China-led AIIB development bank to offer loans with fewer strings attached: sources

China’s new international development bank will offer loans with fewer strings attached than the World Bank, sources said, as Beijing seeks to change the unwritten rules of global development finance.

The Asian Infrastructure Investment Bank (AIIB) will require projects to be legally transparent and protect social and environmental interests, but will not ask borrowers to privatise or deregulate businesses for loans, four sources with knowledge of the matter said.

By not insisting on some free market economic policies recommended by the World Bank, the AIIB is likely to avoid criticism levelled against its rivals, who some people have claimed impose unreasonable demands on borrowers.

It could also help Beijing stamp its mark on a bank regarded by some in the government as a political as much as an economic project, and reflects scepticism in China about the virtues of free market policies advocated in the West.

“Privatisation will not become a conditionality for loans,” said a source familiar with internal AIIB discussions, but who declined to be named because he was not authorised to speak publicly on the matter.

“Deregulation is also not likely to be a condition,” he said. “The AIIB will follow the local conditions of each country. It will not force others to do this and do that from the outside.”