China eyes creation of Asean Bank

Business Recorder, OCTOBER 28, 2011

China is considering a proposal to set up a regional bank to help its small and medium enterprises (SMEs) invest in Southeast Asian neighbours, fund infrastructure projects and promote development in south-western China, two independent sources said.

After approval by the State Council, or cabinet, China would formally invite members of the Association of Southeast Asian Nations (Asean), Japan and South Korea to each take a stake in the Asean Bank, said the sources, who have direct knowledge of the proposal.

China, the world's second biggest economy, is likely to be the bank's biggest single shareholder with an initial investment of up to 30 billion yuan ($4.7 billion), the sources said, requesting anonymity because they are not authorised to speak to reporters.

The other countries' stakes still must be negotiated.

"Asean Bank will be a commercial bank and at the same time a policy bank," the first source told Reuters.

"It will be a mini Asian Development Bank (ADB)." The ADB was founded in 1966 to help fight poverty in Asia.

The Manila-headquartered bank is owned and financed by its 67 member countries.

Its president is traditionally from Japan, the lender's biggest donor along with the United States.

China hopes the Asean Bank will buy it some goodwill in Southeast Asia, providing low interest loans to infrastructure projects and Chinese SMEs investing there, the sources said.

The bank will also settle China-Asean trade in yuan, a step in China's long campaign to make the yuan, also known as renminbi or people's currency, a regional currency.

China's cabinet and the central bank declined immediate comment.

Vietnam's central bank said it had not received any information or an invitation to join.

The Philippine central bank refused to comment.

Central banks of Indonesia, Malaysia, Singapore and Thailand could not be reached for comment.

The Asean bloc overtook Japan to become China's third-largest trading partner this year after the European Union and the United States.

China-Asean trade accounted for 10 percent of China's total trade in the first nine months of 2011.

China is Asean's biggest trading partner.

Two-way trade rose 26.4 percent to $267 billion in the first nine months, an $18.9 billion surplus in favour of Asean, Chinese customs data show.