Significance of establishing the AIIB
- By Zhang Maorong
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E-mail China.org.cn, February 22, 2016
The AIIB is significant to China. First, it helps expand foreign trade and investment. The establishment of the AIIB will start a large number of Asian infrastructure construction programs. Chinese enterprises have a leading position in the infrastructure construction and will gain significant opportunities for development. Also, the AIIB's investment in Asian countries will promote infrastructure construction and interconnection and intercommunication. That will help create a big Asian market, further release Asian economic development potential and stimulate the economic development of the countries within the region. In return, the overseas demand for Chinese commodities will increase and China's economic and trade relations with other Asian countries will improve. The AIIB's investment will push Chinese manufacturing standards to go global, bring overseas orders for Chinese manufacturing and digest high-quality excessive capacity. In addition, since the AIIB works as an international institution, when it invests in its member countries, Chinese enterprises can get better protection for its local investment, thus reducing the investment risk.
Second, the AIIB will spur the RMB internationalization. Now, the degree of RMB internationalization is far from enough and the AIIB can provide the RMB with a helpful international platform. As the AIIB opens the markets of the relevant countries through financing, enterprises from all countries including China will follow up. In this process, the relevant countries will accept the RMB in order to facilitate Chinese investment as Chinese enterprises can invest directly in RMB。Furthermore, although the AIIB mainly makes settlements in US dollars at its initial stage, it may gradually turn to the RMB and the US dollar at the same time in the future. However, it should be noted that a further RMB internationalization mostly depends on the prospect of Chinese economic reform and the pace of opening the financial market. At present, the RMB internationalization has got some achievements, but the US dollar will still be the leading currency in the world for a long time to come. The RMB internationalization still has a long way to go.
Third, the AIIB can help enhance China's influence in setting the world economic and financial rules. Presently, the international financial institutions like IMF and the World Bank are all led by the US; other developed countries and the US dominate in setting the international economic and financial rules. Being the second-largest economy, China's say in the world economy has not improved to match its status. The establishment and operation of the AIIB can be conducive to strengthening China's influence in the world economic governance; meanwhile, China will further take part in setting the international economic and financial rules, creating a better environment for its economic development. What's more, as an international financial institution, the AIIB will form a global "three-pillar" financial pattern together with the IMF and the World Bank. The three pillars will have mutual cooperation, mutual complementation and healthy competition. This will be beneficial to stabilizing the world financial order and effectively guard against economic and financial turmoil and risks.
Courtesy: Chinausfocus
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