With China-led bank looking for private startup capital, path opens up for European investors

The ink is hardly dry on the memorandum of understanding signed very recently by China and 20 other Asian countries agreeing to launch an Asian Infrastructure Investment Bank, and already a warm welcome of participation has been extended to European nations and their business communities.

The rationale behind this exciting formation is clear: focused investment to support the building of infrastructure and jump-start economic growth in Asia.

But while the focus is on Asia and developing Asian economies, it is also clear that investment and economic opportunities and involvement from far outside the region are welcome.

Indeed, Wei Jianguo, vice-chairman and secretary-general of the China Center for International Economic Exchanges, recently declared publicly at the Boao Forum for Asia that the new bank is an open and inclusive platform that welcomes not just Asian countries but others as well, including the United States and European countries.

Legal capital of $100 billion is planned, with the bank set to begin operations in early next year. But only $50 billion of this startup capital, a not inconsiderable sum and commitment, will be provided by the Chinese government. At least another $50 billion from financial institutions and private capital is welcomed, but not necessarily from Asia, which creates an opportunity for European countries and their financial services industries.

The fact that China has instigated such a regionally focused, infrastructure-driven investment organ, with its record on dramatic infrastructure transformation, marveled the world over, and with considerable commitment evident, should be generally welcomed by European industry.

The European economy remains relatively lackluster with an ever-pessimistic outlook. But many of these 21 countries participating in the new bank offer potentially major growth opportunities, providing that the essential infrastructure building blocks are put firmly in place first.

Infrastructure is the sine qua non of accelerated, sustainable economic development, and history tells us that a localized, regional approach always works best.

Indeed, the bank will no doubt fuel much-needed infrastructure building across less developed parts of China as well as throughout Asia.

The European business community should, therefore, view the launch of the bank as an opportunity through which they can establish a firm footprint across dynamic Asian regions. While infrastructure and related opportunities will of course dominate the bank's agenda, a long-term view should also be taken, during which all manner of economic and business opportunities will emerge as the development domino effect unfolds across Asia.

European banks and firms of all sizes and across all industries must, therefore, seize this bank participation offer firmly.

European industry will never get a second chance to achieve and reap the rich rewards of first-mover advantage across Asia. The establishment of the bank presents the ideal vehicle with which European firms can drive development further into and across Asia.

The World Bank, and of course the Asian Development Bank, play a vital role in Asia and in the developing world, and will no doubt continue to do so. But with overall poverty alleviation as their overriding aim, they lack the much-needed industry and infrastructure focus that the new bank will provide. They also continue to offer limited input from major Asian countries such as China, despite their envious record on rapid infrastructure and industrial development.

A China-led bank should lead to a far more efficient and regionally focused organization, but also one that welcomes participation from Europe in particular. One need only look at the impressive foreign direct investment sums still pouring into China from Europe to be convinced of the genuine, open offer by the new bank at its inception to the European business community.

In particular, it is European private capital that is most warmly welcomed. The Chinese government has long since understood the pivotal public-private investment partnership path to effective economic development.

Disappointingly, the US government continues to take a less than positive stance on the Asian Infrastructure Investment Bank concept. US objections, however minor, once again appear to be driven by the country's reluctance to accept the changing balance of economic power from West to East. The US continues to dominate proceedings, and hold major voting rights, in many of the world's key trading and investment institutions such as the World Bank.

Such a stance simply accentuates the investment and long-term economic opportunity now on offer to the European finance and business community.

Perhaps it is the collegiate nature of the European Union and many of its banking and business institutions that leads to a far more engaging and optimistic attitude toward the economic rise and opportunity presented across Asia and China in particular. The current commitment by much of European industry to China and Asia should now be matched by engagement with and participation in the new bank.

The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer in marketing at Southampton Solent University's School of Business. The views do not necessarily reflect those of China Daily.

(China Daily European Weekly 10/31/2014 page11)