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1 [1] (May 4, 2023)

handle is hein.crs/govelmw0001 and id is 1 raw text is: Congressional Research Service Infer ring thi Iegsltive debate sice 1914 Asian Infrastructure Investment Bank Updated May 4, 2023 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 $20 billion in support to member countries to support their pandemic responses through the end of 2023. Other current strategic priorities are climate finance (50% of AIIB lending by 2025), regional connectivity and mobilizing local private capital. 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 and argue that the time may have come for the United States to consider joining the Bank. Background The Asian Development Bank estimates 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 stated 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 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 2023, membership has almost doubled, to 106 members. By contrast, the IMF and the World Bank have 190 member countries. The Bank has approved a total of $37 billion in new projects as of November 2022, up from $12 billion as of December 2019. India is by far the largest borrower (Figure 1). Figure I. AIiB's 5 Largest Borrowers, November 2022 Millions of U.S. Dollars $8.00 S4 00 $2CU Source: AIIB. In recent years, the AIIB has increased its share of standalone projects and decreased the share of loans cofinanced with other MDBs. As of December 2021, 54% of the AIIB projects were cofinanced with other institutions, compared to 67% in June 2018. According to Standard and Poor's analysis, private sector lending is expected to become a larger share of Bank lending, reaching 50% over time. Memnbership and Organization Membership in the AIIB is open to all members of the World Bank or the ADB. Regional members are those located within areas classified as Asia and Oceania by the United Nations. Several European and Asian advanced economies are AIIB members, including France, Germany,