About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

LOG IN
LOG IN


1 [1] (January 21, 2021)

handle is hein.crs/govebof0001 and id is 1 raw text is: As gr Irssional R1esrc Bav k Asian Infrastructure Investment Bank Background In October 2013, at the Asia-Pacific Economic Cooperation Summit in Bali, Indonesia, China proposed creating a new multilateral development bank, the Asian Infrastructure Investment Bank (AIIB). As its name suggests, the Bank's stated purpose is to provide financing for infrastructure needs throughout Asia. The AIIB has also been active in the response to the Coronavirus Disease 2019 (COVID-19) pandemic and is providing up to $13 billion in support to member countries to support their pandemic responses. The AIIB's Crisis Recovery Facility was created in April 2020 and is supporting various health sector and economic resilience projects. The AIIB also notes that the crisis facility can be used to shore up liquidity for other China- financed infrastructure investments. As the first China-led multilateral development bank (MDB), the AIIB presents several policy 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. Some observers have also raised concerns about the transparency and governance of China-funded development projects. They argue that the AIIB may undermine decades of effort by the United States to improve governance, environmental, and social standards; these standards have been achieved through conditions attached to World Bank, Asian Development Bank (ADB), and other MDB loans. Other analysts note the AIIB's track record of facilitating projects and implementing robust safeguards and policies during its five years in existence and argue that the time may have come for the United States to consider joining the Bank. Background Some estimate that potential infrastructure projects in Asia could amount to $26 trillion through 2030, and would likely require mobilizing public and private sources of financing, as well as new sources of long-term development finance. The AIIB was initially conceived as a regional financing mechanism for China's One Belt, One Road initiative to create a network of highways, railways and other critical infrastructure linking China to the rest of the world. At the same time that China is working to deepen its economic relationships with its neighbors, it has intensified its engagement with the Bretton Woods Institutions-the World Bank, International Monetary Fund (IMF) and the regional development banks. China's leaders have complained for many years that the international financial institutions have been too slow in recognizing China's increased stature in the global economy. President Xi, has pursued policies to establish new China- led trade and financial institutions, as well as to further integrate China within the existing international financial institutions. President Xi said that the AIIB would promote Updated January 21, 2021 interconnectivity and economic integration in the region and cooperate with existing multilateral development banks, including the World Bank and the ADB. In October 2014, 21 Asian countries met in Beijing, China and signed a Memorandum of Understanding that set out the general principles undergirding the AIIB's creation. China set the deadline for expressing interest in joining the AIIB at the end of March 2015. U.S. officials were caught off-guard when, in early 2015, the United Kingdom, followed by several other European countries, sought membership in the AIIB. By the time the AIIB's Articles of Agreement were signed in December 2015, the Bank had 57 founding members, representing every region except North America. As of January 2021, membership has almost doubled, with the Bank approving 103 members. By contrast, the IMF and the World Bank have 119 member countries. As of November 2020, the AIIB has approved a total of $21.5 billion in new projects in 26 countries, up from $12 billion as of December 2019. India is the largest borrower (Figure 1). Figure 1. AIiB's 5 Largest Borrowers, December 2020 Chmna r 9% [Azerbaijan 18%J 1%8 Sources: AIIB, Standard and Poor's. As AIIB membership grew to include European and other advanced economies, China's leadership distanced the AIIB, to an extent, from China's One Belt, One Road initiative by agreeing to cofinance its initial projects with the preexisting MDBs. However, it is uncertain how China will balance its stated goal of establishing an independent and high-standard MDB, while pursuing its own economic and national security priorities for the region. In recent years, the AIIB has also increased its share of stand-alone projects and decreased the share of loans cofinanced with other MDBs. As of November 2020, 54% of the AIIB projects were cofinanced with other institutions, compared to 67% in June 2018. According to December 2020 Standard and Poor's analysis, private sector lending is expected to become a larger share of Bank rts.congress.gov Bang aeesh 12 15% >thers 30%