On October 24, China, India and Singapore were among 21 Asian countries that signed the Memorandum of Understanding on Establishing the Asian Infrastructure Investment Bank (AIIB) at a ceremony in the Great Hall of the People in Beijing, signaling a landmark achievement in the establishment of the new bank.

It took only one year for these nations to begin the establishment of the AIIB. This fairly amazing speed shows that the initiative fits quite well with the development needs of Asian countries.

After China put forward the proposal to set up the AIIB, many countries, in particular those along the Silk Road economic belt and the 21st-century Maritime Silk Road known as the "One Belt and One Road," responded eagerly. However, the US and Japan have opposed this proposal since the very beginning and have fomented friction between China and its neighbors by lobbying some nations not to attend.

Their objections have impeded the process of the establishment of the new bank to a certain degree, as some major stakeholders in Asia such as Australia and South Korea have refrained from participating in the AIIB. Most founding members are relatively small economies save for China and India.

Nevertheless, the US failed to sow discord between Beijing and New Delhi. India did not participate in the founding members' negotiations ahead of the establishment of the bank, but decided to join the bank after Chinese President Xi Jinping sent an invitation to its newly elected Prime Minister Narendra Modi.

Plus, all ASEAN member states except Indonesia have joined as founding states. Indonesia did not attend the signing ceremony mainly because of its presidential election. Its government has stated that it would engage in this task after the change of leadership has been completed.

Three reasons may account for the vehement objections from the US and Japan to the establishment of the AIIB.

Firstly, they have argued that the AIIB will be a rival to the World Bank and the Asian Development Bank (ADB).

Also, in their eyes, the bank will serve as a tool of China to expand its political clout in Asia and therefore South and Southeast Asian countries will inevitably turn into China's political and economic vassals once they join the Beijing-led financial institution.

Moreover, they suspect that the bank lacks transparency in equity and funding criteria and will be unable to promote economic development like the World Bank and the ADB.

In the final analysis, they have been opposing the new bank because they fear its founding will threaten their financial hegemony in Asia and the world at large.

China envisioned the AIIB together with the "One Belt and One Road" initiative. Following the establishment of the BRICS Development Bank, the AIIB is another cross-regional financial cooperation institution involving the two emerging powers of China and India. From this perspective, it is indeed part of China's diplomatic endeavors, but it is a cooperative strategy instead of an expansive one.

The AIIB boasts more openness and inclusiveness than the BRICS Development Bank. The equity of the AIIB will be distributed in accordance with the proportion of GDP among its member states. And similar to a commercial bank, the AIIB will adopt a financing mode guided by national capital and participated in by private capital, which means that it must formulate stringent operation rules and standards for projects.

The AIIB has been warmly welcomed because it satisfies the needs of most Asian nations whose development has been severely constrained by backward infrastructure. According to the ADB, Asian countries will likely need $8 trillion of investment in their domestic infrastructure and a further $300 billion to develop regional infrastructure. But the ADB can only provide annual new loans of $13 billion, so the establishment of the AIIB will create a fresh capital source for the whole region.

The AIIB is also a beneficial supplement to the World Bank, the ADB and the US-led global financial system. Though there is no denying that its establishment and the introduction of consequent new international rules pose a challenge to existing international financial institutions, it in no way seeks to overturn them but aims to advance their reform.

On one hand, Washington has been urging Beijing to assume international responsibility and contribute public good to the international community, but thwarting China's efforts to increase its right of speech in international financial mechanisms and to set up the AIIB on the other. This has fully exposed its hegemonic mentality and obsolete concept of geopolitical competition in its foreign policy.

Source of documents：Global Times