The New Banks

This Friday will see the emergence of a new bank backed by China - the Asian Infrastructure Investment Bank (AIIB). The Americans are not exactly pleased.

Since the end of the second World War, global finance has been dominated by the Bretton Woods institutions - World Bank (WB) and the International Monetary Fund (IMF). Both were created in 1944-45. Two decades later, in 1966, the Japanese economic miracle triggered the emergence of the Asian Development Bank (ADB).

The emergence of China as an economic powerhouse, and the reluctance of the WW2 champs to accommodate it, has resulted in the creation of two new banks this year - the BRICS Bank (now the New Development Bank), and now, AIIB.

The story so far can be summarized as follows:

State-owned development arms of the Chinese government are already dwarfing USA's presence. Earlier this week, the chairman of the US government’s Export-Import Bank said Chinese institutions had doled out an estimated $670bn in just two years, compared with ExIm’s outlay of $590bn in loans, guarantees and insurance over eight decades.

How long will it take for NDB and AIIB to upset the Bretton Woods apple-cart?


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REFERENCES:

* (11 Nov'14) - Economist - http://www.economist.com/blogs/economist-explains/2014/11/economist-explains-6

* (22Oct14) - NYT - http://www.nytimes.com/roomfordebate/2014/10/20/a-chinese-rival-to-the-world-bank/the-creation-of-the-asian-infrastructure-investment-bank-is-the-right-move-for-the-global-economy

* (24Oct14): Reuters - ADB chief doesn't welcome Chinese-backed Chinese rival - http://www.reuters.com/article/2014/10/24/us-china-adb-idUSKCN0ID0GJ20141024

*  (2Sep14) - Straits Times- Asian investment bank: Realigning the status quo - http://www.straitstimes.com/news/opinion/more-opinion-stories/story/asian-investment-bank-realigning-the-status-quo-20140902#sthash.EO9tucGM.dpuf
- According to ADB, countries in Asia need US$8 trillion (S$10 trillion) to cover their national infrastructure needs for the period 2010 to 2020. This works out to an average of US$800 billion a year. Currently, ADB lends only about 1.5 per cent of this amount annually.

* http://en.wikipedia.org/wiki/Asian_Development_Bank
* World Bank - FAQs -- http://web.worldbank.org/WBSITE/EXTERNAL/EXTSITETOOLS/0,,contentMDK:20147466~menuPK:344189~pagePK:98400~piPK:98424~theSitePK:95474,00.html
* NDB / BRICS Bank - http://en.wikipedia.org/wiki/New_Development_Bank