AIIB at 10: From China-led to global bank

Amid the typical off-season lull at international organisations in early August, I paid a visit to the headquarters of the Asian Infrastructure Investment Bank (AIIB), the China-led multilateral development bank, located next to Beijing’s Olympic Forest Park. I visit the institution several times a year as part of my longstanding academic research. A commemorative brochure marking its first decade provided the occasion for this essay.

‘Five Globals’

Born small and nimble with an Asian gene ten years ago, the AIIB has since grown into a global organisation defined by what I call the “Five Globals”: global membership, global investment, global financing, global procurement and global recruitment.

Global membership. The AIIB started with 57 members and has expanded every year, reaching 111 today. They are mostly sovereign states, with Hong Kong as the sole exception. Among the dozens of older multilateral development banks (MDBs), the AIIB is now second only to the World Bank in membership.

Both Global South and Western countries, save the US and Japan, are in the AIIB club, spanning all continents except Antarctica. None has withdrawn from the AIIB. Such broad membership is a testament to the organisation’s global appeal and standing amid geopolitical ruptures.

Global investment. AIIB investment reaches across the globe, from satellite development in Indonesia and broadband in Oman to solar plants in Egypt, Covid-19 liquidity support in Ecuador, fiscal and financial reforms in Kazakhstan, and Environmental, Social, and Governance (ESG) investment in global corporate bond markets.

The definition of “infrastructure” investment has evolved and expanded, from hard (roads and dams), social (hospitals and schools), to soft infrastructure (policy-based loans). But the AIIB’s commitments to both climate financing and the private sector have not changed, targeting no less than 50% of its total portfolio respectively.

Global financing. The AIIB raises funds on global capital markets, including London, Luxembourg, Hong Kong, Shanghai and Australia. Leveraging its AAA credit rating from day one, the AIIB has been able to borrow at the cheapest rate to benefit Global South borrowers.

The AIIB promotes diversification of the global currency system by promoting the use of local currencies alongside US dollars. For example, it issued 3 billion RMB bonds in China’s interbank bond market twice and jointly guaranteed Egypt’s issuance of 3.5 billion RMB sustainable panda bonds.

Global procurement. AIIB procurement, at both corporate and project levels, is open to all countries, not just members. This openness is revolutionary, shattering the long-held belief that the resources of international organisations should benefit members only. Opening bidding to all would drive down prices, eventually benefiting and relieving borrowers.        

Global recruitment. The AIIB’s global recruitment has a similar effect. The organisation is able to recruit the best talent it wants, including nationals from the US, Japan, and Chinese Taipei, contributing to its success. European Bank for Reconstruction and Development (EBRD), the AIIB’s European peer, by contrast, recruited the first Chinese staff only after China acceded to it in 2016. 

A corollary of “Five Globals” is the AIIB’s evolved understanding of overseas offices. The organisation used to consider an overseas office as costly and contradictory to its commitment to be a lean bank. But in 2023, it established the first overseas hub in Abu Dhabi, proximate to Middle East and African clients. Its second overseas office will be established in Hong Kong by year-end, to be close to capital markets.     

Over the past decade, the AIIB has faced significant challenges. Institutionally, it has had to strike a difficult balance between high standards and practical feasibility while serving a diverse membership. Geopolitically, it has navigated major conflicts with caution — suspending projects in Russia and Belarus during the Ukraine war on financial risk grounds. Operationally, the Covid-19 pandemic severely disrupted projects, events, and staff mobility. Yet, as founding president Jin Liqun put it, these trials have left the AIIB “stronger, wiser and tougher”.

Within a decade, the AIIB has established itself as a champion of multilateralism and best practices, built on the above “Five Globals”. It is no longer viewed as just a Chinese-led development bank, but as an international organisation. Nor is it an entity of the Belt and Road Initiative (BRI); it supports development initiatives across its membership.

Meanwhile, China’s leadership role in the AIIB is undeniable. It holds more than 30% of the organisation’s capital, giving it effective veto power. Yet China’s leadership differs from that of the US at the World Bank and other institutions where Washington has traditionally held considerable influence. At the AIIB, China has exercised its influence through consultation and by example.

In the Chinese understanding of multilateralism, leadership is distinct from hegemony — the use of veto power to prevail over others or the imposition of one’s will. I would argue that the likelihood of China becoming a hegemon remains low; hegemony is not embedded in its cultural gene. China is not a missionary society but a Confucian one: its instinct is to command respect, not to convert others.

The understanding of the relationship between the BRI and the AIIB has evolved from an ideological, “either-or” framing to one of proactive synergy and mutual complementarity. The two initiatives now work hand in hand to advance their shared mandate of infrastructure investment, while the BRI itself continues to improve in quality and green standards over time.

Chinese multilateralism in the AIIB is also affirmed by the organisation’s neutral position on geopolitical or domestic issues. The AIIB suspended all projects in Russia and Belarus after the outbreak of the war in Ukraine in 2022. But this did not signal support for Ukraine, which has not joined the AIIB by the way; the decision was made purely from an economic and financial safety consideration. Another sensitive issue is that the organisation held a non-interference position toward the Myanmar junta after the coup in 2021, expressing no favour or prejudice toward “the form of government”.

New decade 

At her inauguration, AIIB president Zou Jiayi spoke of the possibility of building “a better world” amid rising conflicts and disruptions. In keeping with its “lean, clean, and green” approach and commitment to multilateralism, the AIIB continues to pursue the dual mandate set out in its charter: infrastructure investment and institutional partnerships.

AI-driven infrastructure should be at the top of the AIIB’s operational agenda, building on its 2020 digital infrastructure strategy, which is due for an update. AI is expected to reshape the AIIB’s existing thematic priorities — green infrastructure, cross-border connectivity and private capital mobilisation — as set out in its corporate strategy. AI itself is also emerging as an infrastructure of tomorrow, particularly through computing power networks.

MCDF, the multilateral fund hosted by the AIIB, should play a more active role in developing and promoting global AI standards, balancing efficiency with security. Global AI governance should be both ambitious and practical, with greater attention to bridging the compute divide.

The AIIB should continue to deepen and expand partnerships with peer institutions. Within the MDB community, the AIIB should seek to join the cross-debarment system, strengthening collective efforts to tackle corruption in development.

The AIIB should also engage broadly with other major international organisations. It should collaborate with the IMF and become a prescribed holder of special drawing rights (SDRs), the IMF’s reserve asset that can be exchanged by member countries for freely usable currencies. As with other major MDBs, this would allow the AIIB to receive and re-channel SDRs, including those allocated during Covid-19, to countries in the Global South to help meet their balance-of-payments needs.

The AIIB should also seek to join the WTO’s efforts on investment facilitation, which has won broad support among its members and already involves the World Bank. In this role, the AIIB could finance specific investment-facilitation projects in developing countries, supporting their sustainable development. To advance such institutional partnerships, the AIIB should make full use of the support of the Chinese government.

The challenges ahead are as unpredictable as the pandemic and the war in Ukraine have shown. Yet the best defence is daily “body building”. The AIIB continues to chart new paths for development, with the support of its full membership and by drawing on the strengths and lessons of the Bretton Woods institutions.

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