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ADB to work with China-backed AIIB: Nakao
by Staff Writers
Manila (AFP) Jan 8, 2016

Chinese economy stable: ADB president
Manila (AFP) Jan 8, 2016 - China's economy, as well as Asia's, are unlikely to slow down sharply this year despite Chinese stock turmoil that has rocked global financial markets, the Asian Development Bank president said Friday.

Sharp selloffs in the Chinese stock markets this week have renewed fears about the fate of the world's second-largest economy and the knock-on effects across the globe.

"I don't have a very pessimistic view about China," ADB president Takehiko Nakao told reporters in Manila, adding the bank was maintaining its 6.7-percent economic growth forecast this year for China.

This would only be slightly lower than its 6.9-percent growth projection for the country in 2015.

Developing Asia as a whole, which has been highly dependent on China, should grow 6.0 percent, or up from 5.8 percent forecast for 2015, Nakao said.

Nakao said China was successfully undertaking important reforms, such as making its economy less reliant on investment and more on domestic consumer demand.

He also cited ongoing reform of state-owned enterprises, expansion of the social security system and reduction of disparities between Chinese cities and rural areas.

"Also there is room for stimulus... because its fiscal position is strong and inflation is subdued," he said.

Nakao said that, despite the latest turmoil on the Shanghai bourse, the index was still about 1,000 points above its end-2013 level.

Nakao also said he did not believe the yuan currency's depreciation was a deliberate attempt by the Chinese authorities to weaken it to boost exports.

"This depreciation is not because of artificial intervention to lower the renminbi," he said, using another term for the yuan.

"It is in a sense the other way. They don't intervene, that's why there is a marked depreciation."

Nakao said a rapid depreciation could trigger a reciprocal move by other countries.

"Already some countries have depreciations in currencies. But I don't think this is a currency war," he said.

The US-backed Asian Development Bank will cooperate with a major new Chinese-led multilateral lending institution and they plan to co-finance projects this year, the ADB's president said Friday.

The Beijing-based Asian Infrastructure Investment Bank has been viewed by some as a rival to the World Bank and the Philippines-based ADB, which was founded in 1966.

But ADB President Takehiko Nakao said he did not believe the AIIB, which will launch next week with starting capital of $20 billion, will diminish his institution and they were happy to work together.

"We agreed we can cooperate," Nakao, told reporters in Manila, adding he already had two meetings with AIIB president-designate Jin Liqun since last year to set parameters for the two institutions' working relationship.

"(Jin's) ideas about operations are different, but because of these different ideas, we can complement each other even more."

Nakao said the two men agreed to co-finance certain projects in the region to address transport and renewable energy needs, and expected to announce specific projects by about the middle of the year.

China's official Xinhua News Agency earlier reported the AIIB, which will launch next week in Beijing, expected to offer its first batch of project loans by mid-2016.

Nakao, former Japanese vice finance minister, would not say how much money the ADB would put into AIIB co-financing.

The United States and Japan -- the world's largest and third-largest economies, respectively -- have notably declined to join the AIIB.

However many other major economies, including Germany, Britain, South Korea and Russia, have signed up.

"There are many reasons to do it (join) because Asian developing nation countries need money for financing infrastructure needs," Nakao said.

Nakao estimated Asia would need eight trillion dollars to close its 2010-2020 infrastructure financing gap, a principal thrust of past ADB lending.

"We welcome any support to us in terms of financing infrastructure," he said.

Nakao downplayed suggestions the AIIB would erode the ADB's role in the region.

"I would say this is more a chance for us, rather than eroding... because we can share our expertise and knowledge and systems," he said.

Nakao said the ADB was helping the AIIB "prepare its safeguard processes for environmental and social protection, and also procurement systems".

He declined to comment when asked about fears China would use the AIIB as a tool to advance its agenda in the region.

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