China redraws global financial map

Plans for China's new development bank, one of Beijing's biggest global policy successes, were almost shelved two years ago due to doubts among senior Chinese policymakers.

From worries it wouldn't raise enough funds to concerns other nations wouldn't back it, Beijing was plagued by self-doubt when it first considered setting up the Asian Infrastructure Investment Bank (AIIB) in early 2013, two sources with knowledge of internal discussions said.

But promises by some Middle East governments to stump up cash and the support of key European nations - to Beijing's surprise and despite U.S. opposition - became a turning point in China’s plans to alter the global financial architecture.

The overseas affirmation, combined with the endorsement of stalwart supporters, including incoming AIIB President Jin Liqun, a former head of China Investment Corp, enabled Beijing to bring the bank from an idea to its imminent inception.

The bank's successful establishment is likely to bolster Beijing's confidence that it can play a leading role in supranational financial institutions, despite the economic headwinds it is facing at home.

A Finance Ministry delegation that called on Southeast Asian nations to gauge interest in the AIIB was not encouraging, the source said. Governments backed the idea, but were too poor to contribute heavily to the bank's funding.

"They are all oil-producing countries, they have foreign currencies, they were very enthusiastic, and they could shell out the cash. That was when we thought 'Ah, this can be done,'" a source said.

Poised to rival the World Bank and the Asian Development Bank (ADB), the AIIB, to which 57 nations have signed up to join, will amplify China's influence on global development finance.

Around a seventh of the 50 countries that signed up to become a founding member of the AIIB in June were Middle Eastern, with Iran, Israel, Egypt, Jordan, Qatar, Saudi Arabia and the United Arab Emirates among the signatories.

Many challenged the need for China to start a new bank given it was already a member of the BRICS Development Bank. AIIB proponents also argued that other members of the BRICS Bank were all jostling to lead the lender. Only the AIIB would give China the global stage to properly wield its financial influence.

By Koh Gui Qing