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AIIB: A Successful Practice of Major-Country Diplomacy with Chinese Characteristics
by Liu Kan, Consul General of the P.R.China
2015/05/07

Recently, the Asian Infrastructure Investment Bank (AIIB) initiated by Chinese Government has been widely reported by world’s mainstream media. As of April 15th, 2015, there are 57 Prospective Founding Members (PFM), including India, Indonesia, Saudi Arabia, UK, Germany, France, Italy, South Korea, Russia, Australia, Egypt, Brazil, etc. The initiative of establishing AIIB was announced by Chinese President Xi Jinping during his visits to South East Asia countries in October 2013, aiming to boost the economy by providing finance to infrastructure projects in Asia region and promoting the connectivity and integration between and among Asian countries. This initiative is applauded by countries in and out of Asia region, as almost all Asian countries and most major countries outside Asia have joined the AIIB rush. Why does this initiative attain acceptance and support globally? As far as I am aware, there are two main reasons.

First and foremost, AIIB meets the great demand of market and will fill in the gap left by existing institutions, and so is widely considered a promising prospect. According to the Asian Development Bank, Asia will face a huge capital shortfall in the next 10 years and to maintain current growth, at least $8 trillion needs to be spent on infrastructure. Yet the exiting multilateral institutions can only provide very limited financial support to the development of infrastructure and private sectors are reluctant to take on in this area because of the huge amount of capital required, long period of the project and uncertainty of the return. As a specialized platform for infrastructure investment and finance, AIIB is to attract capital in and out of Asian countries including private sections, share interests and risk, and cooperate with existing multilateral institutions.

Another drive for AIIB is China’s practice of its major-country diplomacy with Chinese Characteristics, highlighting win-win cooperation, peaceful development and common prosperity. There is an old saying in China, “single flower dose not make a spring”. China’s GDP had reached over 10 trillion in 2014, while upgrading its own economic development, it will take fully advantages of its huge amount of capital, advanced technology and enormous industrial capacity to advance the infrastructural development in the region and to realize an inclusive and sustainable development by promoting inter-connectivity and economic integration.

China upholds an open, inclusive, co-operational attitude in the establishing and operation of the bank. Mainly focusing on infrastructure projects in Asia though, AIIB has received applications for joining in from 59 countries and regions in Asia, Europe, Africa, South America and Oceania. In the preparatory stage, China has held rounds of communication and consultation with applicant countries, non-applicant countries and existing multilateral financial institutions.

Yet there is also a view saying that AIIB initiated by China is to challenge the existing international financial system and mechanism. To me, this is either a misunderstanding or argument with a ulterior motive. Given the tremendous infrastructure financing needs in Asia and the different function and business priorities of AIIB, the AIIB will play a complementary instead of competitive role with existing institutions. It will work closely with the World Bank, the Asian Development Bank and other multilateral and bilateral development institutions, especially in knowledge-sharing, capacity-building, exchange of personal and joint financing, so as to promote regional cooperation and partnership and contribute to efforts in addressing challenges. The heads of WB and ADB have both expressed welcome and willingness to cooperate with AIIB.

China,working together with other members, is confident to build a bank up to high international standards. To that end, AIIB will draw on experience of existing institutions on governance, environmental and social security policy etc, and avoid the existing deficiencies, so as to achieve lower cost and higher efficiency and serve member countries better.

The governance structure of the Bank will consist of three levels: a Council, a Board of Directors, and Management. All power of the Bank will be vested in the Council which may delegate to the Board of Directors and the Management its power as stipulated in the Articles of Agreement.The Board of Directors will be non-resident initially and meet regularly to make key policy decisions. The Bank will develop an effective supervising mechanism to ensure sufficient, open and transparent policy-making.The president and senior management of the Bank will be selected through an open, inclusive, transparent and merit-based process.

Major-Country Diplomacy with Chinese Characteristics also stress opening, cooperation and inclusiveness, which are fully demonstrated in the establishment of AIIB. As stakeholder of existing financial institutions, China will continue to support their contribution in promoting development and reducing poverty, at the same time China is actively pushing reforms of the current institutions to make them more just, balanced and fair, responding more to interests of developing countries and requests from emerging economies.China has also taken an innovative move to establish a new channel of financing for specific field. If there is one message to glean from the number of applicants to join AIIB, it is that the world has sensibly voted for a more inclusive, balanced and mutually beneficial international economic order. Hopefully, the initiative of the AIIB will stimulate positive reforms that make the whole development bank system more effective. China, with its development, will provide more public goods to international community and do its share in promoting the development and good governance of the region and the globe.

According to Memorandum of Understanding on Establishing AIIB (MOU), the authorized capital of AIIB is 100 billion U.S. dollars and the initial subscribed capital is expected to be around 50 billion dollars, and GDP will be the basic parameter in determining share allocation among member countries. March 31,2015 is the deadline for countries to apply for joining the bank as founding members, but the door will always open for interested countries and regions. It is expected that the Prospective Founding Members will complete the signing and ratification of the Articles of Agreement (AOA) in 2015 and AIIB will be formally established by the end of 2015. As agreed, AIIB's headquarter will be in Beijing.

I sincerely hope that all countries can strengthen cooperation and achieve joint development under the principle of peaceful development and common prosperity. And I am fully convinced that the establishment of AIIB will not only meet the needs for development of Asian region and beyond, but also pave a new way for the course of building a more open,cooperative, innovative and inclusive world.



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