries close to them to abstain from participating in the setting up of this Bank but their efforts have not met with success.

AIIB will certainly be a rival to the US dominated World Bank and Japan dominated Asian Development Bank(ADB). That way the new Bank led by China will play an important role in influencing the economies of the developing nations in Asia who will be looking for big financial resources for expanding infrastructure. Indian officials feel that though China will certainly gain in its stature from its major involvement, to start with, China will not like to give the impression that it will dominate the operations of the Bank. Indian officials have found that China is receptive to mutual consultations among the Asian countries and there are indications that China will work on an agreed AIIB charter at a meeting of the member countries in May this year and organize the signing by the members by June 30, 2015.Presently, out of 57 founding member countries of AIIB, 37 belong to Asia and 20 countries belong to other continents.

India has been assured by China that though China will be having the biggest share in the authorized capital which will be at US$ 50 billion to start with , to be stepped up to US$ 100 billion, China will like to run the Bank through mutual consultations through the setting up of a board of governors. China will not follow the World Bank pattern of ensuring limited veto power to USA which virtually runs the management of the World Bank. Indian view is that China is already channelising funds into the infra projects in Asia and other developing countries.USA can not have apprehensions about China’s moves in getting additional clout among the developing nations since US has been using World Bank for long in influencing the economic policies of the poor and developing countries.

AIIB is designed specifically to source finances to build roads, rail and power projects and this is certainly an alternative to the programmes of the World bank and ADB. The argument which the Chinese promoters are giving is that Asia’s infrastructure finances needs far exceed whatever the other international financial institutions are in a position to support. There is a big rush among the least developed countries to improve their respective economies and that can be done by setting up large number of infrastructure projects. Earlier ADB estimated that Asia needs over US$ 8 trillion over the next decade. And between private and official assistance, there is a shortfall of more than US$ 700 billion a year. In fact, World Bank and IMF’s record in funding Asian infrastructure projects, has been most dismal and the AIIB move is a timely one to fill that gap.

This move for AIIB along with the BRICS decision to set up its own Bank, will be galvanizing the process of building up an alternative to US dominated international financial sector. There are differences in the manner of operations of the proposed AIIB with the BRICS Bank but the net outcome will be the erosion of the USA and other western powers domination over the global financial system. As of now, indications are that BRICS nations will have equal votes and will be on even footing. But the Chinese proposal is that the voting strength of the AIIB founder members will be on the GDP and the purchasing power. China will certainly have bigger share but this will not give China veto power though China will have larger say in the operations of the AIIB.

The developed western countries like Britain, France and Germany are more interested in getting business for their companies from the developing countries for their infrastructure projects. The banks of the western countries including those of Italy and Luxemburg are taking close interest as they want to act as bankers to the deals that will be signed by the developing countries for infrastructure projects. These countries of the west which defied USA and joined as founding members of AIIB, are just looking for big business opportunities for them after the operations of AIIB start.

India is already a leading country in exporting technical skill and equipment to some of the Asian countries. Though China is far more economically stronger compared to India and it has more financial muscle power, both China and India have opportunities for doing projects in the AIIB member Asian countries and both the countries can give tough competition to the European countries which are angling for getting new businesses in Asia through their participation in AIIB.

As per the declared policy of China, Beijing proposes to give full play to AIIB and the Silk Road Fund by fusing them with the sovereign wealth funds of countries along the belt and road and by encouraging commercial equity investment funds and private funds to participate in the key silk route projects. The IMF has already shown interest in collaborating with AIIB.As long as China pursues its course of policies in AIIB on the basis of market rules, India should have no apprehensions. India should make all efforts to reap maximum advantage out of its participation in AIIB without bothering whether China is gaining more. Both Asian powers can effectively collaborate in bringing prosperity to the Asian countries including themselves. (IPA Service)