China "Can't Believe Its Luck" On Investment Bank

[galdur]

May 27, 2015 5:12 pm

A bank made in China and better than the western model

David Pilling
 
It is possible that the AIIB will even exceed the standards of existing development lenders

Groucho Marx said he would refuse to join any club that would have him as a member. He did not however try to discourage his friends from signing up. That is what the US did when it came to the Asian Infrastructure Investment Bank, a China-led institution that Washington regarded with some suspicion.
One Beijing-based US executive scoffed at the very notion that China could run a multilateral institution. It did not know the first thing about how such a bank should be governed, he said.

Opponents of the AIIB whispered that it would lend to dictators, despoil the environment and trample on human rights. (Western institutions, of course, have never done any such thing.) The AIIB may turn out very differently from this caricature.
It is just possible that it will even exceed the standards of existing institutions. With 57 members, including Europeans such as the UK, Germany and Sweden, it is evolving fast and may end up an entirely different institution from the one Beijing envisaged.

Last week, members met in Singapore to draw up articles of agreement. With input from both China, which has proved it knows a thing or two about development, and western countries, which have a better record of implementing safeguards, the project has made a promising start.
The bank will have initial capital of $100bn, double that originally intended. That will make it a serious challenger to the Asian Development Bank, the 50-year-old Tokyo-dominated regional bank with capital of $150bn. China will have the biggest capital quota, probably about 25 per cent. India will have the second-largest, then Russia, Germany, Australia and Indonesia. Overall, 75 per cent of the bank’s capital — and therefore voting rights — are likely to be Asian. Initial indications are that China will not have a veto.
The bank will be based in Beijing. It will have a non-resident board that meets periodically in the Chinese capital and convenes by video conference. At first glance, this could raise the suspicion that the AIIB will have less rigorous oversight than the World Bank, with its resident board that approves all loans. Yet many see the World Bank board as expensive — it costs $70m a year — and cumbersome.

David Dollar, a World Bank veteran who has acted as an unpaid consultant to the AIIB, says the World Bank had become so slow and risk-averse that most governments had stopped coming to it for infrastructure financing. He quotes an Indian official, exasperated at the pace of World Bank-sponsored projects, as saying: “Mr Dollar, the combination of our bureaucracy and your bureaucracy is deadly.”
The hope, he says, is that the AIIB can combine the best of both worlds. “The enthusiastic response of developing countries in Asia to the AIIB concept reflects their sympathy with the idea that a bank can have good safeguards and still be quicker and more efficient than the existing banks,” he writes.

In Jin Liqun, tipped to become the AIIB’s first president, China’s new institution has one of the country’s most experienced technocrats. He is a former deputy finance minister and a former ADB vice-president. His job will not be easy. With such high-profile western involvement, the AIIB will find its projects (a dam in Myanmar here, a highway through an Indonesian township there) scrutinised by board members from the likes of Germany. By inviting in so many foreign participants, Beijing has probably given up on the idea that the AIIB can be a crude instrument of Chinese diplomacy. It may even be having buyers’ regret.

In one way, though, the bank is a success before it has even started. It has triggered what one commentator calls “infrastructure wars”. The ADB has performed some accounting magic in order to increase the amount it can lend. ADB officials say the bank will review approval procedures so that it can match the AIIB’s expected greater speed. On the day that AIIB members met in Singapore, Shinzo Abe, Japan’s prime minister, announced that Tokyo would make $110bn available for infrastructure projects in Asia over five years. These, he implied, would be of higher quality than those led by China.
Like Groucho Marx, Japan and the US are not rushing to join the new club. Yet if the AIIB proves as effective as its advocates hope, before long even Tokyo and Washington may be angling for membership.

http://www.ft.com/cms/s/0/14c9f302-0397-11e5-a70f-00144feabdc0.html#axzz3bTNMBxTJ

[bryant.coleman]

China perhaps got tired of the humiliation it received from the Asian Development Bank (ADB). China was having only 5% voting right in the ADB, while Japan was having 13% rights. The United States, which is a country located outside Asia, was also having 13% voting rights. The Asian Infrastructure Investment Bank will soon destroy the ADB. After that the US and Japan can take their voting rights to elsewhere. 

