The Beijing-based Asian Infrastructure Investment Bank, the first multilateral development institution initiated by a developing country, has become the world’s second largest multilateral development bank, trailing only the World Bank Group.
The AIIB’s inauguration took place only two years after it was proposed as one of China’s key globalisation initiatives. It comprises 80 member countries, with more joining this year and next, and has approved 15 investment projects with commitments of $2.5bn. There are strong links with infrastructure investment projects under the Belt and Road initiative, proposed at around the same time as the AIIB in 2013 – these interconnections are likely to become more apparent and more relevant for many countries around the world. Both programmes underline China’s willingness to bear more responsibilities as the world’s largest emerging economy.
Countries along the Belt and Road are mostly emerging markets with urgent national development requirements and limited resources. Joining up different countries’ policies and integrating development goals are crucial to promoting the Belt and Road network. China proposed the initiative, which will deal with investments worth many hundreds of billions of dollars, in response to sluggish global economic growth and rising anti-globalisation sentiment.
After 30 years of rapid development, China has become the world’s second largest economy, with financial strength translating into greater capability to mobilise resources internationally. President Xi Jinping announced an increase in capital of Rmb100bn (around $15bn) for the Silk Road Fund with another Rmb300bn to encourage Chinese financial institutions to carry out overseas business in countries along the Belt and Road. The China Development Bank and the Export-Import Bank of China, too, will provide special loans of Rmb250bn and Rmb130bn respectively to support infrastructure construction and financial co-operation in those countries. As well as harnessing funds from China, the AIIB is promoting Belt and Road projects through partnerships with governments, multilateral development banks, commercial financial institutions, institutional investors and various private sector entities.
The AIIB’s many challenges include enhancing low-cost fund raising, implementing sustainability and environmental principles, leveraging more private capital, and further strengthening co-operation with other multilateral development banks. Reflecting the significance of these initiatives, China has signed memoranda of understanding with the World Bank, Asian Development Bank, New Development Bank, European Bank for Reconstruction and Development and European Investment Bank, as well as the AIIB.
With the support of the Chinese government and the other 79 members, the AIIB will become an irreplaceable institution for the benefit of both the regional and global economy. This mirrors the institution’s commitment to Xi’s statement of support for globalisation at January’s meeting of the World Economic Forum in Davos, where the president said, ‘We hope all leading economies will join a campaign to revitalise trade and investment in an open international system that will promote a stable recovery and show the benefits of globalisation for more countries and peoples.’ As exemplified by the AIIB and Belt and Road initiative, China’s development brings and will continue to create opportunities for local partners and the world economy.
Qiangwu Zhou is Director General of the International Economics and Finance Institute in the Chinese ministry of finance.