On the 24th October 2014, a group of 21 Asian nations came together to launch a new investment bank to operate outside the already existing Asian Development Bank. The new bank known as the Asian Infrastructure Investment Bank (AIIB) is a Chinese initiative, which is set to provide alternative options for funding infrastructural projects in developing nations throughout Asia. The AIIB seeks to challenge the influence of western backed institutions such as the Bretton Woods Institutions in driving developmental initiatives for developing nations.
Members of the AIIB include India, Singapore, Vietnam and other economically dynamic nations, including some of the poorest nations. Although, it is reported that Indonesia and other three determined United States allies (South Korea, Japan and Australia) were not part of the launch, this does not mean that these nations will not become members of the bank in a near future. Fundamentally, the current challenge for the nations yet to join the new bank has relevance to their political positions vis a vis China and the USA. The challenge is to make a strategic choice in relation to China's continued challenge to the United States led international order.
Nonetheless, one thing that is clear about this new bank is that a new era of development cooperation is unfolding in Asia, where by the dominance of the Western backed financial institutions are expected to gradually lose their clout in Asia as China seeks to extend its influence and soft power in the region. It also seeks to eliminate the red tape and the burdens faced by Asian developing nations when applying for loans with the World Bank, International Monetary Fund (IMF) and Asian Development Bank.
Unlike other international financial institutions, the AIIB will focus on infrastructural projects instead of poverty reduction. According to the signed memorandum, China will provide $50 billion to capitalize the bank and another $50 billion will be provided by other nations. This will give China 50 percent shareholder in bank, which could potentially be a worrisome issue to the Western powers as they argue that China will have an undue influence in Asia.
Although, in principle, the creation of this bank is supported by the United Nations, Asia Development Bank and World Bank, there are concerns from the United States that the 'new bank will introduce laxer standards for lending when it comes to environmental and labour protection, transparency of the project bidding process, and human rights'. The United States argues that the bank will also undercut existing lending standards of institutions; the World Bank, IMF and the Asian Development Bank.
However, for China, the AIIB comes at crucial period. Beijing is in the process of improving its global stature by promoting development cooperation with developing nations, outside of the Bretton Woods institutions. Consequently, this highlights China's dual eagerness to move away from the western dominated institutions and provide alternative developmental assistance for the developing nations, as the launch of the AIIB comes after China's commitment to creation of BRICS Development Bank which is also viewed as an alternative to the western dominated financial institutions.