China wants to set up a multilateral development bank in Asia to break the U.S.’s financial hold on the continent, the Financial Times reported Tuesday, citing officials familiar with the matter.
It said that Chinese officials have been touring Asia and the Middle East drumming up support for a new institution with $100 billion in capital, with a view to financing major development projects such as infrastructure. The FT said 22 countries across the region have expressed interest so far.
Such an institution would be a direct rival to the World Bank and the Asian Development Bank, which China thinks are too much influenced by the U.S. and its ally, Japan.
The initiative reflects not only China’s ever-growing financial clout, but also its anger at the U.S.’s refusal to implement a 2010 deal allowing it and other emerging nations greater influence in the World Bank and the International Monetary Fund.
In 2010, after pushing from emerging economies led by China, Russia and Brazil, the G-20 agreed to give them more influence over the two Bretton Woods institutions, in return for funding a big increase in their resources.
However, Congress has refused to ratify the U.S.’s contribution to the reforms, which threatens to unravel the whole deal since the U.S., as the IMF’s largest shareholder, still has effective veto powers many of its actions.
The financial crisis led to a big increase in demand for IMF funds, first from weaker emerging nations but later, and to a far greater extent, from the euro zone. The scale of IMF aid to the comparatively rich euro zone has angered many emerging countries. Asian countries in particular have grumbled that the IMF imposed far softer terms on euro-zone borrowers than it did during the Asian financial crisis in the late 1990s.
The FT noted that China is hardly more satisfied with its role at the Asian Development Bank, established at U.S. prompting in the 1960s with a more or less overt mandate to help stop the spread of Communism in the region against the backdrop of the Korean and Vietnam wars.
The U.S. and Japan each have stakes of over 15% in the ADB, while China, whose economy is now larger than Japan’s, holds only 5.5%.
The FT said Beijing wants to establish what it calls the Asian Infrastructure Investment Bank by the end of the year–which is also the deadline that the IMF has set Congress for ratifying the 2010 deal.