Initial loans to be denominated in dollar
The Asian Infrastructure Investment Bank (AIIB), which plans to start operating in 2016, will offer dollar-denominated loans totaling $10 billion to $15 billion over the next five or six years, the top executive of the AIIB said Tuesday.
The first batch of projects are scheduled to be launched in the second quarter of 2016, and lending will reach $1.5 billion to $2 billion, Jin Liqun, President-designate of the AIIB, told the annual conference of the European Chamber in Beijing.
For the sake of convenience and meeting borrowers' needs, the bank should stick to the dollar in making the loans, according to Jin. "For the purpose of raising funds, the bank might issue bonds in yuan," he said.
Jin noted that the yuan is a strong currency, and once it becomes one of the currencies in the IMF's basket for Special Drawing Rights, it is a "huge" responsibility for the government to make sure that the currency is stable and the economy is open.
China holds a 30 percent stake in the AIIB, but Jin said the bank is not "China's bank" but instead one owned by the countries and regions that are willing to join.
"There are about 30 countries waiting in line for AIIB membership," he said during the conference.
The first year's lending will be relatively small in terms of global infrastructure investment, as it is just the start, Wang Jun, deputy director of the Department of Information at the China Center for International Economic Exchanges, told the Global Times on Tuesday.
"But with increased fundraising, there will be changes in how much the AIIB will lend in the future," Wang said, noting that funding from the AIIB will drive the economic development of some small Asian economies such as Laos and Cambodia.
The operation of the AIIB marks a formal beginning to China's "One Belt, One Road" initiative, with the aims of mutual benefit and connectivity of infrastructure, said Dong Dengxin, director of the Financial Securities Institute at the Wuhan University of Science and Technology.
"As a regional financial institution, the AIIB is expected to become an international entity. The bank will learn from global institutions, try to operate transparently and fairly, and have no political bias toward loan projects," Dong told the Global Times on Tuesday.
"With the rising status of the yuan, an increasing number of countries will not only use the currency in their reserves and in investment, but also directly lend yuan to some future projects," Wang noted.
China needs to strike a balance between its interests and the international strategic status of the new institution, Dong said.
