On October 24, 2014, China launched a new development bank, the Asian Infrastructure Investment Bank (AIIB), posing a challenge to U.S. policymakers. Chinese President Xi Jinping has said that the bank would “promote interconnectivity and economic integration in the region.” and “cooperate with existing multilateral development banks,” including the World Bank and the Asian Development Bank (ADB). The ADB estimates Asia’s total infrastructure investment needs at $8 trillion between now and 2020. This sum is substantially greater than any individual country or existing multilateral development bank (MDB) can provide. Collectively, existing MDBs currently provide around $130 billion of annual infrastructure financing. Addressing Asia’s large infrastructure gap will likely require mobilizing public and private sources of financing, as well as new sources of long-term development finance. However, the creation of the AIIB, the proposed Bank raises many issues including: the Bank’s governance and operational practices, the U.S. role and possible participation, and the relationship between the AIIB and the existing MDBs, among others. Some observers have raised concerns about the transparency and governance of China-funded development projects and see the AIIB proposal potentially undermining decades of efforts by the United States and others to improve governance and environmental and social standards. An additional possible U.S. concern is the emergence of Chinese-led regional economic institutions, such as the AIIB, in which the United States may have little influence.
Date of Report: March 23, 2015
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