“China’s Status Deficit and the Debut of the Asian Infrastructure Investment Bank.” The Pacific Review. A Critique

Note: References to China and its intentions specifically refer to the ruling CCP’s preferences, and could change were the regime to collapse.

Is the AIIB designed and destined to be a Chinese dominated institution, an echo of the Western dominated IFIs, or a true multilateral IFI? This is the question that has been asked about the AIIB, but there remain larger questions about the AIIB, China’s ambitions, and its relationship to the much larger in scale BRI that perhaps overshadow the findings. 

The paper posited that China’s perception of the gap between its own economic power and the prestige allotted to it by IFIs in terms of not only voting rights but also respect spurred them to create a competing institution, the purpose of which is less clear. According to the findings, the international acceptance gained by the AIIB seemed to cause China to curtail its ambitions and allowed the AIIB to develop as an ostensibly politically neutral, progressive IFI. However, there are questions about China’s ultimate goal; was the AIIB truly designed to be a symbol of China’s rise, competition for the Western ruled IFIs, an attempt to dismantle and depoliticize the international order of conditional loans and the Washington consensus, or does China aim to simply mimic and replace the Western order in form and function with institutions that are more dominated by China politically.

China’s main qualm with the Western IFIs was that their economic catchup in the last three decades had not led to a commensurate increase in their representation in the decision making of Western IFIs. The BRICS New Development Bank, the NDB, was a way to change this, although because of equal voting shares, it could never be seen as “China’s” project.

The idea for the AIIB was birthed by Xi Jinping, the initial aims for which were possibly more similar to either a profit seeking commercial bank, or a Chinese government aid agency with China contributing and holding 50% of the shares. Notwithstanding these aims, because of international recognition, it has developed differently, with 35% of its founding members from outside of Asia. China allowed its shares to be diluted to the point that they hold near 26% voting rights, enough for a veto in a supermajority vote setting.

In the empirical analysis of the traits of the states and projects that actually received AIIB loans, all political/strategic variables failed to pass the significance test, indicating that there does not seem to be any relationship between AIIB loan provisions and political closeness or interest from China, potentially a surprise for China-skeptics.


Economic variables performed better, as expected, with potential market size (GDP) as a significant variable. This implied that countries that had larger economies and thus had more need received more project funding, although growth rates or GDP per capita could have been included too to capture the need for this economic development too, as opposed to measuring large states against already mature developed economies with large GDPs and no need for IFI loans. While this analysis certainly holds, it should be noted in regards to data availability that the AIIB is still in its infancy, but with the member states hailing from Europe, India and other states not traditionally in China’s orbit, it is not surprising that this course of development has led the AIIB to be a less politicized IFI than it otherwise could have been.

Regarding the debate of whether the AIIB aims to end the Western order, and has deliberately aimed to lower the bar regarding the standards for IFI lending, they did adopt the World Bank’s environmental, health, and safety guidelines. In terms of practical implementation, it has been significantly more ambiguous, although the paper claimed that was “no evidence of a race to the bottom (23),” yet. The AIIB seems to only be paying lip service to being “green,” and as of yet hasn’t placed restrictions on coal plants, and funds environmentally and socially objectionable projects at much higher rates than competitor IFIs.

This does not bode well for the world, and the revolution brought about by this Chinese IFI might be similar to that brought about by China’s industrial rise, a lowering of the bar in terms of environmental, labor, and health standards worldwide, not something to celebrate.


Thus, it seems that perhaps the AIIB is focused more on external optics and creating a parallel institution than a progressive one.


It was also measured whether the AIIB had made changes to improve on the areas in which China had previously criticized other Western IFIs in terms of institutional structure, but while the paper saw that progress had been made, the jury is still out on whether that is true or whether the AIIB is a poorer carbon copy of a Western IFI, and not a progressive institution. China remains the primary voteholder in this institution with veto power over any proposal to increase the capital stock. The president has consistently been Chinese, although the track record is short, and electing a new president needs 75% approval, higher than the 50% for the ADB, giving China essential veto power over an unwanted president.

This indicates that China still seeks to dominate the institution in the same way that the US and Japan have for Western IFIs, not to truly change the system, but to replace the US with China. 

In regards management, unlike the World Bank’s 25 person full time board who votes on loans, the AIIB has a 12 person voluntary board which holds virtual meetings only on critical issues, and actually delegates the loan decision making to the management team. This key institutional feature may actually be the crux of the depoliticization of loan distribution, and the reason for China’s inability to interfere in loan provisions, much of which have been distributed to countries with which China politically is less than friendly.

In regards to conditionality, the paper asserts that the World Bank and ADB make loans based on the political preferences of major power holders, but seems to err in claiming that this is consistently connected to the issue of conditionality. Conditionality is ostensibly issued to ensure the highest likelihood of recouping the loan, and shouldn’t necessarily be thought of as explicitly political. The paper claims that these variables show that the AIIB is more progressive in regards to institutional reform, but the actual results seem less clear as to whether this is really the case. The AIIB has simply removed some of the structural and political obstacles that countries had faced with other IFIs, whether this represents progress or simply a temporary political shift, or an attempt to supercede Western IFIs is not clear. 

Most importantly, the paper made some cursory references to the BRI, and previous concerns were raised over whether the AIIB was a way to multilateralize funding for BRI supported projects. Yet, if it was assumed that China was so flush with cash they could have bankrolled the entire AIIB, why threaten strategic BRI projects with a multilateral organization instead of directly funding BRI projects? The funding disbursed by the BRI is nearly alarmingly 60 times larger than that of the AIIB, and thus the scale and importance in Chinese strategy is incomparable. In the current context, the BRI seems entirely separate, perhaps a form of China’s using money to buy political support or facilitate their strategic interests in the region.

The paper’s premise is well founded, and made clear that thus far, the AIIB, because of the broad participation by Western countries and international acceptance, seems on a good trajectory to behave like a Chinese-led, but not Chinese-dominated multilateral-like IFI. It has a different aim than the BRI, less strategic, and more focused on the projection of China’s symbolic influence and soft power, which makes study of the BRI and its use for geopolitical manipulation all the more important.

It may be too early to jump to conclusions about the long term prospects for the AIIB. Some of the reasons that Western backed IFIs seldom weathered defaults may have been the political connectedness between the governing states and recipient states inherent in Western IFI loans, as well as the structural reform mandates. The unconditionality of AIIB loans and the lack of political connectedness between it and debtor states may threaten the stability of these lower-standard loans in the future should some of those countries consider default viable. Down the line, this could threaten to break apart the membership and potentially cause China to buy back shares, thus returning it to potential domination.

It is too early to tell, but perhaps there is not enough data yet to speculate yet if it is a true multilateral, progressive IFI trying to multilateralize IFIs or just a Chinese clone trying to replace American hegemony. I would argue the latter is true, and that China’s aim is to create parallel institutions to reduce the importance of and delegitimize the Western order. China feels threatened by the West politically, and sees its meteorically quick economic rise as the golden ticket into the hegemon club. By reducing the importance of Western IFIs, lowering the standards for loans, and sustaining a functioning system of states working in opposition to the Western order, with a little chaos added in, China likely believes it can dethrone the United States and overtake them, first economically, then militarily, and finally politically. It seems, though, to misunderstand the element of political cooperation that was fundamental to the rise of the IFIs and the current order, and perhaps overestimates its own ability to disrupt this system. Notwithstanding this, this may very well be their ultimate intention. The implications for the AIIB, the BRI, and other Chinese attempts to reorder the global financial system could have deep implications for the future of the world economic and political order.

Staff writer: Ari B