BEIJING—China’s Finance Minister, Lou Jiwei, has proposed the establishment of an Asian Infrastructure Investment Bank (AIIB), with available capital of USD$50 billion, mostly to be funded by China. In an apparent rejection of existing international development banks, such as the Asian Development Bank (ADB), China wants to have more of its own say in how funding is provided in Asia. The United States, Japan and India are large shareholders in the ADB—China’s opposition to some of the bank’s programs has previously been the subject of political concern, with Beijing being known to outright veto proposed funding projects.
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Should the AIIB come to fruition, it will be one of a number of recent moves by China to boost its influence in the region, desiring to play a more pivotal role in Asia. This latest proposal is a sign that if China cannot wield enough power through established banks, it will form its own without the burden of its regional rivals. As proposed, the AIIB would see its initial capitalization at about a third of that of the ADB—which is ranked AAA by Standard & Poor’s, as compared with the AA- rating given to the Chinese government.
It is expected that other participants in the AIIB would include China’s friendly regional partners, such as Pakistan, South Korea, Kazakhstan, Mongolia and Sri Lanka. Notably, ADB primary members Japan and India have not been included. The bank’s policies would differ from those of the ADB by concentrating on infrastructure development rather than direct poverty alleviation.
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