UPDATE 1-China says "clean, green" AIIB up and running in the new year

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BEIJING, Dec 25 (Reuters) - The China-backed Asian Infrastructure Investment Bank (AIIB) has been formally established and is expected to be operational early next year, and its head reaffirmed the lender will be “lean, clean and green”, Xinhua news agency said on Friday,

The setting up of the bank came after 17 funding members of the AIIB, which account for just over 50 percent of its share capital, ratified an agreement, state television quoted Finance Minister Lou Jiwei as saying.

The bank will hold its opening ceremony in mid-January and formally elect its president, state television said.

The bank will initially focus on financing projects in power, transportation, and urban infrastructure in Asia, the television quoted the bank’s president-elect, Jin Liqun, as saying.

First proposed by President Xi Jinping less than two years ago, the bank has become one of China’s biggest foreign policy successes. Despite the opposition of Washington, major U.S. allies such as Australia, Britain, Germany, Italy, the Philippines and South Korea have joined.

Jin said the bank would operate in an open, fair and efficient manner, playing down concerns over transparency and standards governing the $50 billion lender.

“There will be zero tolerance of corruption, and we will make the bank lean, clean and green,” Jin told Xinhua.

“Our target projects must be financially, environmentally and socially sustainable,” he said.

The AIIB, seen as a potential rival to the World Bank and Asian Development Bank, is expected to lend between $10 billion and $15 billion a year in its initial years, Jin has said.

The bank is open to new members, which could gradually dilute the existing members’ shares and voting stakes, Jin said. (Reporting by Kevin Yao; Editing by Nick Macfie)