By the March 31 deadline, 30 nations had been approved as founding members of the Asian Infrastructure Investment Bank, including 26 from Asia, three from Europe and one from Oceania.

 

On March 29, Australia became the latest developed nation to apply for membership in the China-led Asian Infrastructure Investment Bank (AIIB) after G7 members like Britain, Germany, France and Italy.
 

By the March 31 deadline, 46 countries had applied to be founding members of the AIIB, but the United States and Japan have remained on the sidelines. The bank now has approved 30 nations as founding members, and the initial membership will be finalized on April 15.

However, some in the West have interpreted the construction of the AIIB as an attempt to challenge the world order.

“We should be wary of falling into the trap of geopolitical discourse,” said Da Wei, director of the Institute of American Studies at the China Institutes of Contemporary International Relations. “The AIIB is not a private entity that belongs to China but a multilateral institution. It treasures open, inclusive principles and mutually beneficial cooperation and abides by the rules of financial institutions. It is not a tool of geopolitics, and we should abandon the outdated zero-sum mentality when discussing it.”

AIIB for regional connectivity
The initiative was praised when it was first put forward by President Xi Jinping during his visit to Southeast Asia in October 2013. In just one year, 21 nations signed the Memorandum of Understanding on Establishing the AIIB as founding members. More than half of the G7 have scrambled to join the AIIB before the deadline.
 

Huang Weiping, a professor from the School of Economics at Renmin University of China, said the popularity of the AIIB is no surprise. “The AIIB is a mutually beneficial choice for developing and developed countries both in and outside Asia.”
 

Developing countries in Asia are in urgent need of regional connectivity and other infrastructure, but their demands for capital are not being met owing to a severe shortage of public financial products. In such a context, China would like to use its savings to fill the gap and promote economic development in Asia, Huang added.
 

European scholars attribute the popularity of the AIIB in Europe to the attraction of China’s economy. “Many European countries hope to diversify their foreign investment,” said Rana Mitter, director of the University of Oxford China Centre, “Their application to the AIIB indicates their confidence in China’s economy.”
 

Tim Wright, a professor from the School of East Asian Studies at the University of Sheffield, said that many European countries don’t want to miss out on sharing the dividends of the economic development in China as it plays an increasingly important role in global economy.
 

In response to concerns that the AIIB will threaten the current international financial order, British Treasury Chief George Osborne said he believes that it is an invaluable opportunity for Britain and Asia in terms of investment and common growth.
 

Unlike the World Bank and the Asian Development Bank, which offer loans for poverty alleviation,  the AIIB will focus on infrastructure investment, said Wang Yongzhong, a research fellow from the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.
 

Da Wei also argued that the AIIB is a complement to the existing multilateral development banks rather than an alternative. “China will maintain its membership in the World Bank and the Asian Development Bank.”

 

Corporate global governance
It is worth noting that the Obama administration’s position on the AIIB has received overwhelming criticism from American academics.

Jonathan D. Pollack, a senior fellow in the John L. Thornton China Center at the Brookings Institution, wrote that the US and Japan have repeatedly claimed they welcome China’s participation in the construction of the 21st century international order, and economic governance is a likely field for cooperation. But, he added that their concerns about the AIIB indicate they are not prepared for China to achieve an international status that is equal to its economic significance.
 

To maintain its dominant role, the US has tabled reforms to the voting share of IMF members that would distribute more shares to emerging economies like China, said Wang. “However, the AIIB can infuse democracy into global financial governance.”
 

As China strengthens its economic power and plays a larger role in global governance, many scholars argue that it is reasonable and necessary for the country to promote the reform of the global financial system, which can help build a fairer order. In fact, the AIIB initiative, together with the Silk Road fund and the BRICS Development Bank, is a significant part of China’s efforts to participate in global financial governance.
 

Qin Yaqing, president of China Foreign Affairs University, pointed out that the purpose of China’s participation in global institutional reform is not to supersede other mechanisms. Instead, it aims to achieve a state of co-evolution in which the new institution and other existing platforms learn from each other, balance one another and integrate.
 

On one hand, the AIIB can draw upon China’s success in development financing, while the World Bank and the Asian Development Bank follow the business pattern of the Western development banks, Wang said. For instance, the idea of “planning first” advocated by the China Development Bank also applies to other developing countries in Asia, he added.
 

On the other hand, China should draw upon the experience of the existing international development institutions. Attracting major European countries to join the AIIB is only a first step, he said. However, “The operation in the future is the key to success. China now lacks experience running a complicated multilateral financial institution.”

 

 

Mao Li is a reporter at the Chinese Social Sciences Today.