China’s Asian Infrastructure Investment Bank: supporters and absentees
From Brazil to New Zealand, from South Korea to Switzerland, countries from the five continents are expressing interest in joining the China-led Asia Infrastructure Investment Bank (AIIB). As its name suggests, the AIIB will lend money to build roads and other forms of infrastructure deeply needed across developing Asia. North America, embodied in the US, seems to be a lonely cold observer of the Chinese initiative, which came up on October 24 last year by the agreement of 21 Asian countries. In fact, many European US allies, including Italy, have recently announced that they will join the new bank, which can already count on more than 40 countries.
It seems to be a good timing for China to play a greater role in international lending institutions. The €47 billion AIIB is expected to start operations by the end of 2015. Moreover, the new bank is in line with another Chinese initiative, the so-called New Silk Road, which involves a €32 billion fund as initial investment and is aimed at increasing China’s presence in the infrastructure market – mainly dominated by Europeans – and to develop industrial and financial cooperation.
The synergy of these initiatives can explain why the AIIB is believed to be a component of a wider Chinese strategy to enhance the country’s regional and global power, and why it is often perceived as a challenge to the established World Bank and Asian Development Bank, led respectively by the US and Japan, the other notable absentee.
The official argument the US made in trying to discourage other advanced economy from joining the AIIB is that China should invest its money in existing institutions, these not encountering the governance problems a China-led bank would, they say, likely have. However, such an argument does not appear especially consistent when it comes from someone who still holds the privilege of choosing the World Bank president. If the real concern of the US is preventing the creation of an institution which could strengthen Chinese economic and political interests, the same concern has not stopped China’s historical rival. Indeed, the possible AIIB membership of Japan, whose contribution would consist from €1.4 billion to €2.8 billion, is scheduled to be discussed with China in June.
On the contrary, on April 13, Taiwan’s request to join the AIIB as a founding member was turned down. Ma Xiaoguang , a spokesman for the State Council’s Taiwan Affairs Office in Beijing, commented that they “will find a way for Taiwan to participate in the AIIB under a proper name”, therefore excluding Taiwan from the governance of the bank. During last week, controversies were already arisen about the name the island country – that China claims as part of the mainland – would have used in joining the new bank.
With the intent of reassuring about the institution’s transparency and governing standards, on April 11 during a forum in Singapore, Jin Liqun, secretary general of the bank’s multilateral interim secretariat, has declared that the bank will be “lean, clean and green”, underlying that it will not be influenced by politics. A zero-tolerance approach toward corruption and great emphasis in promoting economy: these are the pillars on what China would like the AIIB to be founded on.