[Diplomacy] AIIB: Asian Infrastructure Investment Bank- purpose, structure, India’s interests- pro & anti arguments

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IAS Mock Interviews
  1. Background
  2. AIIB: Chinese interest
    1. #1: Make truckload of profit
    2. #2: help in Maritime Silk policy
    3. #3: Counter US-Japan dominated IMF+ADB
  3. AIIB: Membership
    1. Who has not joined?
    2. AIIB Structure
    3. Shareholding and Voting Power
  4. Pro Arguments: India will benefit because
    1. #1: something is better than nothing
    2. #2: we do have voting power
    3. #3: Africa will benefit
    4. #4: Competition = cheaper loans
  5. Anti-Arguments: India won’t benefit bcoz:
    1. #1: America says so
    2. #2: bogus countries will benefit
    3. #3: China doesn’t listen to others
  6. Mock Questions


  • ADB report: till 2020, every year, ASIA needs ~$800 billion for infra-structure investment.
  • Asian Development bank (ADB) itself can’t lend more than $10 billion.
  • Bretton woods organisations (IMF and World bank) not interested in lending such large fund to Asia alone.
  • Therefore, 11th(!) Jinping came up with idea to setup “multilateral development bank” to lend money exclusively to Asia. (2013)

AIIB: Chinese interest

What are the real motives of China behind setting up Asian Infrastructure Investment Bank (AIIB)?

#1: Make truckload of profit

  • China has a hugh forex reserve. Wants to make profit out it.
  • AIIB’s total authorized Capital: $100 billion. Out of that, China willing to give 50% capital=> bank circulate loan money => bank earns interest=>China gets truckload of dividend for being largest shareholder.

#2: help in Maritime Silk policy

  • AIIB will finance rail-road-ports infrastructure along the ancient silk route.
  • Thus, it’ll help China’s maritime Silk policy.

#3: Counter US-Japan dominated IMF+ADB

  • IMF not reforming its governance structure. The size of Chinese economy, same as USA. Yet Chinese voting power in IMF = 1/3rd of American voting power.
  • In ADB, US+Japan =each has ~16% shareholding, while China has ~7%. Again China resents their domination. (*numbers from Business-standard report).
  • Therefore, China wants to counter IMF+ADB’s hegemony (domination) via BRICS+AIIB.
  • Countering IMF= will also help to popularize use of Chinese Yuan instead of US dollar.

AIIB: Membership

Asian Infrastructure Investment Bank (AIIB)

Asian Infrastructure Investment Bank (AIIB)

Asian Infrastructure Investment Bank (AIIB) has total 22 members= China + 21 others who signed MoU. Let’s count:

  1. Bangladesh
  2. Brunei
  3. Cambodia
  4. China
  5. India
  6. Indonesia (later joined)
  7. Kazakhstan
  8. Kuwait
  9. Laos
  10. Malaysia
  11. Mongolia
  1. Myanmar
  2. Nepal
  3. Oman
  4. Pakistan
  5. Philippines
  6. Qatar
  7. Singapore
  8. Sri Lanka
  9. Thailand
  10. Uzbekistan
  11. Vietnam

Who has not joined?

  • Bhutan, Tajikistan, Kyrgyzstan – not part of the bank
  • Initially Indonesia didnot attend MoU signing ceremony. But later it joined.
  • South Korea, Australia did not attend MoU signing ceremony. Reports say, USA played behind the curtains to force them not to join this bank.

AIIB Structure

HQ: Beijing; 3-tier structure
Board of Governors
  • Highest Decision Making body.
  • Voting power according to share holding
  • Shareholding according to GDP
Board of Directors
  • Board of Governors, will elect these directors.
  • They’ll decide budget and submit reports to Board of Governors
  • He is the president of Board of directors.
  • Person with long experience and ethical integrity in banking /economics / finance.
  • He’ll be selected on “merit”.
  • Responsible for Day to day administration, hire and fire staff.
  • He can appoint vice President to reduce work load.


  • 2014, Oct: at present only MoU is signed. Bank is yet to begin operations.
  • 2015: Article of association will be signed. Then structure-function and voting power will become clear.

