Asian Infrastructure Investment Bank and Development: A Chinese Soft Power Tool for Global Leadership

Introduction

In October 2013, at the Asia-Pacific Economic Cooperation Summit in Jakarta, Indonesia, China’s President Xi Jinping proposed creating a new multilateral development bank (MDB): the Asian Infrastructure Investment Bank (AIIB). Headquartered in Beijing, launched in October 2014 with the signature of a Memorandum of Understanding by 21 Asian countries (including China), and operational on January 16, 2016, the AIIB has a governance structure similar to other MDBs (Weiss, 2018). It is an MDB devoted to achieving green, technology-enabled, by financing sustainable and high-quality infrastructure to promote regional, national and international connectivity. Although the US opposition by affirming the AIIB would not meet global transparency, environmental and labor standards, procurement requirements, and other safeguards (Bustillo & Maiza, 2018), it has grown up to 103 approved members worldwide (data 2021). Today, the AIIB capitalizes at USD100 billion and is Triple-A-rated by the major international credit rating agencies. As a new addition to the MDB family, the AIIB’s mandate includes promoting regional cooperation and partnerships to address development challenges by working closely with other multilateral and bilateral development institutions.

Xiao (2016) summarizes four driving forces to explain the creation of the AIIB. First, the arrival in November 2012 of Xi Jinping, as the new China’s president, changed the traditional economic policies developed by his predecessors Jiang Zemin and Hu Jintao, guided by a conservative strategy focused on transforming China. The brand-new president focused on his policies following the so-called “double circulation,” defined by simultaneously developing domestic welfare and international competition. Second, setting the goal of achieving development based on building infrastructures as a priority to avoid severe bottlenecks in China and abroad, especially in the Asian region. Third, to compensate Beijing’s frustration over the Western, especially the US dominance of the existing international multilateral bodies. And fourth, the arrival of a new ‘Eurasian shift’ to link Europe and Asia by land and sea.

Creating the AIIB as an MDB is a central component of President Xi’s regional economic and foreign policy. It aims to boost economic connectivity from China to Central and South Asia, the Middle East, and Europe (through the Silk Road Economic Belt) and, along a maritime route, from Southeast Asia to the Middle East, Africa, and Europe (the 21st Century Maritime Silk Road) (Weiss, 2018). As a result, the creation and launch of the AIIB are much more than promoting business and social interconnectivity and economic integration in the Asian-Pacific region and cooperation with existing MDBs (Xiao, 2016).

Added to the Silk Economic Belts (Road and Maritime), China is most likely to conduct an inclusive institutional balancing strategy to provide extra benefits to followers. Among them, the AIIB’s founders have benefited from pooling support and strengthening the AIIB’s legitimacy (He & Feng, 2019). In short, a nation joining the AIIB bets on the winning horse.

The success of this AIIB’s legitimacy and attraction is seen in its rapid growth and international recognition. In 2018, the AIIB was granted Permanent Observer status in the deliberations of both the United Nations General Assembly and the Economic and Social Council. The AIIB represented about 79 percent of the global population and 65 percent of global gross domestic product (GDP) in 2020. Headed by China, the AIIB is defined by self-governing, rules-and treaty-based, AAA-rated, with preferred creditor status focused on assuring structural change and economic growth. As a result, the AIIB is becoming an instrument of development for developing countries, especially in Africa and Asia, and to a lesser extent in Latin America and the Caribbean, as this bank is one of the main tools used by China to turn into the first world economic power during this decade. China has economic potential in terms of development and growth far superior to the economic potential of the United States. The American nation is declining in terms of less economic power, in general, for its citizens due to higher domestic poverty rates, especially in blacks (19.5%) and Hispanics (17%), according to data from the US poverty statistics (https://federalsafetynet.com/us-poverty-statistics.html), among other reasons.