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.