The AIIB as Alternative Regional Development Financing Mechanism

• In Event: Foreign Aid and Financing: New forms and New Uses

Abstract

The relationships between regional and global institutions and among regional institutions are important and controversial in global governance. The Asian Infrastructure Investment Bank (AIIB) demonstrates China’s disappointment at the slow pace of reform in global financial governance and its determination to promote so-called “incremental reform” in the global financial system. The AIIB presents an opportunity and/or challenge to global governance as China presents a different set of ideas and governance features to operationalize this regional development financing institution. Though it is still a new institution, it is still possible to provide an early assessment of its effectiveness, and its relationship with international development financing by evaluating the first investment projects it has carried out so far. This paper will draw heavily from author’s field research in China and Southeast Asia countries to identify the domestic and external variables that can help explain the project performance outcome. We show that the strategic context of a particular project affects China’s approach to the investment project and ultimately the success or failure of the project. We suggest that outside options and indispensability can help explain the success and failure in China’s strategy with respect to the issue of regulation of regional development financing.

Author

• Wei Liang, Middlebury Institute of International Studies