China formally joined the Inter-American Development Bank in a signing and flag placement ceremony held on Monday at the IDB’s headquarters in Washington, DC. The Asian giant became the Bank’s 48th member nation, contributing $350 million to various programs.
The entry of China, an increasingly important trading and investment partner for Latin America and the Caribbean, takes place at a time when the IDB is striving to assist its borrowing member countries to deal with the impact of the global financial crisis. The region’s economic growth is expected to slow down to around 2 percent in 2009 – its lowest level in six years.
“China’s welcome addition to the IDB family will further strengthen our institution at a critical moment for the world economy, when countries need to protect recent social and economic gains,’’ said IDB President Luis Alberto Moreno. “These challenging times require bold and unified actions that will be a key part of the agenda leading up to our Annual Meeting in March in Medellin, Colombia. China is an essential partner in the road ahead.’’
The IDB is the leading source of long-term lending for development projects in Latin America and the Caribbean, providing an array of services that range from technical know-how to grants for small enterprises.
In 2008 the IDB approved $12.2 billion in loans, credit guarantees and grants – a record level reflecting the requirements of its members amidst the global crisis. The IDB also approved a special $6 billion emergency liquidity program for its members, of which $900 million have already been allocated.
China was represented at the ceremony by its ambassador to the United States, Zhou Wenzhong. A delegation traveled from China led by Mme. Jin Qi, the director general of the international department at the People’s Bank of China.
''Today is an exciting day when, after 15 years of efforts, China becomes a formal member of the Inter-American Development Bank group,'' said Amb. Zhou. ''At the conjuncture of the current financial crisis, it is of greater importance to strengthen comprehensive cooperation between China and Latin America. China’s accession to the IDB will create a new platform and opportunity to boost China-Latin American cooperation, hence a win-win choice for both sides.''
After signing the documents formalizing China’s entry, Moreno and Zhou placed the Chinese flag among the ensigns of the other 47 IDB member countries.
The signed documents will be deposited in the Organization of American States, the founding institution of the Inter-American system. China is an observer nation at the OAS, which was represented at the ceremony by its secretary general, José Miguel Insulza.
Over the past decade China has become a major commercial partner for many countries in Latin America and the Caribbean. Trade between this region and China jumped 13-fold since 1995, from $8.4 billion to $110 billion in 2007. China is now the region’s second biggest trading partner after the United States.
With China’s addition, IDB membership now encompasses 40 percent of the world’s population and nearly three-quarters of its GDP.
China will contribute $350 million to the IDB group. Of this amount, $125 million will go to the Fund for Special Operations, the IDB’s soft-loan window for its poorest member countries. Another $75 million will create a multidonor fund to strengthen the institutional capacity of Latin American and Caribbean countries.
China also joined the IDB’s affiliated institution, the Inter-American Investment Corporation (IIC), which focuses on small and medium-sized companies, and the Multilateral Investment Fund (MIF), an entity administered by the IDB, which promotes growth and poverty reduction through private sector investment, focusing on micro and small enterprises and microfinance.
China will contribute $75 million to the IIC to establish a fund that will provide investment capital to small and mid-sized enterprises.
The IDB will receive on behalf of the MIF $75 million from China. Part of the contribution will be used to establish a fund to promote projects designed to increase economic opportunities for the poor in the region.
China’s entrance was approved by the other member countries in a voting process ended on October 15. The 26 Latin American and Caribbean borrowing nations own 50.01 percent of the IDB. The United States holds 30 percent of the shares.
China is purchasing 184 shares, or 0.004 percent of the IDB’s ordinary capital, which became available after the breakup of Yugoslavia. China will be the IDB’s third Eastern Asian member after Japan and South Korea, which joined in 1976 and 2005, respectively.
The Governor of the People’s Bank of China will represent his country on the Board of Governors, the IDB’s top decision-making body. Most IDB governors are either finance ministers or central bank presidents.
China will participate in the Board of Governors’ next annual meeting, scheduled to take place in Medellin, Colombia, on March 27-31. The IDB is also celebrating the 50th anniversary of its foundation this year.