Despite the clunky name, the Asian Infrastructure Investment Bank promises to be “lean, clean, and green.” And despite the fact it has said it will complement, not compete with, other agencies, the new China-led bank has emerged as a clear rival to the club of rich nations that control lending to the world’s poor ones.
In the one-upmanship that drives geopolitics, the bank is a victory for Chinese President Xi Jinping as he vies with U.S. counterpart Barack Obama in Asia, Bloomberg Markets magazine reports in its July/August special Rivalry issue. The U.S. has called the shots at the New York–based World Bank since its formation in 1944. Japan has held the presidency of the Asian Development Bank from its birth in Manila in 1966. And only a Western European has ever claimed the managing directorship of the International Monetary Fund, which was created in 1945.
This year, though, Beijing succeeded in breaching the alliance of the affluent by persuading major European nations to sign up as founding members of the AIIB—despite Washington and Tokyo trying to talk them out of it. The U.S. and Japan say the bank lacks transparency and concern for the environment. China has pledged to be clean and green. Adding to the PR pitch, it’s also stressing “lean,” to imply that it offers less-bureaucratic decision making than its rivals.
China has long objected to its lack of clout at the World Bank, the IMF, and the ADB. It announced plans for the AIIB in 2013, saying the bank would fund transportation, energy, and communications projects across Asia. Since then, 57 nations have signed up to join the Beijing-based lender, including such U.S. allies as the U.K., France, Germany, Israel, and Australia. “The initial success of AIIB is a diplomatic victory for China,” David Dollar, a senior fellow at the Washington-based Brookings Institution, wrote in a guest commentary for the Bloomberg Brief Economics Asia newsletter. “The U.S. diplomatic response has not been adroit, playing into the narrative of U.S. decline in the Asia-Pacific.”
Dollar notes such perceptions may change if the U.S. plays a smarter hand in Asia, such as successfully implementing its proposed Trans-Pacific Partnership trade agreement. And the untested AIIB has much to prove. It will eventually be capitalized at a relatively modest $100 billion, compared with the World Bank’s $225 billion and the ADB’s $150 billion. And it won’t be making its first loan until the end of this year—time enough for global economies and alliances to shift.
This story appears in the July/August special Rivalry Issue of Bloomberg Markets magazine.