Will Asian Infrastructure Investment Bank Become a Reality?

Establishment Hopeful

The gap between the AIIB’s provisional initial registered capital of US $100 billion and the ADB’s capital of US $165 billion is not immense. China’s ratio of investments could be 50 percent, with South Korea and Singapore more active in the contributions. But should more countries participate, China will accordingly lower its investment ratio.

China’s foreign exchange reserves stand at US $4 trillion – top in the world. Those of South Korea and Singapore are also considerable. This guarantees capital funds on which to establish the AIIB. The bank will moreover bring into effect a “subscription system” for registered capital, whereby at the initial stage member states need only contribute 20 percent of their investment.

It must be acknowledged that not every Asian country is interested in building the AIIB. As a substantial ADB shareholder, Japan owns much right of speech. Since its foundation in 1966, all successive presidents of the ADB have been Japanese. As the Diaoyu Islands issue has recently alienated Sino-Japanese relations, Japan is unenthusiastic about the AIIB.

Meanwhile, nor is India overly keen on building the AIIB. The country might join the AIIB, according to an official from India’s Ministry of Finance, but only so long as its concerns over who is in charge of it are resolved. India will in fact need US $1 trillion over the next decade for infrastructure investment, and the ADB is clearly unable to fill the existing finance gap. Since it has a large number of infrastructure projects, however, India will be in no hurry to close all avenues that lead to joining the AIIB. During President Xi’s visit to India, Prime Minister Modi said that the country would study the proposal to participate in the AIIB. For the moment, India merely has a positive attitude towards it.

However, the attraction to join the AIIB is irresistible. When China and Mongolia forged a strategic partnership last August, Mongolia announced its participation in AIIB construction as a founding member. During his September visit to Sri Lanka, President Xi also invited Sri Lanka to join in building the AIIB. Judging from current responses, prospects for establishing the AIIB are on the whole optimistic, although challenges might arise to its follow-up development.


BAI MING is a researcher and vice director of the Department of International Market Research under the Chinese Academy of International Trade and Economic Cooperation of the Ministry of Commerce.


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