AIIB Chooses the Right Path as It Moves Forward

By Wang Yiwei

Beijing-based development bank works with existing global financial institutions to improve infrastructure connectivity across Asia

Last July, global credit rating agency Fitch Ratings issued a AAA rating to the Asian Infrastructure Investment Bank (AIIB), giving it a stable future outlook. The Beijing-based bank secured the highest possible credit rating from Fitch after receiving the same rating from Moody’s, one of the other “Big Three” ratings agencies, at the end of June.Both ratings reflected the sound management and reputation of the AIIB.

About the author:Wang Yiwei is a professor at Renmin University of China in Beijing.

In fact, the AIIB has attracted great attention from the international community since it was first proposed by China in October 2013. Formally established in January 2016 in Beijing, the AIIB had attracted 80 members by the end of June 2017, and it is the first multilateral financial institution initiated and established by China. The AIIB has become a successful model as it was initiated by a developing country, has attracted developed countries to join it and has become an international financial institution held in high esteem globally. What are the secrets behind its success?

The AIIB focuses on infrastructure in Asia, which is key to the development of Asia and the world as a whole. Infrastructure construction is an essential prerequisite of socio-economic development,and adequate funding is necessary to carry out infrastructure construction. It was estimated that between 2010 and 2020, infrastructure investment in developing countries in Asia will require more than US$700 billion annually. Before the AIIB was set up, the size of annual investment that multilateral development banks injected into the infrastructure sector of Asia was only about US$10 billion to US$20 billion. Therefore, the establishment of the AIIB is conducive to helping to fill the funding gap, while also supporting infrastructure construction and interconnection in the region.

There is a common saying in China that goes,“Building a road is the first step on the path to becoming rich”. China has experienced the truth of this sentiment since realizing rapid economic development after the introduction of reform and opening-up policies in late 1978. China has outstanding advantages in terms of design, construction, operations, management,funding, technology and qualified personnel in both traditional and emerging fields of infrastructure such as railways, highways, airports, shipping,human-computer interaction and the Internet of Things. Therefore, the AIIB was initiated and set up by China as a strong power in infrastructure construction, which will give full play to its advantages in this regard.

The ways in which the AIIB is changing infrastructure development in Asia can be expressed in the following areas:

The Bank benefits from unique advantages. Although the majority of the AIIB’s members are developing countries, it also includes quite a few developed countries. This advantage makes it a bridge and a link propelling South-South and North-South cooperation.

Win-win cooperation also helps. The AIIB doesn’t enjoy the fruits of development alone. It has successfully collaborated with the Asian Development Bank, the World Bank and other international multilateral financial institutions to create a mode featuring mutual benefit and win-win cooperation, which conforms to the expectations of the international community.

The AIIB is a trailblazer of a new path. It not only urges reforms of the international financial system, but also initiates a new approach to “efficient and green” global governance. The values of the AIIB include “openness,transparency, independence and accountability”,which are also the principles it uses in selecting its management, reflecting its adherence to the concept of modern governance as an innovative measure that differentiates itself from existing major multilateral development banks.

Additionally, mutual learning is of great value to the AIIB. It draws on the experiences and practices of existing multilateral development banks in terms of governance structure, environment and social security policies,procurement policies and debt sustainability. At the same time, it pursues open regionalism and conducts joint financing, knowledge sharing, capacity building and other forms of cooperation.