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China-led AIIB Sees Membership Expansion: What's Next?

 
 

Earlier this month, the China-led Asian Infrastructure Investment Bank saw its first expansion since the Bank’s launch early last year. The AIIB added 13 new members, bringing its total membership up to 70. Afghanistan, Belgium, Ireland, Peru, Fuji, Hungary, Armenia, Ethiopia, the Republic of Sudan, and Venezuela are included among the 13 applicants to the bank who received approval. Brazil and South Africa — two of the bank’s largest members who received approval to join, but missed a deadline to complete the formal process for membership — received an extension of 12 months to join the development bank.

As the AIIB enters its second calendar year of operation, it’s clear that the bank’s trajectory continues upward. Though China founded the bank and exercises a de facto veto over funding decisions given its existing vote share, an expanding membership will likely require Beijing to shed some its existing shares. China holds 26 percent of voting shares in the institution, with a three-quarters majority vote required for certain decisions, including on changing the bank’s governing rules and approving major funding projects.

As the Financial Times observed, the continuing expansion of the AIIB contrasts sharply with the recent budget proposal put out by the U.S. administration of President Donald J. Trump, which proposes cutting U.S. contributions to the World Bank — the AIIB’s primary western competitor — by $650 million. The Trump budget would also lead to reduce U.S. participation at the International Monetary Fund, if approved.

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For China, a lack of representativeness for developing states, including itself, at these institutions that are among the cornerstones of the post-Second World War international order led it to spearhead alternatives, like the AIIB. With the Trump administration’s disinterest in maintaining U.S. influence on global affairs through these institutions that have historically carved out an exceptional role for Washington, Beijing’s odds of seeing the AIIB expand more rapidly than previously expected appear stronger.

We may soon see if the AIIB will experience growing pains as an organization. One of the enduring questions surrounding the organization has been regarding the extent to which Beijing may succeed in maneuvering its funding decision-making toward projects that incidentally benefit its own interests. As I’ve said before, evidence from the bank’s early funding decisions and its overall governance structure don’t necessarily lead to the conclusion that it’ll just end up as another tool in China’s geoeconomic toolkit.

Moreover, it remains to be seen how the United States and Japan will alter their perspective on the bank, especially with a new administration in Washington. Given the Trump administration’s seeming distaste for all things multilateral, it’s unlikely that joining the AIIB will be a priority. The Obama administration did not join the bank on the grounds that its standards on the environment and labor would be lower than the World Bank and Asian Development Bank. Japan, similarly, chose not to join the AIIB for similar reasons, but may reconsider soon.

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