The brainchild of Chinese President Xi Jinping, the multilateral financial institution was launched in January 2016 to counter Western dominance of the World Bank and the International Monetary Fund.
The China-backed Asian Infrastructure Investment Bank expects to more than double its lending power for regional projects over the next five years, a top executive said, denying it was an arm of the Communist Party. The brainchild of Chinese President Xi Jinping, the multilateral financial institution was launched in January 2016 to counter Western dominance of the World Bank and the International Monetary Fund. It has already bankrolled a dozen projects, including a highway in Pakistan, a power plant in Myanmar and a deepwater port in Oman, and AIIB’s vice president Thierry de Longuemar said more will follow.
So far none of the projects are part of Beijing’s much- vaunted Belt and Road infrastructure initiative, but de Longuemar said the bank would be prepared to get involved but not as “an instrument” of the government. China is the bank’s largest shareholder with a 28 percent stake, followed by India with eight per cent, and it is chaired by a former Chinese vice minister of finance, Jin Liqun.
“You can’t deny that it’s a Chinese initiative,” de Longuemar told AFP, ahead of the bank’s second general assembly on the South Korean island of Jeju on Friday. “China has a higher interest in the success of this institution. But to say that it is a Chinese bank rather than an international bank would be… a big exaggeration,” he added, during an interview at the AIIB’s temporary Beijing office staffed by 100 people.
“China’s wish isn’t to create a new instrument of the Chinese state, it is to demonstrate its ability to promote a truly international institution based in China.” The bank’s shareholders have pledged to raise the AIIB’s total capital to the “enormous sum” of USD 20 billion over five years, de Longuemar said, from USD 9 billion today. By tapping financial markets, it could quadruple its lending power to USD 80 billion, added the Frenchman, a former Asian Development Bank vice president.
The bank approved USD 1.7 billion in loans in 2016 and plans to increase lending to USD 2.5 billion this year. “In a few years, we will have a loan capacity that will most likely reach $10 billion a year or more,” de Longuemar said.
Critics had feared the bank would set low standards for projects and undermine principles adhered to by the World Bank and other multilateral development finance institutions. But de Longuemar said the AIIB had a set of principles on financing projects, ensuring they are financially viable and that they follow social and environmental rules.
“There are things it won’t finance, like coal-fired power plants,” he said. Having the bank’s headquarters in Beijing “obviously creates an environment that favours Chinese interests”, de Longuemar conceded.
In areas such as transport infrastructure, for instance, “Chinese businesses are particularly competitive”, he said. “If the Chinese are the best bidders, there is no reason to reject their companies.”
The bank’s three-day meeting on Jeju will officially welcome 19 new members, including Canada, Belgium and Hong Kong, bringing the number of shareholders to 77. While several European nations have joined the bank, holding a fifth of the capital, the United States and Japan have notably declined to become members.
Former US President Barack Obama’s administration chose to stay out of the AIIB on concerns about its transparency and governance. While it is not clear if Xi raised the issue during talks with US President Donald Trump in Florida in April, it would have been “politically perfectly coherent” for him to have done so, de Longuemar said. “The door remains open” to Washington, he said.