China's new development bank is progressing nicely

In late August Jin Liqun was announced as its president-elect of the AIIB, and some strong indications on how the Chinese-backed development bank will operate are starting to emerge. While China’s economy may be experiencing some difficulties, and attracting some negative international press, it looks like the AIIB in its choice of leader and its approach to funding is making every post a winner.

Certainly Jin’s appointment has been well received. A 66-year-old former Chinese finance vice-minister, he was educated in the West, speaks English and French, and has travelled widely. 

His previous roles include vice-president of the Asian Development Bank, chairman of the board of supervisors of the China Investment Corporation, the country’s US$740 billion (Bt27 billion) sovereign wealth fund, and chairman of the China International Capital Corporation, an investment and securities bank. 

His international connections and experience, and what observers described as his urbane and diplomatic approach, will be highly valuable given the AIIB is widely seen as a rival to the US-dominated World Bank and the Japan-led ADB. 

A widely-travelled man, he likes quoting Shakespeare and reading French poetry, while his adroit management of relationships with senior international figures over the years has earned him the nickname “barbarian handler” in China. He seems a great choice to lead an institution which China hopes will greatly enhance its influence and regional clout in Southeast and Central Asia.

The AIIB has around 50 member countries from the East and the West, with the most notable omissions the US and Japan. Headquartered in Beijing, and with an initial war chest of $100 billion, it plans to invest in public works such as roads, bridges, ports and other projects, working alone and in partnership.

Meanwhile, details from various sources are emerging about the bank’s operating guidelines. Although these are yet to be confirmed officially, they indicate the AIIB will conduct its business differently from its long-established development bank peers. 

The AIIB’s loans will have fewer strings attached to them than those from the World Bank. While projects will need to be legally transparent and protect social and environmental interests, borrowers will not have to privatise or deregulate businesses.

Reports also indicate the AIIB will have simpler internal review and risk assessment criteria for projects to reduce costs and cut red tape. And it will operate with far fewer field offices and staff than the ADB and the World Bank.

Observers say that in response to the more streamlined approach of the AIIB, the World Bank and ADB are already reviewing how they work, which is likely to benefit all the region’s borrowers.

So far so good for the AIIB and China. Even before its official launch, it appears to have stolen a march on its counterparts.