Korea asks China for the AIIB headquarters

The Korean government asked China to put the headquarters of the Asia Infrastructure Investment Bank (AIIB) in Seoul or Songdo, according to sources confirmed by the JoongAng Ilbo yesterday.

Korea was previously thought to be highly conflicted about participating in the China-initiated project in the face of opposition from the United States, which fears the bank will only increase China’s influence in the region. The JoongAng report shows that Seoul is tilting toward participating after all.

According to government sources, the Korean government made a request to the Chinese government in April saying it “wants to establish the AIIB headquarters in Seoul or Songdo International City.”

At the time, Korea was the only country to have made such a request.

It is believed that China wants the headquarters in Beijing. It is not yet clear whether Korea has indicated to China that it will join the bank or will make its decision contingent on the headquarters being based here.

During Chinese President Xi Jinping’s visit to Seoul, President Park Geun-hye said Korea will decide on joining the AIIB after further coordination with China. Xi was satisfied with the remark and so was the United States, Korea’s Foreign Minister Yun Byung-se said during parliamentary questioning last week.

The AIIB is being created by China to rival U.S.-led international bodies like the World Bank and the Asia Development Bank (ADB). It is interpreted as a response to the U.S.-led Trans-Pacific Partnership, the largest-ever free trade deal in which China isn’t participating.

Japan has also been excluded from the AIIB and instead is involved with the ADB.

China is going to supply at least 50 percent of the stake in the $100 billion institution. If created, it can be a rival to the $165 billion ADB.

The Korean government has been telling China that headquartering the AIIB in Korea will make it more international and less worrisome to the United States, Japan and other western countries.

If Korea succeeds in landing the headquarters, the country’s status in international financial circles will be elevated.

As for participating in the AIIB, Korea is torn between China and the United States. China is aggressively asking Korea to join the project.

On the other side, the U.S. government has expressed clear opposition to Korea’s participation. Until June, it took behind-the-scenes moves to oppose it, and made them public this month.

Sydney A. Seiler, a member of the Senior National Intelligence Service, expressed Washington’s concern about the issue in an interview on July 7. Jen Psaki, spokeswoman of the U.S. State Department, expressed concerns at a briefing on July 8.

If Korea wins the bid for the AIIB headquarters, it can tell the United States that Seoul is reining in China. Korea will try to persuade China that a Seoul-based AIIB headquarters can have a better governance structure.

Reportedly, China plans a voting system that will be proportional to each country’s stake in the AIIB. For instance, if China holds a 50 percent stake in the organization, it can wield 50 votes out of 100, being able to do whatever it wants.

It also plans to do without a permanent members committee. Local media reported that Korea was told by the Chinese government to invest 500 billion won to 700 billion won ($490 million to $686 million) in the institution but that it won’t get voting rights.

The Korean government’s main stance is that “more countries should take part in the AIIB by reducing China’s proportion,” the JoongAng Ilbo report says.

Recently, China has started changing its stance on various issues involving the bank, according to recent remarks by its finance minister.

“In terms of China being the largest shareholder, the percentage of the stake can be less than 50 percent,” said Chinese Finance Minister Lou Jiwei. “Participation of the U.S., Japan and European countries is welcome.”

BY PARK JIN-SEOK, SONG SU-HYUN [ssh@joongang.co.kr]