Challenges and opportunities coexist in AIIB's future

By Xu Lifan
0 Comment(s)Print E-mail, February 13, 2016
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After over two years of preparation, the Asian Infrastructure Investment Bank (AIIB) was formally inaugurated on January 16 with 57 founding members giving the green light. It is the first time China has established a multilateral financial institution to participate in global economic governance as an initiator and rule maker.

It means China's diplomatic effort and its demand for improving the international economic governance system have been widely recognized. However, the AIIB's future success depends on whether it can establish a scientific and efficient internal management order, how well it fits into China's overall foreign strategy, whether it can cooperate well with the international financial system, and whether it can avoid all kinds of security risks, predictable and unpredictable.

These four elements will determine its vitality and development, and the current internal and external environment suggest challenges and opportunities co-exist.

How to reflect the core value of AIIB

The AIIB is committed to building a "lean, clean and green" organization with zero tolerance towards corruption as its core value. The internal governance structure must overcome the drawbacks existing in many other multilateral institutions, such as the low efficiency in decision making, so that the bank can make accurate judgments and timely decisions for infrastructure projects in Asia and even beyond.

In its management framework, the AIIB has set up a board of governors, a board of directors and a management team, reflecting democratic and highly-efficient decision-making. The Board of Governors consists of the finance ministers of member countries as the AIIB has no permanent board. Therefore, even though its level is high, actual power is small.

In the long term, the AIIB's business will be mainly in the management of the Board of Directors and its management team. This aims not only to ensure a shortened loan granting process, but also avoiding an excessive politically-oriented operation. At the same time, it has an internal audit department reporting directly to the Board of Directors. This is conducive to balance in the operating mechanism.

Among the AIIB's top five shareholders, Russia is faced with quite severe economic challenges at home, therefore it has a strong demand for external financial support. In this regard, the AIIB has appropriately assigned senior management posts to small shareholders in order to ensure balanced interests.

At the same time, Jin Liqun, the AIIB president, announced that China will for now not apply for loans. Moreover, China has prepared US$50 million as a special fund for less developed member countries to carry out infrastructure projects, playing an exemplary role in this regard.

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