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6 White Paper on the Business Environment in China
1.4 Rising Soft Power
Asian Infrastructure and Investment Bank President Xi Jinping’s “Chinese dream.” 2
(AIIB) and “One Belt, One Road” (OBOR) Jin Liqun, president-designate of the Asian Infrastructure
Initiative
Investment Bank, said that the new bank wouldn’t select projects
The China-initiated Asian Infrastructure In- to favor Chinese companies and wouldn’t act as “China’s bank”.
vestment Bank (AIIB), signed by 51 Prospective Found- When asked whether the bank might have an institutional
ing Members (PFMs) as of September 2015, is expected to be bias toward Chinese companies, Mr. Jin replied: “China is the
operational by the end of this year. China has been generally major shareholder. But this does not mean that this is China’s
cooperative with and supportive of the Bretton Woods insti- bank. The bank is not owned, managed or operated by China.
tutions. At the same time, it is frustrated that existing multi- The bank practices universal procurement and universal
lateral institutions limit its global ambitions. The slow pace recruitment,” and wouldn’t favor Chinese companies over those
of reforms at the Western-dominated IMF and World Bank from, say, the U.S., he added. 1
prevents China and other emerging economies from playing a
greater role in international political economy. The AIIB aims Mr. Jin said the AIIB will invest in core infrastructure proj-
help to rectify the situation, while boosting China’s status as ects such as railroads and power, but retain the option to broad-
a global power. 2 en its portfolio into associated investments such as environmen-
tal investments. “AIIB will be a good global citizen,” he said,
China will be the largest shareholder, with 26.06 percent of adding that the bank will operate with a focus on “transparency,
the votes, giving it an effective veto over major decisions, fol- openness, independence and accountability.” 1
lowed by India with 7.5 percent and Russia with 5.92 percent;
however, it is expected that all founding members will have the Some analysts suggest that the AIIB and OBOR are direct
right to create the governance and operational rules of the bank. responses to the Obama administration’s rebalance to Asia;
The bank came together in less than two years amid strong glob- others consider them as examples of a more confident China
al interest. It was seen as a propaganda victory for China when attempting to reshape the global order. These may be important
U.S. allies such as the U.K. and Germany joined. 3 factors, but there is a much more significant domestic impetus.
For example, many of the infrastructure projects proposed un-
China has also proposed the “Silk Road Economic Belt” and der OBOR would benefit China’s poor inland regions, inte-
“21st Century Maritime Silk Road,” or “One Belt, One Road” grating them with the global economy and helping to mitigate
(OBOR), an even broader and more ambitious initiative. The China’s rapidly growing wealth gap. They will also contribute to
AIIB will serve as the financing arm of OBOR. The AIIB will more balanced and sustainable development and allow China
begin with authorized capital of $50 billion, eventually to be to relocate its labor-intensive and low value-added manufactur-
raised to $100 billion. The projected investment for OBOR ing facilities overseas, helping solve the severe environmental
will be $1.4 trillion, about 12 times larger than the Marshall problem facing China today.
Plan, which was about $120 billion in today’s value. In addition
to the economic benefits, the AIIB and OBOR will significant- Challenges
ly facilitate the movement of goods, services, and people across
national borders. 2 China faces many challenges in implementing the AIIB
and OBOR. First, the United States and Japan remain non-
Over the past two decades, China has contributed committal to the AIIB, although that is an improvement
substantially to infrastructure or “hardware” of many developing from their previous firm opposition. The AIIB will probably
nations, but it remains short of “software” or soft power. As function well without the participation of the United States
Zhiqun Zhu, a professor of political science and international and Japan. But, The Diplomat argues, the participation of these
relations in Bucknell University, states in The Diplomat, two countries is important for China since it will help improve
Beijing hopes that its new initiatives with a non-coercive, non- the new bank’s credit rating and give it added legitimacy. 2
military approach will help enhance its international image as a
responsible global power. The AIIB and OBOR have become Many recipient countries in Asia have poor credit, which
an integral part of China’s new diplomacy, reflecting its growing means many projects may be promising at the beginning but
interests and clout. They are also important steps to realizing will be difficult to pursue, observes The Diplomat. Agreement
and consensus are reached at the top levels of government, but
50 implementation is at the local level. 2
1.4 Rising Soft Power
Asian Infrastructure and Investment Bank President Xi Jinping’s “Chinese dream.” 2
(AIIB) and “One Belt, One Road” (OBOR) Jin Liqun, president-designate of the Asian Infrastructure
Initiative
Investment Bank, said that the new bank wouldn’t select projects
The China-initiated Asian Infrastructure In- to favor Chinese companies and wouldn’t act as “China’s bank”.
