China-led bank spreads its wings to Africa, South America to bankroll infrastructure projects
The bank has contracted 24 projects worth about US$4 billion – ranging from power plants to rail and port facilities – in its two years of operation
The China-led Asian Infrastructure Investment Bank will be spreading its tentacles to South America, Africa and further into the Middle East soon, as it marks the start of its third year in business, its president says.
“We have quite a number of South American countries joining, and I think it will be very good for us to finance some middle-income projects in South America, bringing South America and Asia together, cutting the transaction and shipping costs between Asia and South America,” said the bank’s president, Jin Liqun, in an exclusive interview with the South China Morning Post.
“I would also pay attention to supporting African member countries. Asia is developing quickly, but it cannot sustain itself well without collaborating closely with African countries.”
Tuesday will mark the second anniversary of the AIIB since it opened for business in January 2016, and it has so far invested in 24 financing projects worth around US$4 billion. Its portfolio ranges from power plants to rail and port facilities in developing countries, mostly in Asia, with the exception of investments in Egypt and Oman.
The AIIB’s geographical expansion underscores what Jin described as the bank’s role in pushing “broader based social and economic development in the member countries in which we invest”. The South America and African regions have their own regional multilateral development banks, the Development Bank of Latin America and the African Development Bank, respectively.
China has been forging closer ties with emerging economies in Africa and South America in recent years, resulting in a number of these nations breaking off ties with Taiwan, the self-ruled island claimed by Beijing but which still retains a few diplomatic allies.
The AIIB’s past two years have been a crucial period to build up a system, nurture culture and recruit people with “top-notch” track records. But more important, Jin said, was the establishment of the institution’s credibility.
“In the early days, many people were sceptical about the rationale of having this bank … whether China would take this as a political instrument to push its political agenda,” he said.
But increasingly, he said, such concerns were dissipating as more people saw China’s commitment to building the bank into a multilateral development institution with 21st century governance.
The 68-year-old, a former Chinese vice finance minister, was also clear in distinguishing the AIIB from China and the Chinese government’s global trade development project known as the “Belt and Road Initiative”.
However he noted that it was inescapable that some projects the AIIB might be involved in would be connected to the belt and road plan, simply because of the scale of the initiative, which covers more than 60 nations across land and maritime corridors dubbed the New Silk Road.
“The proper role played by China in the last two years, is that China strictly observes the principle of multilateralism or internationalism of this bank. There has never been any interference by the Chinese government in the decision-making process,” he said.
A loan to China for an air quality improvement and coal replacement project that was announced last month was more of a case of demonstrating the bank’s commitment to environmental protection.
“China is not going to borrow substantially from the bank. But if there are very good projects … like implementing Paris Agreement commitments, or dealing with pollution, we can be involved,” he said.
The AIIB currently has 84 member countries, with Japan and the US the only two of the Group of Seven leading nations that have yet to sign up.
Jin reiterated that the door remains open, regardless of whether the US and Japan become members, for the bank to work together with these nations.
Jin said the bank had been successful in winning over its critics.
“I said at the beginning, when people were sceptical, I don’t really mind; misunderstanding is understandable. You cannot talk people into believing you. You can earn your trust, your credibility by what you do. I think this has worked.”
Additional reporting by Elaine Chan