International finance institutions
Two multilateral banks based in China
The Shanghai-based New Development Bank (NDB), also known as the BRICS Bank, was founded in 2014. It is a significant institution, but not a big player among the multilateral development banks. So far, the NDB has disbursed about $ 15 billion in infrastructure financing. The World Bank Group, by contrast, disbursed more than $ 60 billion in 2021.
The major shareholders of the NDB are Brazil, Russia, India, China and South Africa. The governance system is well designed. The BRICS members are in control. The bank is a worthy start, but not making a difference in global affairs yet.
The Asian Infrastructure Investment Bank (AIIB) is another new international financial institution. It is headquartered in Beijing. With total disbursements worth about $ 20 billion so far, it is not a big player either. China is the dominant power, though the AIIB now has 103 member states, including major EU countries such as Germany, France and Italy. Beijing took the initiative to start the AIIB before the NDB was even discussed in the BRICS context. There is no resident board of directors, so the president has a lot of leeway. Rules concerning social or environmental protection are quite loose, and efficiency and flexibility have been declared to be the top priorities.
It is quite obvious that the AIIB is more important in the eyes of China’s leaders. To a large extent, it supports the regime’s foreign policy, including its massive international infrastructure programme called the Belt and Road Initiative (see main story). Moreover, China is running many other international funding programmes which are geared to forging partnerships with countries in several world regions, including Africa, Central Eastern Europe or Latin America. Region-specific summits are held in Beijing regularly as well.
Praveen Jha is a professor of economics at Jawaharlal Nehru University in New Delhi.