AIIB highlights China's global ambitions

China's first multilateral development bank is targeting financially, environmentally and socially viable projects, its president says.
Jin Liqun, president of AIIB, at the World Economic Forum in Tianjin
Jin Liqun, president of AIIB, at the World Economic Forum in Tianjin

China’s first multilateral development bank will only fund financially, environmentally, and socially viable projects, its president Jin Liqun said at the World Economic Forum on Wednesday.

“Any project that would be good for Asia, whether in or outside of Asia, would be good for the bank,” said Jin, head of the Beijing-based Asian Infrastructure Investment Bank.

Officially launched last December, the China-backed AIIB, arguably the country’s biggest success in rewriting the global financial rules in the face of US objections, held its first annual meeting over the weekend bringing together 57 founding members. The majority of them are countries from Asia and Western Europe.

On the eve of its first annual gathering, the bank’s board of directors on Friday approved its first four loans totaling $509 million, including three co-financed projects with multilateral development bank partners including the World Bank and Asian Development Bank.

The loans will fund infrastructure projects in Pakistan, Indonesia, Tajikistan, and Bangladesh. AIIB also aims to lend about another $1.2 billion this year, according to its statement.

The nascent but ambitious AIIB parallels another China-led initiative, One Belt, One Road, which currently covers about 60% of the global population in more than 60 countries in Asia and beyond. The bank is expected to deploy the lion’s share of its $100 billion in registered capital on Belt and Road-related projects.

One Belt, One Road is central to Chinese President Xi Jinping’s big vision to revive China’s old glory along the ancient Silk Road trading routes that once stretched from the old Chinese capital of Chang’an through Eurasia and reached as far as Ancient Rome.  

In the meantime, China aims to forge a closer geo-economic network that connects with countries in Asia, the Middle East, North Africa, and Europe via growing trade links and stronger infrastructure facilities, to bolster its influence overseas.

The aggressive plan has been compared by some to the 1948 Marshall Plan pioneered by the US in war-ravaged Europe to counter the threat of Soviet expansion and harden transatlantic trade ties, despite Beijing’s rejection of the analogy.

In the face of some scepticism and suspicion over the AIIB and Belt and Road programme, China aims to build up a transparent development bank and to fund projects with other countries for mutual benefit, according to Jin of AIIB.

“China is the proponent, initiator and promoter. But China itself cannot do all this. China proposes but does not impose. It’s a response to the need [of infrastructure investment]. The need may not have been well expressed but China has now expressed it,” Jin said during a panel discussion on the Belt and Road initiative.

Based on Asian Development Bank forecasts, Asia’s infrastructure investment needs in 2010-2020 amount to $8 trillion.

For Ian Bremmer, president of Eurasia Group, the Belt and Road initiative will help Beijing to forge stronger political and commercial ties with other countries in the region by funding their infrastructure projects. That helps to explain why it is strongly backed by President Xi and by “real money” from big Chinese financial institutions. 

“The infrastructure is badly needed and generally doesn’t have enough support. This fills a vacuum,” said Bremmer, head of the New York-based political risk consultancy. “There are very serious political positives that are gonna come out of this near term…Money talks, and no one knows that better than Chinese.”

He pointed out, however, that the economics of Belt and Road-related projects could be “disappointing over the next decade as “it’s hard to have projects in this part of the world that are actually investment-ready and give you good returns.”

Benedikt Sobotka, chief executive officer of Eurasian Resources Group, speaks at the World Economic Forum in Tianjin (Photo credit: WEF)

Benedikt Sobotka, chief executive officer of Eurasian Resources Group, a Luxembourg-based natural resources company, echoed Bremmer’s point about the challenges involved in finding commercially viable projects. Nonetheless, many of these projects are already underway, mainly ports, power plants, and railways -- something his company was taking advantage of.

"For us, [One Belt, One Road] is not a concept but a reality…It’s actually happening,” Sobotka said, noting how his company had secured billions of dollars in financing from Chinese banks for its infrastructure projects in Central Asia.

Zhang Bingjun, chairman of state-backed Tianjin TEDA Construction Group, was similarly upbeat. His company, for instance, has been working with the Egyptian government on developing an economic and trade zone near the Suez Canal, whose construction by TEDA began in 2008.

Zhang said many Chinese enterprises are looking for such opportunities globally. “The launch of this strategy is driven by the demand of Chinese companies…China’s leaders have brought up [One Belt, One Road] after in-depth analysis of the Chinese and world economies.”

Li Daokui, an economics professor at Tsinghua University and a former member of China’s Monetary Policy Committee, said if the Belt and Road plans succeed in the coming decades, the countries in the region will “form a highly effective, efficient and socially developed region like the European Union.”

“The region will become highly converged economically rather than be in conflict,” he said, while warning that Beijing has to be careful with its investments, in particular environmentally.

“We need to have good environmental protections, otherwise local people will have regrets.”

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