Diversity in Membership Shows the Asian Infrastructure Investment Bank Gaining Clout

After the United Kingdom announced its decision to become a founding member of the Asian Infrastructure Investment Bank (AIIB) earlier in March, France, Italy, and Germany followed suit last week and committed to joining the AIIB’s founding ranks. Spearheaded by the Chinese government, the bank’s conception and construction have been mired in controversy. The United States is the AIIB’s leading critic, and these new memberships of American allies will surely create new questions about the bank’s future place in the world. The

commitment of European countries to the AIIB not only benefits them but also lends legitimacy to China in its endeavor. Although these new memberships deal a major blow in  U.S. attempts to reduce the AIIB’s influence, they are mainly a reflection of a shift away from politics towards business, specifically the business of development.

The Asian Infrastructure Investment Bank’s ultimate goal is to stimulate the regional economy. As its name suggests, it would focus mainly on encouraging private sector construction and development of infrastructure. The project also fits into China’s attempts to create a modern day Silk Road to increase economic cooperation with its neighbors. Currently the bank has more than 30 members in its founding body and is set to launch sometime next year.

Chinese president Xi Jinping first brought up the project of creating a bank led by an Asian power in October 2013 in Indonesia, announcing his goal to create a new development bank similar to the World Bank specifically for the Asia-Pacific region. The announcement came only days after the US-led Asian Development Bank projected that regional growth would slow, and this timing offered a first glimpse into the way the project would evolve into another aspect of the rivalry between China and the United States.

Indeed, the project has been so controversial mostly because the United States questions China’s motivations. The United States claims that another international bank would be redundant, and that it merges China’s ambitions to become a regional economic and political power with its recent attempts to repair a reputation bruised by aggressiveness in the region. In addition, it could potentially rival other previously established international financial institutions like the World Bank, the International Monetary Fund, and the Asian Development Bank.

Although these claims have some validity, it is important to also nuance them with the United States’ underlying intentions. The existing international financial institutions are mostly led and funded by the United States. Although the Chinese government claims that the AIIB would attempt to counterbalance rather than rival them, from the U.S. perspective, the AIIB  competes not only with these existing institutions, but also with the US-led Trans-Pacific Partnership, which China is yet to be a member.

However, the participation of European nations in the AIIB shows that focusing on underlying intentions of the major proponents and opponents of the project is beside the point. The European nations who joined the Bank in past weeks have traditionally been strong allies of the United States. Their decision to join the AIIB, shows that they are moving away from politics to consider actual economic needs throughout Asia.

The establishment of the AIIB means that future Chinese investments across Asia are more likely to benefit locals than past Chinese projects. Indeed, by investing through the AIIB, Chinese contributions would not be considered foreign direct investments and the bank’s governing body, not the Chinese government, would control how funds are allocated. This would help avoid controversies similar to those that arose in Africa, for example, and ensure that projects employ local labor and create jobs, instead of importing Chinese workers. The European countries that have pledged to join the AIIB could also play a role in ensuring that China is not unfairly advantaged, and bring in Western ideals, such as a minimum wage and workplace safety regulations, that could help raise living standards in regions in which the AIIB invests.

This shift in focus from politics to concrete change means both businessmen and politicians around the world are sure to keep a close eye on the development of  the AIIB’s membership and its implementation. For now, although China acknowledges resistance to the AIIB, it has not named the United States as an opponent of the project. Controversy surrounding the bank, however, is not likely to clear up in the near future. Australia recently declared that it would also become a founding member of the Bank, and the IMF announced its plans to cooperate with the AIIB. Ultimately, the diversity of founding members and alliances with other institutions show that even if China has underlying intentions, the AIIB seems poised to make a real difference in the lives of locals across Asia.