[galdur]

WW3 may start soon, Soros warns, unless US loosens up on China

Published on May 22, 2015
There's a warning that World War 3 will erupt in just a few years - unless the US financial system loosens up on China. Billionaire investor George Soros says America needs to let Beijing join the global currency basket, or the consequences could prove catastrophic.

https://www.youtube.com/watch?v=MwwhVoR4Jqs

[galdur]

Why China has the upper hand in the South China Sea

By Barry C. Lynn June 3, 2015

Washington’s failure in recent years to keep careful watch over what goods are made where — especially when it comes to such vital items as electronics and drugs — means the United States now depends far more on China than vice versa.

Back in the 1990s, advocates of liberalizing U.S. trade with China said economic interdependence would inevitably lead to peaceful coexistence. But one-sided dependencies invite adventurism, as China’s growing belligerence today proves.

Washington must now address the fundamental flaws in the international trade system that gave China such a big advantage. The White House claims the proposed Trans-Pacific Partnership will help offset China’s increasing heft. Unfortunately, the pact, which includes 11 Pacific Rim allies but excludes Beijing, will do nothing to fix the problems.

The fact that the global trading system is not working as promised is most dramatically evident in the seas around China. Beijing is engaged in a pattern of provocation bordering on recklessness. In late 2013, China unilaterally imposed an “air defense declaration zone” covering portions of the East China Sea. Earlier this year, the Chinese navy set about transforming a reef in the Spratly Islands into a military base.

International relations in East and South Asia are tenser than at any time since the 1960s. Japanese Prime Minister Shinzo Abe last year compared the situation to 1914 just before World War One. The U.S. Navy recently began to directly challenge China’s claims of sovereignty over large swaths of the South China Sea.

This is the opposite of what was supposed to happen when the United States and its allies created the World Trade Organization in the mid-1990s and then invited Beijing to join. President Bill Clinton asserted that “growing interdependence would have a liberalizing effect in China.”

Worse, the extreme industrial interdependence fostered by the World Trade Organization appears to have put powerful levers into China’s hands.

During the Cold War, the United States promoted high degrees of integration with allies, including Japan, Germany, Britain and Canada. Washington did this to promote mutual prosperity and peaceful coexistence. Yet even though each of these nations was smaller than the United States — and all were more or less democratic — Americans chose not to rely entirely on any of these close friends for any vital good.

Today, the United States depends on China for myriad items that U.S. citizens need every day. These include 100 percent of key electronics and chemical components. They even include basic ingredients for some of the nation’s most important drugs, including antibiotics. Given that supply chains often run on a just-in-time basis, in which goods are produced only as fast as they are consumed, there are often no backup supplies nearby.

China, by contrast, depends on the United States for little of vital importance. For what it does import in quantity, like energy and metals, it holds large stockpiles.

And unlike Washington’s main trading partners of the past two decades, China’s economy is bigger than America’s and growing fast. China is also by no means a democracy. Quite the contrary. The United States finds itself increasingly dependent on the good will — and stability — of the world’s most powerful and sophisticated autocracy.

The World Trade Organization freed U.S. corporations and foreign nations to restructure every assembly line on which Americans depend in almost every respect, such as by concentrating production wherever and however they wished.

Washington’s challenge now is to understand what this revolution means in the real world. Most specifically, how exactly does Washington’s asymmetrical dependence on China affect U.S. sovereignty and freedom of action? Might it, for example, lead Beijing to conclude that the United States will not use force in response to Chinese aggression?

The proposed Trans-Pacific Partnership, at best, amounts to a doubling down on a strategy that failed. At worst, it sets Americans to fighting with one another at a time when the international threats they face grow ever more complicated and dire.

Globalization is a smart and viable strategy. U.S. trade policy from the end of World War Two to the mid-1990s proved that.

Rather than waste more time on the Trans-Pacific Partnership, Washington must figure out how the extreme changes of the 1990s upset those balances. More to the point, it must swiftly figure out how to live and trade peacefully with China in what is fast becoming a post-global world.

http://blogs.reuters.com/great-debate/2015/06/03/how-u-s-dependence-on-chinese-goods-invites-beijing-adventurism/

[galdur]

Is China Floating a China-Euro Currency Bloc?

