The misunderstood AIIB
by Shahar Hameiri and Lee Jones / The Interpreter / 17 May 2018
China’s Asian Infrastructure Investment Bank (AIIB) has been viewed through the wider debate over whether a rising China will overturn or uphold the US-led “rules-based liberal international order”. As the first significant international organisation established by China, the AIIB is often seen to indicate wider Chinese intentions.
The AIIB clearly does not challenge the global governance status-quo. To be sure, its mission, rules, and governance are a bit different from those of existing multilateral development banks (MDBs), such as the World Bank and Asian Development Bank.
Its sole focus is on infrastructure development, not poverty reduction; loans are extended at commercial rates; recipients’ repayment capacity is an important part of the business case for projects; nine of the twelve directorships are reserved for Asian members; the board of directors, and the larger board of governors, are non-resident, potentially affording the bank’s management more operational freedom than in other MDBs; and China’s 26.6% of the AIIB’s vote share gives it veto power over decisions requiring a super-majority, although not in operational matters.
Nonetheless, most careful observers have concluded that the AIIB’s structure, governance, and operating procedures closely mirror those of other MDBs. This assessment is supported by the AIIB’s collaboration with these MDBs on projects: the great majority of the AIIB’s active projects are co-funded with other MDBs, and are accordingly governed by their rules.
The AIIB, however, is a marginal player within China’s fragmented development finance domain. It has also played a minor role in the implementation of China’s flagship Belt and Road Initiative (BRI), although it was ostensibly established to support it. To date, the AIIB has loaned just more than US$3.5 billion (out of $19 billion total paid-in capitalisation), of which around a third appears BRI-related, linked to infrastructure for transnational connectivity.
By contrast, in 2016 alone China’s policy banks, the China Development Bank and Export-Import Bank, reported BRI lending of $101.8 billion. Chinese commercial banks have also allocated hundreds of billions in BRI-related credit. Therefore, debates on China’s challenge to the global governance status-quo in development financing that focus on the AIIB are misguided. Read more…