China says it worries about effect of UK exit

BEIJING // China has expressed serious concerns on the effect Brexit may have on global markets.

The referendum in which British voters opted to leave the European Union, “will cast a shadow over the global economy … The repercussions and fallout will emerge in the next five to 10 years,” China’s finance minister Lou Jiwei said yesterday, at the first meeting of the Asian Infrastructure Investment Bank (AIIB) in Beijing.

The pound and global markets were hit severely on Friday.

Mr Lou agreed with some commentators that the markets’ reaction to the Brexit vote may have been excessive but he said that the vote has thrown up an atmosphere of unpredictability.

“It’s difficult to predict now. The knee-jerk reaction from the market is probably a bit excessive and needs to calm down and take an objective view,” Mr Lou said.

At the same event, the newly formed AIIB announced plans to admit new members from Europe and Latin America. The bank now has 57 members including Middle Eastern countries such as the UAE, Saudi Arabia, Kuwait, Oman, Qatar, Egypt and Jordan.

The AIIB’s board also sanctioned US$509 million in loans for four projects in Pakistan, Bangladesh, Tajikistan and Indonesia. It is now looking for more projects to assist so it can meet a financing target of $1.2 billion this year.

“We are working on a number of additional projects and look forward to bringing them to our board for its approval later this year,” the AIIB president Jin Liqun said. “More Latin American nations will join AIIB soon.” Brazil is so far the only member from Latin America.

Mr Jin said that he cannot rule out the possibility that AIIB may not go ahead with its plans to open an office in London soon. But the AIIB would continue to work closely with European countries including the UK.

The China-backed AIIB had initially attracted criticism from international bankers and experts who questioned its ability to remain independent in project selection and assessment. But the bank has surprised its critics by roping in three other multinational development banks, the World Bank, the Asian Development Bank and the European Bank for Reconstruction and Development as financing partners.

“AIIB should learn from the experience of other multilateral agencies and forge close partnership with the World Bank, Asian Development Bank and other institutions,” the Chinese vice premier Zhang Gaoli said at the opening ceremony for AIIB’s meeting.

It is crucial for the AIIB to comply with multilateral agency procedures and rules, Mr Zhang said.

The World Bank, which is the lead bank in the Indonesian project, has made sure that its environment and procurement standards are used as yardstick for loan assessment.

Mr Jin said the bank is looking at more projects that will improve interconnectivity in Eurasia.

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