What Do the Asian Infrastructure Investment Bank’s Recent Forays outside of Asia Mean?

There is virtually no disagreement that there is a major role for development finance in Asia. In the Asia-Pacific region today, poverty is not uncommon. Close to 2 billion people live on less than $5.50 per day and more than 233 million live on less than $1.90 per day. Development and infrastructure have the potential to bring greater prosperity and opportunity to the region. A 2017 study, however, estimates Asia’s infrastructure investment needs at roughly $1.7 trillion per year to maintain growth.

Prior Status Quo

Supporting this important work, the Asian Development Bank (ADB) has been in existence since 1966 and, as of December 31, 2021, is capitalized at $163 billion. Although the United States and Japan each have 15.6 percent of shareholdings in the bank, the non-borrowing shareholders, comprised mostly of Western democracies, control over 50 percent of the bank. As of the end of 2021, China was the second-largest borrower nation at $18.4 billion and, as of April 2022, had been the recipient of over $45.88 billion in cumulative funding over 1,314 projects.

China Plays Developed/Developing Nation When Convenient

Despite having the world’s second-largest economy, China remains a developing nation under the rubric of most multilateral development institutions such as the World Bank and World Trade Organization (WTO). Indeed, China has benefited from this designation for decades through preferential trade rules and development finance not available to developed nations.

But at the same time, having the world’s second-largest economy has allowed China to exert influence, project power, and to challenge the United States’ primacy in the world. China’s One Belt, One Road Initiative (now known commonly as the Belt and Road Initiative, or BRI) started with its regional focus to support poor but resource-rich countries in central Asia, South Asia, and Southeast Asia in building infrastructure—in ways that benefit China and make it more self-reliant, of course. BRI has not remained regional in scope.

In fact, there is ample evidence to support criticism that China’s intentions with BRI and other programs are not entirely altruistic or in the spirit of partnership but, rather, in its own self-interest. It seeks to make loans and extend credit to strategically important and resource-rich nations for infrastructure development—built by Chinese companies with Chinese materials and equipment paid for with the very same loans and credit—to render them dependent on China or, worse, claim the spoils of their choosing in settlement upon default.

One of the more interesting developments overshadowed by BRI is the creation of the Beijing-based Asian Infrastructure (AIIB) Development Bank—with China still a developing nation by WTO standards—as its largest shareholder and benefactor.

But China will not be a developing nation forever. And much like the preparations for a debutante ball, China is setting the stage for its impending graduation from developing to developed nation.

U.S. Skepticism

Not surprisingly, there was some skepticism on the part of the United States when China proposed the development of the AIIB in 2014 with a capitalization of $100 billion, of which China was to capitalize $50 billion.

Officially, the National Security Council issued the following statement on the creation of the AIIB:

We believe any new multilateral institution should incorporate the high standards of the World Bank and the regional development banks. Based on many discussions, we have concerns about whether the AIIB will meet these high standards, particularly related to governance, and environmental and social safeguards.

Less officially, the public perception is that the United States conducted an outreach campaign to allies, including the United Kingdom, South Korea, and Australia to persuade them not to join the AIIB. True or not, the fact remains that the competition for international clout, recognition, and respect between the dominant world power, the United States, and the next ascending world power, China, has intensified in recent years.

Deciphering the Diplomacy

Reading between the lines, it would be fair to surmise that the United States viewed AIIB as less of a tool for social and economic progress in Asia and more of a tool to for China to advance its stature on the international stage as a challenger to a unipolar world. More practically, it was viewed as a tool to advance China’s foreign policy agenda—including as a complementary function to its BRI—and priorities as a foil to Western-led institutions. As a structural matter, Article 5 of the Articles of Agreement prevents the issue of stock that would reduce the percentage of capital stock held by regional members below 75 percent except by a supermajority vote of the AIIB’s board—in effect, guaranteeing China an outsized role in determining the bank’s investment and direction, if not controlling it outright with similarly aligned nations.

Ultimately, the United States failed to convince many of its allies—with the exception of Japan, which has held the presidency of the ADB since its inception—to refrain from joining the bank: Germany ($4.48 billion), United Kingdom ($3.06 billion), South Korea ($3.74 billion), Australia ($3.69 billion), France ($3.38 billion), Italy ($2.57 billion), Saudi Arabia ($2.54 billion), Spain ($1.76 billion), United Arab Emirates ($1.19 billion), Netherlands ($1.03 billion), Canada ($995.4 million), Poland ($832 million), Israel ($749.9 million), and New Zealand ($461.5 million).

The end result, of course, is an institution that is largely controlled by China, heavily subsidized by U.S. allies, and actively funding development. But with the AIIB in operation for a full five years and $34.91 billion invested over 176 projects, what does its track record indicate?

Look to the Facts

Critical to a proper analysis is a review of the AIIB’s execution against its purpose laid out in plain text in the bank’s foundational Articles of Agreement:

The purpose of the Bank shall be to: (i) foster sustainable economic development, create wealth and improve infrastructure connectivity in Asia by investing in infrastructure and other productive sectors; and (ii) promote regional cooperation and partnership in addressing development challenges by working in close collaboration with other multilateral and bilateral development institutions.

Although the bank’s foundational documents are clearly Asia-focused, there is sufficient “play in the joints” to stretch that meaning—and the bank has expanded that meaning into Latin America, Europe, and Africa.

The bank’s investments were largely consistent with the focus of its foundational documents from 2016 to 2019. Then, in 2020, it ventured outside of Asia when it partnered with the World Bank to provide $50 million in financing to Ecuador’s Corporación Financiera Nacional to address liquidity constraints faced by micro-, small-, and medium-sized enterprises in Ecuador due to the Covid-19 pandemic.

Again, in 2021, the AIIB expanded its reach again, this time into Africa, with two investments in Rwanda totaling $200 million to support Covid-19 pandemic recovery and future resilience to pandemics by increasing broadband access and address financing constraints due to Covid-19, and into Europe proper with an investment in Hungary, with $216 million in medical and pharmaceutical supplies and refurbishment of hospitals in Budapest designated as critical to pandemic response.

Now in 2022, the AIIB is stretching the play in the joints again. This time away from Covid-19-related funding and into direct economically important investments in Brazil with a $100 million credit facility to be administered by the Banco de Desenvolvimento de Minas Gerais for “subprojects primarily located in Minas Gerais, that involve either renewable energy and eligible infrastructure related sectors that link Brazil and Asia through enhanced trade and investment flows.”

This should come as no surprise. Like with China’s flagship BRI, what began with a regional focus in central Asia, South Asia, Southeast Asia, Europe, and Africa in 2013 soon became global in scope. By 2017, BRI had expanded to Latin America as a “natural extension of the 21st Century Maritime Silk Road.”


With the benefit of hindsight, it would seem that the perceived U.S. concerns over the AIIB seem less and less far-fetched. Only time will tell whether China’s use of the AIIB as a tool of its foreign policy will be tightly controlled by Beijing or whether it will only occasionally advance projects that augment China’s global efforts.

The fact remains: with beachhead investments in Africa, Europe, and the United States’ “backyard” in Latin America, the United States can expect to see more investments outside of Asia in the near future.

The question remains: Knowing that China is using the AIIB as a tool in its foreign policy portfolio, will the United States cede ground or refocus and align its development finance strategy with U.S. foreign policy goals and compete?

Pedro Allende is a non-resident senior associate with the Americas Program at the Center for Strategic and International Studies in Washington, D.C.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Pedro Allende
Senior Associate (Non-resident), Americas Program