Published on Jun 4, 2015

SHOW NOTES: https://www.corbettreport.com/?p=15014

In today's thought for the day James discusses an editorial from The Global Times about China's upcoming inclusion in the IMF's SDR basket. Is China sending up a trial balloon for the idea of deeper Chinese-European monetary integration, and if so what would this mean for the ongoing creation of the new monetary world order?

[bryant.coleman]

Is China Floating a China-Euro Currency Bloc?

It will be better for China to keep away from the Euro. The Euro is losing its value day-by-day, and I am sure that the situation will continue in the near future also. I don't think that China will be getting any benefit out of this. Why can't China float a currency bloc with the BRICS nations? India or Brazil can substitute the European Union.

[galdur]

Is China Floating a China-Euro Currency Bloc?

It will be better for China to keep away from the Euro. The Euro is losing its value day-by-day, and I am sure that the situation will continue in the near future also. I don't think that China will be getting any benefit out of this. Why can't China float a currency bloc with the BRICS nations? India or Brazil can substitute the European Union.

Yes, in fact China´s exports to Asia, Russia and Brazil amount to more than to U.S. and Europe combined. So, to maintain trade growth they´ve been gradually shifting from those stagnant and debt-ridden economies to more lively ones. Maybe that Euro thing has to do with Chinese investments over there I don´t know.

[elusive1]

The world needs some push back to Uncle Sam for sure, just can't imagine major players trusting China. Remember, when the USA got it's rating downgraded, the dollar got stronger.

[galdur]

The world needs some push back to Uncle Sam for sure, just can't imagine major players trusting China. Remember, when the USA got it's rating downgraded, the dollar got stronger.

Yes, the dollar has had a considerable bounce since last year especially in anticipation of interest rate hikes. When that gets postponed and QE4 (or is it 5?) arrives it´ll probably soon be back in the dumps.

[bryant.coleman]

The world needs some push back to Uncle Sam for sure, just can't imagine major players trusting China. Remember, when the USA got it's rating downgraded, the dollar got stronger.

The United States is taking undue advantage of the status of USD as the world's reserve currency. Now it is time to end that. I don't know whether CNY will be any better than the USD or not. But for sure, it can't be worse than the US Dollar. And we need multiple reserve currencies instead of a single one. Other important currencies such as JPY, RUR, EUR, CHF, AUD, INR, UKP, CAD.etc should be given the same status as the USD, and the international trade should be conducted in them.

[Agestorzrxx]

The world needs some push back to Uncle Sam for sure, just can't imagine major players trusting China. Remember, when the USA got it's rating downgraded, the dollar got stronger.

The United States is taking undue advantage of the status of USD as the world's reserve currency. Now it is time to end that. I don't know whether CNY will be any better than the USD or not. But for sure, it can't be worse than the US Dollar. And we need multiple reserve currencies instead of a single one. Other important currencies such as JPY, RUR, EUR, CHF, AUD, INR, UKP, CAD.etc should be given the same status as the USD, and the international trade should be conducted in them.

You got be kidding me.
We even don't believe CNY by ourself. Of course CNY is worse than US dollar. Why the Investment Bank use US dollar, because no one will accept CNY.
Do you know the mechanism to issue CNY?
Of course, you don't. I don't know too because it's the top-secret of the government.
At least, the mechanism to issue US dollar is transparent.
How can you trust a currency when you don't know the mechanism to issue it?

[bryant.coleman]

We even don't believe CNY by ourself. Of course CNY is worse than US dollar. Why the Investment Bank use US dollar, because no one will accept CNY.

Times are changing my friend. The Chinese government have made it clear that they want the CNY to replace the USD as the global reserve currency. And already they have received the support from a large number of other powerful nations for this initiative. For example, Russia is offloading its US Treasury Bonds, and conducting its trade with China in CNY.

http://en.wikipedia.org/wiki/Internationalization_of_the_renminbi

[Agestorzrxx]

We even don't believe CNY by ourself. Of course CNY is worse than US dollar. Why the Investment Bank use US dollar, because no one will accept CNY.

