The Asian Infrastructure Investment Bank (AIIB)

By Aodi Jiang

The Asian Infrastructure Investment Bank (AIIB) has been a hot topic in the past couple of months. As an international student from China, I want to take this opportunity to briefly introduce this topic to the class.

The Asian Infrastructure Investment Bank is an international financial institution proposed by the government of China. On October 24th, representatives from 21 Asian nations signed an agreement to establish the AIIB, which is aimed to lend money to build roads, mobile phone towers and other forms of infrastructure in poorer parts of Asia. As of April 2, 2015, almost all Asian countries and most major countries outside Asia had joined the AIIB, except the US, Japan (which dominated the Asian Development Bank) and Canada. Countries known as major US allies such as Britain, Germany, France, Italy, Australia and South Korea, also joined AIIB as founding members despite US pressure. North Korea’s application was rejected.

image

Many questions why China is proposing and taking lead in the creation of a new bank in Asia when there is already the Asian Development Bank (ADB). China’s answer is that Asia has a massive infrastructure funding gap which currently no existing institutions could fill. It is true since a 2010 report from the ADB estimated that Asia alone would need to spend some US$8 trillion on infrastructure in the next decade and the reality is that neither the World Bank nor the ADB have the political power or the funds to meet the challenge. China also said that ADB and World Bank mainly focuses on areas of environmental protection and gender equality, but the AIIB will concentrate its firepower on infrastructure.

On April 11, when asked if the establishment of the Asian Infrastructure Investment Bank would be a competition or even a ‘threat’ to the World Bank, Jim Kim the current president of the World Bank replied: “As we sit back and look at the new development plan—17 goals, 169 targets— [and the goals of] the United Nations, that’s a multitrillion-dollar agenda. You know, all the multilateral development banks together are less than $200 billion. [So] how are we going to get there? We’ve been saying again and again and again that it’s going to take a new kind of collaboration. There’s not anywhere near enough financing for infrastructure in Asia. And China, they’ve defined Asia very broadly—from Japan to the Middle East is really Asia now. We look forward to working very closely with them. We just want them to use international standards. The enemy is poverty, not another institution”.

As the leader of the establishment of the AIIB, China has offered to put up US$50 billion of its own money. China will also be playing a key role in contributing through its financial muscle and political power. Furthermore, China has roughly US$3.9 trillion in foreign reserves, more than any other country, and decades of infrastructure construction experience. Personally, I think it is a great move from China, as one of the world’s largest economy powers to take responsibility at economics development in Asia. What do you think?

 

 

Citations

“Asian Infrastructure Investment Bank.” Wikipedia. Wikimedia Foundation, n.d. Web. 14 Apr. 2015.

“World Bank President Jim Kim on Asian Infrastructure Investment, Africa Rising, and His Bromance with Jack Ma.” Quartz. N.p., n.d. Web. 14 Apr. 2015.

Advertisements

5 responses to “The Asian Infrastructure Investment Bank (AIIB)

  1. I think this is a great topic especially because of the diplomatic battle it ensues. It’s going to be very interesting how the dynamic between this bank and the already existing IMF is going to play out. I think the creation of this bank is showing further how China is becoming less of a lender and more of a consumer. On top of that, I think we are beginning to see the transition of China from developing to developed especially with their new protectionist policies.

    Like

  2. I think this is a really great topic. The creation of this new bank has spurred such an intense diplomatic debate. The controversy between how this bank and the already existing IMF are going to co-exist is very interesting. I believe that with the creation of this bank, more protectionist policies like reduction of capital inflows and outflows, and overall huge GDP growth is showing the world the transition of China from lender of money to consumer. As we see this transition, I believe we are also going to see China moving from developing to developed. Really cool post!

    Like

  3. asadsajjad17

    I find the fact that Canada didn’t join quite humorous. Even after taking Canada’s geographical location and the fact that they are the United States number 1 trading partner into account, Canada tends to side with the US on nearly every issue local or global.

    No wonder its often called “the 51st State” in the Union!

    Like

  4. Sound’s sweet that many development countries and high level developing countries pay much more attention in the infrastructure in a poor country, which provide a basic to improve their own country’s economy. However, there are some questions coming out. Who manage the infrastructure and how do they manager it? Hopefully, the infrastructure benefit for local resident rather than some international trading company.

    Like

  5. Dear Aodi,

    It is always interesting to see development of a new organization. Multilateral development banks can be great tools when used with a combination of other factors. It will be interesting to see the impact the organization will make on the development of the region and we will have to wait and see what happens in the future.

    ~Professor Myra Chaudhary

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Authors

%d bloggers like this: