An Early Indication of China's Asian Infrastructure Investment Bank (AIIB)

The AIIB, China's new multilateral development bank, held its first annual meeting over the weekend. As is well known, last spring, the Obama Administration received flak for opting out of the AIIB and pressuring its allies also not to join. As explained in the Diplomat, two concerns prompted the U.S. to remain leery of the AIIB:

 "1) Its voting structure gives China a disproportionate voting share, which means it can effectively manipulate the bank to further its own economic and strategic goals in the region; 2) The AIIB will not follow the same high standards as existing financial institutions when deciding which projects to fund, forgoing important criteria like environmental protection, human rights, and anti-corruption."

Source: Xinhua/Li Xin

Moreover, there were concerns that the AIIB would become yet another regional institution (along with the One Belt One Road and the Maritime Silk Road initiatives) used to strengthen China's influence in Asia, undermining the work of existing multilateral banks, if not the broader liberal international order. Such concerns continue to linger as the AIIB sets its sights on bringing in new members and financing projects outside of Asia (i.e. Latin America and Africa).

An early look at the AIIB following its first annual meeting suggests that some of the concerns, at least regarding the AIIB's institutional design, may be unfounded. An article published last weekend in the Washington Post headlined, "Asia’s new infrastructure bank is out to prove it’s not China’s pawn." reports that the AIIB is actually co-financing 3 of its 4 initial projects with other multilateral banks, including the World Bank. According to a British VP at the AIIB, this collaboration is only possible if the AIIB meets standards adopted by other multilateral banks. In terms of voting power, China is the largest shareholder at 26%, but it does not give China an outright majority to impose its preferences.

What does this mean for Asia' growing institutional architecture? Contrary to notions of "rival regionalism" or "institutional balancing," institutional overlap may actually foster positive global goods for the region. Despite the potential redundancies of overlapping institutions, they can facilitate greater interaction among states and help fill in governance gaps. Perhaps the AIIB can complement existing institutions such as the Asian Development Bank (ADB) and World Bank. I wouldn't be surprised to see if the U.S. comes around to the AIIB in the near future if it can find some face saving way to do it.