Updated March 17, 2022
Asian Infrastructure Investment Bank
In October 2013, at the Asia-Pacific Economic Cooperation
interconnectivity and economic integration in the region”
Summit in Bali, Indonesia, China proposed creating a new
and “cooperate with existing multilateral development
multilateral development bank, the Asian Infrastructure
banks,” including the World Bank and the ADB.
Investment Bank (AIIB). As its name suggests, the Bank’s
stated purpose is to provide financing for infrastructure
In October 2014, 21 Asian countries met in Beijing, China
needs throughout Asia. The AIIB has also been active in the
and signed a Memorandum of Understanding that set out
response to the Coronavirus Disease 2019 (COVID-19)
the general principles undergirding the AIIB’s creation.
pandemic and is providing up to $20 billion in support to
China set the deadline for expressing interest in joining the
member countries to support their pandemic responses
AIIB at the end of March 2015. U.S. officials were caught
through the end of 2023. The AIIB’s Crisis Recovery
off-guard when, in early 2015, the United Kingdom,
Facility (CRF) was created in April 2020, and is supporting
followed by several other European countries, sought
various health sector and economic resilience projects. As
membership in the AIIB. By the time the AIIB’s Articles of
of February 2022, 46 CRF projects have been approved,
Agreement were signed in December 2015, the Bank had
totaling $11.6 billion across 25 member countries.
57 founding members, representing every region except
North America. As of March 2022, membership has almost
As the first China-led multilateral development bank
doubled, to 105 members. By contrast, the IMF and the
(MDB), the AIIB presents several policy issues, including
World Bank have 190 member countries.
the Bank’s governance and operational practices, the U.S.
role and possible participation, and the relationship between
To date, the Bank has approved a total of $31 billion in new
the AIIB and the existing MDBs. Some observers have also
projects as of Dec. 1, 2021, up from $12 billion as of
raised concerns about the transparency and governance of
December 2019. India is the largest borrower (Figure 1).
China-funded development projects. They argue that the
AIIB may undermine decades of effort by the United States
Figure 1. AIIB’s 5 Largest Borrowers, December 2021
to improve governance, environmental, and social
standards; these standards have been achieved through
conditions attached to World Bank, Asian Development
Bank (ADB), and other MDB loans. Other analysts note the
AIIB’s track record of facilitating projects and
implementing robust safeguards and policies and argue that
the time may have come for the United States to consider
joining the Bank.
Background
The Asian Development Bank estimates that potential
infrastructure projects in Asia could amount to $26 trillion
through 2030, and would likely require mobilizing public
and private sources of financing, as well as new sources of
long-term development finance. The AIIB was initially
Source: AIIB, Standard and Poor’s.
conceived as a regional financing mechanism for China’s
“One Belt, One Road” initiative to create a network of
highways, railways and other critical infrastructure linking
In recent years, the AIIB has increased its share of
China to the rest of the world. At the same time that China
standalone projects and decreased the share of loans
is working to deepen its economic relationships with its
cofinanced with other MDBs. As of December 2021, 54%
neighbors, it has intensified its engagement with the
of the AIIB projects were cofinanced with other
“Bretton Woods Institutions”—the World Bank,
institutions, compared to 67% in June 2018. According to
International Monetary Fund (IMF) and the regional
December 2020 Standard and Poor’s analysis, private sector
development banks. China’s leaders have stated for many
lending is expected to become a larger share of Bank
years that the international financial institutions have been
lending, reaching 50% over time. It was 27% of AIIB’s
too slow in recognizing China’s increased stature in the
total approvals of $12 billion as of year-end 2019. The
global economy.
AIIB's private-sector lending was 34% of total approvals of
$31 billion as of Dec. 1, 2021, and is expected to reach a
President Xi has pursued policies to establish new China-
50% share of annual lending by 2030.
led trade and financial institutions, as well as to further
Membership and Organization
integrate China within the existing international financial
institutions. President Xi said that the AIIB would “promote
Membership in the AIIB is open to all members of the
World Bank or the ADB. Regional members are those
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Asian Infrastructure Investment Bank
located within areas classified as Asia and Oceania by the
and operations; and approving strategic, planning, and
United Nations. Several European and Asian advanced
budget documents.
economies are AIIB members, including France, Germany,
Italy, the United Kingdom, Australia, New Zealand, South
Issues for Congress
Korea, and New Zealand. Seventeen of the G-20 members
China’s Economic Diplomacy
are also AIIB members. Only the United States, Japan, and
Mexico are not AIIB members.
