“What the AIIB’s Focus on Asia and Infrastructure Means for Chinese Multinationals”

Take a look at the names of today’s well-established multilateral development banks. There are the International Bank for Reconstruction and Development (World Bank), the European Bank for Reconstruction and Development, and the Asian, Inter-American, Islamic and African Development Banks. Next to institutions with such a broad orientation towards “development” and “reconstruction,” the particular focus of the newly established Asian Infrastructure Investment Bank (AIIB) on one region and economic sector is atypical and unique.

Why this high level of specificity? It quite certainly has to do with the fact that this bank is a China-led initiative. Infrastructure is an area where Chinese multinational enterprises are cost-effective and have accumulated much experience from previous involvement in large-scale construction projects at home and in other parts of the developing world. Projects funded by the AIIB will provide further opportunities in the infrastructure construction sector, with a fair share of contracts offered to Chinese multinationals. Moreover, China and its multinationals would benefit significantly from greater “connectivity” in Asia. With improved infrastructure in the region, Chinese multinationals would enjoy better overland access to markets, production locations and natural resources in Asia and beyond, reaching places as distant as the Middle East and Europe. Asia greatly needs connectivity, and China’s initiative to establish the AIIB for this very specific purpose will, if successful, benefit Asian countries enormously. This should improve China’s standing in a region where it is not particularly popular. There is also a genuine belief in China, based on its own development experience, that infrastructure is particularly important for economic development and must have priority before other issues such as, for example, good governance. Although the AIIB’s mission might broaden over time, its focus on Asia and infrastructure at this initial stage is a clear manifestation of China’s key role in founding the bank.