The AIIB agreement was signed in Beijing on June 29.
A framework agreement for the operations of the Chinese-led Asian Infrastructure Investment Bank was officially signed in Beijing today, with representatives from the 57 founding members gathering for the ceremony. However, only 50 countries actually signed the agreement – seven (Denmark, Kuwait, Malaysia, the Netherlands, the Philippines, South Africa, and Thailand) have to get the AIIB charter formally passed through domestic processes before they can officially sign. Chinese media said the seven are expected to join by the end of the year (although things may be more complicated in the case of the Philippines).
The signing of the agreement came with new clarity on how AIIB capital and voting rights will be divvied up. As expected, China is the largest shareholder, accounting for 30.34 percent of AIIB shares. China is followed by India (8.52 percent), Russia (6.66 percent), Germany (4.57 percent), and South Korea (3.81 percent). Australia, France, Indonesia, Brazil, and the U.K. round out the top ten. As I previously noted (see: “A Big Step Forward for China’s AIIB”), 75 percent of shares were reserved for Asian members, giving them a proportionately larger say in bank governance.
More importantly, China will have 26.06 percent of voting rights – giving it an effective veto as major decisions require 75 percent approval. However, Chinese Vice Finance Minister Shi Yaobin told Xinhua that “China is not deliberately seeking a veto power.” China Daily previously reported that as other countries join (and current members’ voting rights decrease proportionately), China could naturally cede its veto — and would not deliberately seek to maintain it. In practice, it may not matter whether China has a singled-handed ability to veto, though; it’s likely that Beijing could convince enough partners to join it in blocking any potential changes it might find unappealing. That means China can balance defending its control over AIIB with the optics of giving up a veto.
AIIB will be based in Beijing but use English as its operating language. It will be led by a president, to be chosen from among the Asian member countries via an “open, transparent, and excellent” selection process (according to the agreement signed Monday). The president will sit for five years, with the possibility of a second term. The AIIB will also be governed by a non-standing board of directors, which will convene as necessary to make major decisions.
The AIIB is expected to begin operations by the end of 2015.