Chinese officials see economic development in Asia as
helping to guard against regional instability (e.g., in
The AIIB’s total capital is $100 billion, with 20% paid-in
Afghanistan, Pakistan, and Central Asia) and deepening
and 80% callable capital. As of November 2021, $19.02
regional commercial and political links to Beijing. China’s
billion of the Bank’s $20 billion paid-in capital has been
regional infrastructure financing may also serve to channel
China’s overcapacit
subscribed. China is contributing $50 billion, half of the
y in its manufacturing and construction
total subscribed capital. India is the second-largest
sectors. China’s efforts on behalf of the AIIB also raise
shareholder. The Bank is based in Beijing, China, and
questions about China’s relationship with the existing
headed by Jin Liqun, China’s former vice minister of
MDBs, where it remains a large borrower. Critics question
finance and former chairman of the supervisory board of
why China still borrows large volumes from the MDBs,
China’s sovereign wealth fund. President Jin was elected to
often for infrastructure projects, yet believes it has
a second five-year term, which started on January 16, 2021.
sufficient management expertise to lead a new MDB.
China is the largest shareholder, and its voting power (27%)
Transparency and Governance Concerns
is substantially greater than the second largest AIIB
Several operational aspects of the AIIB raise concerns for
member, India (8%). This is the largest gap between the top
some U.S. officials. The Obama and Trump
two shareholders at any of the existing MDBs, although the
Administrations did not see joining the AIIB as in the U.S.
United States has the largest voting share in any single
interest. China’s large voting power combined with the
MDB (30% at the Inter-American Development Bank).
AIIB’s nonresident executive board have led some analysts
to question the AIIB’s independence from China’s leaders.
For special votes, such as approving membership, selecting
However, since the Bank’s founding, its membership has
the president, increasing the capital stock, and changing the
grown to include almost all of the world’s countries, it has
size or composition of the executive board, the AIIB
developed robust operational guidelines and standards, and
Articles require either a super majority (75% of total voting
it maintained AAA ratings from the major rating agencies.
power with two-thirds of the membership) or a special
majority (50% of total voting power with one-half of the
Notwithstanding the AIIB’s track record, China, through its
membership) of the Board of Governors has an effective
infrastructure financing/loans and bilateral aid, has often
veto over these types of decisions.
supported large-scale infrastructure projects throughout
Asia with less regard to social or environmental standards,
Figure 2. AIIB Total Voting Power, March 2022
or the underlying institutions in the recipient country, than
the MDBs (including the AIIB). Some observers argue that
competitive pressure from the AIIB and China’s bilateral
sources of financing may lead some MDBs to reconsider
the World Bank’s international best practices in
procurement policies and other safeguards. Absent best
practices on procurement and other safeguards, there
arguably is greater potential for corruption in MDB-funded
projects, especially in countries with weak domestic
institutions.
Commercial Implications for U.S. Firms
Many European governments may have joined the AIIB to
ensure access for their domestic firms in bidding on
contracts involving potential infrastructure projects. While
Source: AIIB
China has issued assurances that there will be open and
The AIIB has a governance structure similar to other
transparent procurement, it remains uncertain to what extent
firms from non-AIIB member countries are considered for
MDBs, with two key differences: (1) it does not have a
bidding on AIIB projects. China’s existing loan and project
resident board of executive directors that represents
member countries’ interests on a day-to-day basis; and (2) it
management practices continue to cause worry among some
observers. The impact that AIIB lending may have on
gives more decisionmaking authority to regional countries
setting technological and other standards in the region is
and the largest shareholder, China. Management of most
MDB’s day-to-day activities (approving loans, establishing
another concern. For example, if China uses the AIIB to set
up infrastructure for communications, transportation, and
policies, and overseeing MDB management) is typically
energy that uses Chinese equipment or services or to
delegated to a resident board of directors, which meets at
least once a week. In comparison, the powers delegated to
connect more broadly to China’s networks, this potentially
the AIIB’s
gives China an ability to develop a strong commercial
executive board are modest and limited to
foothold in Asia that could disadvantage or exclude U.S.
establishing AIIB policies; supervising AIIB management
firms.
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Asian Infrastructure Investment Bank
IF10154
Martin A. Weiss, Specialist in International Trade and
Finance
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https://crsreports.congress.gov | IF10154 · VERSION 13 · UPDATED