Challenges and opportunities coexist in AIIB's future
- By Xu Lifan
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E-mail China.org.cn, February 13, 2016
Links with China's development strategy
The "Belt and Road" initiative and the internationalization of RMB occupy the core position in current Chinese foreign economic strategy, which must be linked to the AIIB. Actually, there are many intersection points between the AIIB's business and China's "Belt and Road Initiative." From this perspective, in addition to the role of money lender, the bank can serve as a bridge with others in many fields.
First, it lays a solid material foundation for regional economic integration through promoting regional connectivity. Currently, due to the establishment of new multilateral trade organizations, such as the Trans-Pacific Partnership Agreement (TPP), and new trade rules, a solid foundation of regional economic integration has a "spillover value" in maintaining regional and global free trade.
Second, it attracts social capital to build an international operating platform. For a long time, Chinese capital has faced investment barriers and punitive measures of political discrimination abroad. The AIIB welcomes capital from multiple channels, especially private capital. In this way, it provides social capital with a new channel avoiding risks brought about by blind investment.
Third, it provides a new way for tackling China's excess capacity. This is mainly concentrated in infrastructure-related industries such as iron, steel, and cement. As a money lender and go-between, the AIIB can help Chinese enterprises cope with this so as to play a proper role in Asian infrastructure construction.
How to work with other multilateral organizations
According to the commitment of the founding member countries, the AIIB's legal capital stands at US$100 billion, which is still utterly inadequate even if it is all paid-in. So, from the capital perspective, the AIIB needs to cooperate with multilateral organizations, including the World Bank and the Asian Development Bank.
In addition to financial cooperation, it also needs to learn from the organizations' cumulative experience, such as in how to achieve democratization in decision-making and balanced interests, how to prevent bad debts, how to assess investment loan projects, and how to prevent systemic crises.
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