China moves to allay fears its new development bank will compete with the World Bank and Asian Development Bank

One of the more controversial developments in the aid sector in recent times has been China's move to set up a multilateral development bank, the Asian Infrastructure Investment Bank (AIIB).

It had divided the global community, with the United States in particular pressuring governments, including Australia, not to sign up.

There were concerns a China-dominated multilateral lender could fail to meet international environmental, social and governance standards.

Despite being the world's second largest economy, China has limited voting power over multilateral lenders that count the US and its allies as their biggest financial backers.

But China moved to reassure the global community its plans to set up the AIIB are not designed to compete with existing multilateral financial institutions.

A senior adviser to the Chinese government on the AIIB told the Australasian Aid Conference in Canberra the aim was to complement the likes of the World Bank and Asian Development Bank (ADB).

Zhou Qiangwu said the institutions which dominate the international development arena had limitations and their expenditure did not begin to meet the meeds of Asia, especially in terms of infrastructure growth.

"This new bank will be a multilateral development bank of specialisation, openness, high standards and (will) also try to be innovative," Mr Zhou said.

"You know the African Development Bank, Asian Development Bank, the World Bank and some others focus on poverty reduction as their major objectives, while this new bank will be only focused on infrastructure."

The AIIB was launched in Beijing last October at a ceremony attended by Chinese finance minister Lou Jiwei and delegates from 21 countries including India, Thailand and Malaysia.

China would be its largest shareholder with a stake of up to 50 per cent in the $US50 billion project.

The aim was to give project loans to developing nations.

Zhou Qiangwu said the AIIB would in the future expand its business to include so-called social infrastructure like education and health, but its first focus would be hard infrastructure.

"We would put regional and cross-border objectives as the priority, particularly in the coming five to 10 years," he said.

Mr Zhou said the AIIB would pay close attention to environmental assessments and labour standards, some of the issues of concern raised by the United States, European countries and others.

He also told the Australasian Aid conference steps would be taken to prevent corruption of projects financed by the bank.

Last year, Australian Prime Minister Tony Abbott indicated Australia would consider joining the AIIB if it had the same governance arrangements and transparency as the World Bank

The AIIB, with headquarters in Beijing, is due to open this year.

It will be joined in 2015 by another new international institution, the BRICS Bank, which was announced last year by participating countries Brazil, Russia, India, China and South Africa, which will be based in Shanghai.