So far, more than 50 countries have either joined or applied to be members of the China-led Asian Infrastructure Investment Bank (AIIB). The bank’s progress demonstrates China’s approach to shaping the Asia-Pacific region. The forming of the AIIB is a leading-edge geopolitical, economic story. Last week, Justmeans’ editorial director, John Howell ran a piece called, China’s New Investment Bank is a Global Economic Game Changer, explaining that the basic rules of the global investment game just changed. How the AIIB is expected to report $100 billion in registered capital to deal with the estimated $730 billion needed between now and 2020 to fund infrastructure spending in Asia.
The countries that have joined the AIIB include Australia, the UAE, Russia, South Korea, Israel and many of America’s closest allies in Western Europe – U.K., France and Germany. Moreover, the Chinese government probably cannot believe its own luck when Israel committed to join; it could not have expected to attract such a longstanding American ally. However, China’s success with the AIIB is not just luck—it is very clever economic planning and policy.
Worried about China’s growing diplomatic clout, the U.S. has expressed concerns about the AIIB, particularly on grounds of transparency and governance. While America has not joined, it has said it supports co-financing projects and has proposed that the AIIB works in partnership with existing development institutions, such as the International Monetary (IMF), World Bank and the Asian Development Bank to ensure appropriate safeguards are followed.
However, the nations who have joined the AIIB have done so because they share China’s view – that the IMF and World Bank are outdated and archaic when it comes to development and international economic cooperation. Especially, as many western governments have long used bilateral aid and the World Bank lending to gain favours in the international arena to influence the domestic politics of poorer countries. China is promising to give developing countries more seats at the decision-making table and to refrain from interfering in their domestic policies. Whether these promises are actually kept remains to be seen.
In the meantime, the World Bank’s President, Jim Yong Kim has publicly stated that the World Bank will be working with the AIIB to fight poverty and fund infrastructure projects. Particularly, as the President believes that the decisions made with the partnerships created this year will help determine whether the World Bank has a chance to reach its goal of ending extreme poverty in just 15 years.
Photo Credit: AIIB