Times are changing my friend. The Chinese government have made it clear that they want the CNY to replace the USD as the global reserve currency. And already they have received the support from a large number of other powerful nations for this initiative. For example, Russia is offloading its US Treasury Bonds, and conducting its trade with China in CNY.

http://en.wikipedia.org/wiki/Internationalization_of_the_renminbi

Another joke, they want to doesn't mean they can do, right?
CNY even can't compare euro and Japanese yuan. Do you think US dollar was replaced by euro or Japanese yuan.
Sure, you know,they are not .
Russian, do they really want CNY, sure  they didn't, they really want is US dollar.
It's never changed.
I can tell you, CNY is one of the most inflation money in the world.
the exchange with US dollar can be keep stable because CNY is not a free exchange rate money .
Who accept CNY is a fool .

[cryptocoiner]

We even don't believe CNY by ourself. Of course CNY is worse than US dollar. Why the Investment Bank use US dollar, because no one will accept CNY.

Times are changing my friend. The Chinese government have made it clear that they want the CNY to replace the USD as the global reserve currency. And already they have received the support from a large number of other powerful nations for this initiative. For example, Russia is offloading its US Treasury Bonds, and conducting its trade with China in CNY.

http://en.wikipedia.org/wiki/Internationalization_of_the_renminbi

Not gonna happen. =)

[BLKBITZ]

Is China Floating a China-Euro Currency Bloc?

It will be better for China to keep away from the Euro. The Euro is losing its value day-by-day, and I am sure that the situation will continue in the near future also. I don't think that China will be getting any benefit out of this. Why can't China float a currency bloc with the BRICS nations? India or Brazil can substitute the European Union.

Maybe Russia and brazil but china hates india.

[elusive1]

I think a good analogy is with CNBC, Bloomberg and Fox News Business Channel. The majority of people that watch those business only channels are likely in line with Fox politically. However, when their money is on the line, they will throw ideologies out the window and watch the channel that actually gives them the most professional outlook.

No "Big Boy" nation is going to give up dollars.

[bryant.coleman]

Maybe Russia and brazil but china hates india.

The Sino-Indian relations have seen quite a lot of improvement in the last one year time, ever since Narendra Modi was elected as the Prime Minister of India. The Chinese seems to have realized that they have enough enemies among their neighbors, and may be it is time to woo at least some of them back to their fold. Good relations between the two nations can benefit both the sides.

[Agestorzrxx]

Maybe Russia and brazil but china hates india.

The Sino-Indian relations have seen quite a lot of improvement in the last one year time, ever since Narendra Modi was elected as the Prime Minister of India. The Chinese seems to have realized that they have enough enemies among their neighbors, and may be it is time to woo at least some of them back to their fold. Good relations between the two nations can benefit both the sides.

If you believe Chinese can be friend with other countries, you are a fool.
China is a dictator country, they only can buy friends, but never could make a real friends.
You can't be friends with some one if you are don't share the same values.

[Agestorzrxx]

Is China Floating a China-Euro Currency Bloc?

It will be better for China to keep away from the Euro. The Euro is losing its value day-by-day, and I am sure that the situation will continue in the near future also. I don't think that China will be getting any benefit out of this. Why can't China float a currency bloc with the BRICS nations? India or Brazil can substitute the European Union.

You are really naive, my friends.
China can't keep away from Euro. We Chinese government do business don't for economic benefits, but for political interests.
After Venezuela debt default about $20 billion dollars of China, but we Chinese government continue loan them about $50  billion dollars, for what?
Of course we Chinese will lose some money, but we could keep a dictator government of Venezuela.
That the Chinese government want.

[bryant.coleman]

If you believe Chinese can be friend with other countries, you are a fool.
China is a dictator country, they only can buy friends, but never could make a real friends.
You can't be friends with some one if you are don't share the same values.

Half of the world nations are under dictatorships, including the United States. Does that mean we should stop doing business with all of them? And I disagree with your argument that "You can't be friends with some one if you are don't share the same values". Take Japan and the USA for example. There is hardly anything similar between these two nations. Still, they are good friends.