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China,United States : CHINA aims to break US hold in ASIA with rival to the WORLD BANK

June 26, 2014

Beijing diplomats supports for new institution free from US control.

China wants to set up a multilateral development bank in Asia to break the US s financial hold on the continent.

These Chinese officials have been touring Asia and the Middle East drumming up support for a new institution with $100 billion, with a view to financing major development projects such as infrastructure. About 22 countries across the region have expressed interest so far.

Such an institution would be a direct rival to the World Bank and the Asian Development Bank, which China thinks is influenced by the US and its ally, Japan.

The initiative reflects only China s ever-growing financial clout, but also its anger at the US s refusal to implement a 2010 deal allowing it and emerging nations greater influence in the World Bank and the International Monetary Fund.

In 2010, after pushing from emerging economies led by China, Russia and Brazil, the G-20 agreed to give them more influence over the 2 Bretton Woods institutions, in return for funding a big increase in their resources.

Congress refused to ratify the US s contribution to the reforms, which threatens to unravel the whole deal as it still has effective veto powers.

The financial crisis led to a big increase in demand for IMF funds, first from weaker emerging nations but later, from the euro zone. The scale of IMF aid angered many emerging countries.

Asian countries grumbled that the IMF imposed softer terms on euro-zone borrowers than it did during the Asian financial crisis in the late 1990s.

The Asian Development Bank, established at US prompting in the 1960s with a more or less overt mandate to help stop the spread of Communism in the region against the backdrop of the Korean and Vietnam wars.

The US and Japan have stakes of over 15% in the ADB, while China s economy is now larger than Japan s, holds only 5.5%.

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Source: TendersInfo (India)

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