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10 Apr 2015

International Economy

China Heads the New Infrastructure-Focused AIIB Development Bank (Current Issue No. 2616 Full Ed.)

Currently, infrastructure investments are considered as equally important to economic growth as international trade. But because such investments require massive funding, the Asian Infrastructure Investment Bank (AIIB) was founded by Chinese President Xi Jinping in 2013. It was part of China's planning to enhance Asian connectivity via infrastructure, i.e., roads, rail, seaports, airports, energy facilities and telecommunications networks. Application for membership was accepted until March 31, 2015.
As the creator of the AIIB, China is actually fulfilling its target to become a larger participant in the international economic arena, while also advancing the CNY as one of the world's major currencies. These reasons explain why China is willing to put as much as USD50 billion up as initial capital for the AIIB, and intends to raise the capital to USD100 billion in later phases.
As a startup, the AIIB – bounded by limited funding and understaffing of experienced personnel – is yet to achieve a significant role internationally. However, the bank will be eyed for its part as another respectable development bank as well as the impact it is going to have on the World Bank and ADB. KResearch holds the view that China currently has only a small role in the World Bank and ADB vis-à-vis its size and economic significance. For this reason, China still has sufficient funding to be the mainstay of the AIIB, and thus having a more prominent role in the global economy.

As for Thailand, being an AIIB member certainly promotes our regional posture. Furthermore, the bank indirectly benefits us since it helps funding infrastructure projects in neighboring states, e.g., Myanmar, Lao PDR, Cambodia and Vietnam, which in the end will build links between Thailand and other Asian nations, notably China and India – two of the world's largest economies with exciting growth potential.

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International Economy