China offers $10 billion in infrastructure loans for Southeast Asia

KUALA LUMPUR (Reuters) - China is offering $10 billion in infrastructure loans to Southeast Asian countries, a senior foreign ministry official said on Sunday.

The world's second-largest economy will also provide aid worth 3.6 billion yuan (U.S. $560 million) to underdeveloped states within the Association of Southeast Asian Nations (ASEAN) in 2016, Vice Foreign Minister Liu Zhenmin told a news conference during the annual East Asia Summit, which this year was held in Kuala Lumpur.

Liu did not say which bank would provide the loans.

The pledges come as China seeks to expand its influence in the developing world, including Southeast Asia, with government aid programmes and loans. The Asian Infrastructure Investment Bank (AIIB), a development bank backed by China, won support from Asian and Western European economies this year despite an ambivalent response from the United States.

The AIIB was officially created in June and is set to rival the World Bank and Asian Development Bank in development work in Asia. It is set to officially launch at the end of this year.

By not insisting on some free market economic policies recommended by the World Bank, the AIIB is likely to avoid the criticism leveled against its rivals, who some say they impose unreasonable demands on borrowers.

The United States, which initially cautioned nations against joining the AIIB, has expressed concern over how much influence China will wield in the new institution. China has maintained it will not have veto powers, unlike the World Bank where Washington has a limited veto.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

(Reporting By Megha Rajagopalan. Editing by Bill Tarrant.)