16.14
     bound by a deadline not ruling out the possibility         (ii) The AIIB also supports China’s strategic
     of joining in. Though the US has been openly                    interests in its hugely ambitious ‘Silk
     opposing this move some experts view that the                   Road Economic Belt’ policy.
     US in place of opposing it should work with it.          (iii) By exporting technology, transferring
     Experts have suggested that China is promoting a                development know-how, and facilitating
     solution to the shortage of infrastructure capital in           industrialisation using Chinese long-
     Asia and there is nothing wrong in supporting it.24             term finance to the under-developed
     Size of the AIIB: The AIIB will be one of the                   economies, China will not only find a
     largest development banks, but still a fair bit                 bigger market, promote prosperity of all
     smaller than the European Development Bank,                     nations along the ‘Belt and Road’, but
     World Bank and ADB. It will start off about the                 also diversify its foreign asset portfolio.
     same size as the BRICS Development Bank, which            (iv) It will make China emerge a much bigger
     was formed by Chinese initiation with Brazil,                   global power player which is supposed
     Russia, India and South Africa in 2014.                         to be keen to challenge America’s long-
                                                                     established strategy of institutionalising
          Based on the lending capital ratios of the
                                                                     power in a rules-based order. The case of
     World Bank and European Development Bank
                                                                     the AIIB shows that China now seeks to
     —the AIIB could extend loans for infrastructure
                                                                     define this order for itself, with the battle
     spending at around 100 per cent to 175 per cent
                                                                     for influence in Asia increasingly fought
     of its subscribed capital. This would mean having
                                                                     through rules and institutions.
     outstanding loans of up to $US175 billion.
                                                                (v) The so-called ‘rules based order’ was set
     With Public Private Partnerships and increased
                                                                     up after the 2nd World War through
     subscriptions, considerably larger amounts could
                                                                     policies such as the Bretton Woods
     leveraged for projects in the future.
                                                                     agreement which established US
     An edge to China: The Bank is supposed to give                  dominated organisations such as the
     China an edge in the global economy, major ones                 World Bank and IMF in which China
     are—                                                            plays a very small role.
           (i) The AIIB will be a better way for China           Members of multilateral development banks,
                to deploy its massive foreign exchange     historically, enjoy benefit such as getting ahead of
                reserves which are currently earning next  the queue for loans and enjoying a greater chance
                to nothing in US Treasury bonds. China     of success for national firms competing for project
                believes that the commercial financing     work. Put bluntly, without signing up it is highly
                of infrastructure differentiates the AIIB  likely that a large chunk of the billions of dollars
                from the likes of the ADB which places a   worth of work on offer will simply be doled out
                greater emphasis on poverty reduction.     to Chinese companies. Before conclusive remarks
                                                           could be drawn, it will better to keep watching
       24.    The Guardian, October 27, 2014.
                                                           the future developments regarding the new bank.