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Banking & Finance

AIIB hits its first-year lending target

China-led bank's careful approach is working, but staffing is hard

BEIJING The Asian Infrastructure Investment Bank has made solid progress in its maiden year, attracting many potential new members and hitting its lending target, but the China-led institution's location has hampered efforts to recruit personnel.

Jin Liqun, the bank's president, summarized the AIIB's first year as very productive in comments released Jan. 16, one year after it opened for business. Many projects are already in the works for 2017, the former Chinese vice finance minister said.

The bank, which started out with 57 members, is soon expected to welcome around 30 more, including Canada and Greece, bringing its total membership to 87 or so. That will make it larger than the 67-member Asian Development Bank, which is funded chiefly by Japan and the U.S.

The AIIB has lent cautiously, so far. A total of $1.73 billion is committed to nine projects, but six, including a power project in Pakistan, are joint initiatives with other international lenders such as the World Bank. Its three stand-alone projects involve a power grid investment in Bangladesh, and port and rail projects in Oman. Still, the bank achieved its loan target of $1.2 billion for the first year.

The AIIB "focused heavily on membership expansion in the initial stage, while playing safe on lending," said an expert on international finance.

Concerns that top AIIB stakeholder China, with roughly 30% of the bank's paid-in capital, might use the institution to advance its national interests have not been borne out thus far.

The bank is considering barring loans for coal and petroleum power projects. China could have used the lender to promote its exports of coal-fired power plants, but European members have been urging caution on loans to the coal sector due to climate change concerns, said a person familiar with the matter.

A LITTLE HELP The bank has struggled to hire enough qualified managers. The Asian Development Bank has some 3,000 staffers, while the AIIB has only about 90.

AIIB headquarters has access to Google, Facebook and other websites that are blocked elsewhere in China. The bank hoped easing such restrictions would attract foreign staffers, but Beijing's severe air pollution keeps many away.

Foreigners also have difficulty adapting to Beijing because English is not widely understood. "The bank is paying the price for not placing its main office in Shanghai or Hong Kong, where English is widely understood and financial talent abounds," said a diplomatic source in the capital.

Japan and the U.S. are the only members of the Group of Seven industrial economies that have declined to join the AIIB. James Woolsey, a former CIA director who served as an adviser on national security to U.S. President Donald Trump before he took office, rattled markets last year by telling a Hong Kong newspaper the U.S. made a strategic mistake in not joining the China-led lender.

Trump has made many hard-line comments about China. But Beijing may try to persuade the U.S. to join the bank as it gears up to host a spring summit to promote its Belt and Road Initiative.

A Japanese economic official said the Trump administration would probably not hesitate to help American companies grab a slice of Asia's infrastructure business by joining the AIIB. If the U.S. decides to join, Japan will have no option but to follow suit, a Japanese cabinet member said.

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