vestment Bank (AIIB), signed by 51 Prospective Found- When asked whether the bank might have an institutional
ing Members (PFMs) as of September 2015, is expected to be bias toward Chinese companies, Mr. Jin replied: “China is the
operational by the end of this year. China has been generally major shareholder. But this does not mean that this is China’s
cooperative with and supportive of the Bretton Woods insti- bank. The bank is not owned, managed or operated by China.
tutions. At the same time, it is frustrated that existing multi- The bank practices universal procurement and universal
lateral institutions limit its global ambitions. The slow pace recruitment,” and wouldn’t favor Chinese companies over those
of reforms at the Western-dominated IMF and World Bank from, say, the U.S., he added. 1
prevents China and other emerging economies from playing a
greater role in international political economy. The AIIB aims Mr. Jin said the AIIB will invest in core infrastructure proj-
help to rectify the situation, while boosting China’s status as ects such as railroads and power, but retain the option to broad-
a global power. 2 en its portfolio into associated investments such as environmen-
tal investments. “AIIB will be a good global citizen,” he said,
China will be the largest shareholder, with 26.06 percent of adding that the bank will operate with a focus on “transparency,
the votes, giving it an effective veto over major decisions, fol- openness, independence and accountability.” 1
lowed by India with 7.5 percent and Russia with 5.92 percent;
however, it is expected that all founding members will have the Some analysts suggest that the AIIB and OBOR are direct
right to create the governance and operational rules of the bank. responses to the Obama administration’s rebalance to Asia;
The bank came together in less than two years amid strong glob- others consider them as examples of a more confident China
al interest. It was seen as a propaganda victory for China when attempting to reshape the global order. These may be important
U.S. allies such as the U.K. and Germany joined. 3 factors, but there is a much more significant domestic impetus.
For example, many of the infrastructure projects proposed un-
China has also proposed the “Silk Road Economic Belt” and der OBOR would benefit China’s poor inland regions, inte-
“21st Century Maritime Silk Road,” or “One Belt, One Road” grating them with the global economy and helping to mitigate
(OBOR), an even broader and more ambitious initiative. The China’s rapidly growing wealth gap. They will also contribute to
AIIB will serve as the financing arm of OBOR. The AIIB will more balanced and sustainable development and allow China
begin with authorized capital of $50 billion, eventually to be to relocate its labor-intensive and low value-added manufactur-
raised to $100 billion. The projected investment for OBOR ing facilities overseas, helping solve the severe environmental
will be $1.4 trillion, about 12 times larger than the Marshall problem facing China today.
Plan, which was about $120 billion in today’s value. In addition
to the economic benefits, the AIIB and OBOR will significant- Challenges
ly facilitate the movement of goods, services, and people across
national borders. 2 China faces many challenges in implementing the AIIB
and OBOR. First, the United States and Japan remain non-
Over the past two decades, China has contributed committal to the AIIB, although that is an improvement
substantially to infrastructure or “hardware” of many developing from their previous firm opposition. The AIIB will probably
nations, but it remains short of “software” or soft power. As function well without the participation of the United States
Zhiqun Zhu, a professor of political science and international and Japan. But, The Diplomat argues, the participation of these
relations in Bucknell University, states in The Diplomat, two countries is important for China since it will help improve
Beijing hopes that its new initiatives with a non-coercive, non- the new bank’s credit rating and give it added legitimacy. 2
military approach will help enhance its international image as a
responsible global power. The AIIB and OBOR have become Many recipient countries in Asia have poor credit, which
an integral part of China’s new diplomacy, reflecting its growing means many projects may be promising at the beginning but
interests and clout. They are also important steps to realizing will be difficult to pursue, observes The Diplomat. Agreement
and consensus are reached at the top levels of government, but
50 implementation is at the local level. 2
