China’s status deficit and the debut of the Asian Infrastructure Investment Bank

Abstract

This paper seeks to explore whether the Asian Infrastructure Investment Bank (AIIB) has become an instrument of power led by China to fulfill her geopolitical interests. After an investigation of the AIIB’s power structure, institutional design, and its 34 approved projects, this study finds that although the AIIB deviates to some extent from international standards while considering loan decisions, the bank itself does not appear to be a norm challenger so far. Instead, it has become more cooperative and inclusive, with a shifting focus towards mutually beneficial cooperation and reform of the international financial system. This paper argues that the AIIB's current configuration results from the decrease in China’s status deficit—the gap between China’s recognized international financial status and its own perception of its financial power. Quantitative and qualitative evidence shows that when the idea of the AIIB was first conceived, China’s status deficit was large, which meant that in a global power struggle the AIIB was more likely to be manipulated by a dissatisfied China. As the AIIB evolved, China’s international financial status gained positive recognition and the AIIB received wider acceptance; China’s status deficit shrank. As a result, the AIIB has become a reform-minded multilateral financial institution that has made concessions to establish rules and has sought collaboration with its counterparts.

Keywords:

• Asian Infrastructure Investment Bank
• China
• global governance
• international financial institutions
• race to the bottom

Notes

1 Please refer to the both Article 3 of ADB’s and AIIB’s AOAs.

2 Please refer to the Articles 4, 5, 25, 29, 38, 41, 43 and 53 of the AIIB’s AOA.

3 The data comes from “The Observatory of Economic Complexity” which can be accessed at https://atlas.media.mit.edu/.

4 The data includes loans from 2005 to September 24, 2018. Please refer to https://data.adb.org/dataset/adb-sovereign-projects.

5 “Concerns about the AIIB Exclusion List and a Comparison with the ADB Prohibited Investment List, IFC Project Exclusion List, and Investments Prohibited under World Bank Safeguards,” https://goo.gl/DjHvW5.

6 The four categories are: (1) aligned (renewable energy projects); (2) conditional (natural gas-fired power or electricity transmission and distribution infrastructure); (3) misaligned (new coal-fired power plants); (4) controversial (sometimes involve significant environmental and social risks).

7 They are Brazil, Egypt, Iran, Italy, Kuwait, Malaysia, the Philippines, Portugal, South Africa, Spain, and Uzbekistan.

8 See Article 31(ii) of the Agreement Establishing the Asian Development Bank and Article 26 (ii) of the AIIB’s AOA.

Additional information

Notes on contributors

Ian Tsung-yen Chen

Ian Tsung-Yen Chen is an Assistant Professor at Institute of Political Science of National Sun Yat-sen University in Taiwan. His research interests include international political economy, international organizations and global financial politics. His recent work appears in the Asia Europe Journal, International Relations of the Asia-Pacific, Issues & Studies, Mainland China Studies,Stanford Journal of East Asian Affairs, and The Pacific Review.