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China’s world bank has rickety foundations

Mar 24 , 2015

If any country knows about the risks and rewards of building infrastructure, it is China. Over the past two decades, the People’s Republic has erected countless roads, dams, power plants, bridges and airports in its pursuit of economic development. The result has been a surge in debt, waste, corruption and pollution. It’s a dubious foundation from which to construct the new Asian Infrastructure Investment Bank.

In the past few weeks, large Western countries led by the United Kingdom have rushed to join the China-led body, which was set up last autumn and already has 27 members, mostly from Asia. The eager applicants have annoyed the United States and enhanced China’s efforts to alter the architecture of global finance. Yet amid the diplomatic sniping, the new bank’s prospects have been largely overlooked.

Asia undoubtedly needs better infrastructure, as anyone who has endured a traffic jam in Indonesia or avoided tap water in India knows. These problems will only get worse as populations expand and more people move to cities. The Asian Development Bank (ADB) – the Japanese-led institution that is one of the new Chinese body’s main rivals – has estimated that the continent needs to spend $730 billion on infrastructure every year between 2010 and 2020.

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