The establishment of the Asian Infrastructure Investment Bank (AIIB) in 2016, on a Chinese initiative, constituted an attempt to bridge the gap in infrastructure financing in Asia. However, it was also perceived in the West as a potential vehicle for China’s geostrategic agendas, fueling the suspicion that the institution might compete rather than align with existing multilateral development banks (MDBs) and impose its own standards.
After almost a decade of existence, the AIIB seems to have proven such critics wrong. It has managed to establish its credentials, has cooperated with other MDBs as well as with national development assistance agencies and aligned with their standards and operating practices. The bank has also expanded its scope of activities both geographically and in terms of sectors. Going beyond infrastructure financing, the AIIB has established a special facility to help developing countries recover after the Covid-19 pandemic.
Despite these positive achievements, several of the initial concerns have not been fully placated, and some signs point to possible dangers in the years to come.
While the AIIB could not be shown to be the main financing instrument of President Xi’s flagship project (Belt and Road Initiative – BRI), the conditions may now be in place for China to turn the institution into a geopolitical tool.
Although there is no evidence so far of Chinese Communist Party’s (CCP) interference in the internal governance of the bank, the concentration of power in the hands of the bank’s President (at the expense of the board of directors) is a source of concern. Moreover, the increasingly heavy-handed assertive China should not be taken lightly and calls for utmost caution on the part of the bank’s members.
Lastly, the AIIB’s performance in terms of environmental and social standards calls for tighter oversight.
Policy recommendations
The AIIB has proven its usefulness as a complement to other MDBs. EU member countries should keep cooperating with the bank while making full use of their oversight capacity over its activities.
- First, more EU member states (smaller EUMS in particular). should be encouraged to join. With more EU countries as members, they will have more of a say.
- Secondly, it is desirable to maintain or even enhance coordination among European countries within the Eurozone and the wider Europe chairs of the board of directors.
- Thirdly, European countries should push for synergies with other MDBs and national development finance institutions (DFIs), making sure that the AIIB stays aligned with other MDB’s operating practices and standards, with regard in particular to social and environmental standards.
- Lastly, EU countries should lobby to get the bank’s presidency to rotate in the next election due in January 2026.
Stay tuned with us by reading more: ReConnect China Policy Brief 21-The China-led AIIB