Shareholding and Voting Power

Indian newspapers are giving different numbers. Therefore, I’m relying on Xinhua for ‘authentic’ information on this China-led bank:

  • Authorized capital is 100 billion USD
  • China willing to give 50% of that = 50 billion.
  • But China said they don’t want to be ‘single majority shareholder’ and In future, they will gradually dilute Chinese shareholding when new members join.
  • Shareholding to be decided on GDP adjusted for Purchasing Power parity (PPP).
  • Accordingly, China largest and India second largest shareholder.

Pro Arguments: India will benefit because

#1: something is better than nothing

  • 12th Five year plan says we need $1 trillion dollar investment in infrastructure.
  • While Modi is relaxing FDI, promoting “Make in India”, striving for ease of doing business; Modi met Chinese, Japanese and American leaders to invest in India and so on.
  • But still, $1 trillion is a huge amount, so whatever few billions dollars we get as ‘soft loan’ from AIIB, BRICS  bank or xyz other institution- is good.

#2: we do have voting power

  • India will be the 2nd largest subscriber to AIIB.
  • Besides we have good relations with other asian countries that are in AIIB but are not “best friends” of China.
  • So collectively, we’ll have sufficient voting power in the board, to counter any moves hurting Indian interest.

#3: Africa will benefit

  • Since AIIB will loan to Asian countries, it’ll slightly reduce world bank’s pressure to finance Asian projects. Then World bank can divert more funds to Africa.
  • African development is also in India’s best interest because:
    • Indian exports will increase
    • Terror networks will weaken
    • Sea-piracy will decrease.

#4: Competition = cheaper loans

  • ADB often accused of a “slow-moving bureaucracy”- gives loans too late and with too many strings attached.
  • China brags that AIIB will have a clean, simplified and efficient bureaucracy.
  • October 2014:  World Bank President Jim Yong Kim began internal restructuring, reducing staff salary and perks. It means things are not hunky dory with world bank (same going with Yahoo).
  • The entry of AIIB will further increase the competition, catalyze the reforms in other Multilateral banks- perhaps they’ll reduce interest rates, EMIs and may even begin telemarketing for “Sovereign loans”!

Anti-Arguments: India won’t benefit bcoz:

#1: America says so

  • AIIB’s objectives are ambiguous
  • AIIB lacks transparency.

#2: bogus countries will benefit

  • In past, China loaned to countries without good-governance or respect for human rights or functional democracy or environmental safety: Pakistan, Myanmar and many African autocracies to name a few.
  • Using AIIB, China will try to legitimize such funding in the name of infrastructure development.
  • Counter argument: in past even ADB loans to Cambodia and Laos have been misused, ethnic minorities were displaced for infra-projects. so, AIIB= villain, and ADB+World bank = saints, such sterotyping is wrong.

#3: China doesn’t listen to others

  • 2014, July: South Korea proposed- we should setup AIIB Headquarter in Seoul or Songdo- to reduce the fears of US, Japan and Western powers.
  • But Jinping rejected the idea and setup HQ in Beijing. This is one of the reasons why South Korea did not come to MoU signing.
  • China may use the same strong-arm tactics in future as well e.g. AIIBS giving loan to project in PoK and India protests.
Timeline: AIIB
201311th Jinping says let’s open a new bank.
2014, JuneS.Korea wants HQ in S.Korea, but Jinping decides Beijing.
2014, OctMoU signed among China and 21 nations to setup AIIB.

Mock Questions


  1. twisting the facts to create 2TF, 3TF, even 5TF questions example: AIIB HQ is Seoul; Chairman is Jim Yong Kim, India is 3rd largest shareholder, Australia has joined, Laos is the only ASEAN country not to join and so on. Then you’ll be asked to find out the correct statements.
  2. Interchanging facts between AIIB and BRICS bank to create more ‘true/false’ type questions.
  3. Match the following: Bank vs HQ, Bank vs Chairman, Bank vs Members

Mains examination

Answer following 200 word each:
GS2: Important international institutions, structure, mandate.

  1. Compare and contrast the structure and purpose of BRICS bank and AIIB.   [In 2013 mains, similar question on IMF vs world bank, was asked.]
  2. Has India made a right choice by joining China-led AIIB? Justify your stand.  200 words.
  3. Does India need AIIB?  (Similar one liner question asked in Mains 2009)

GS3: infrastructure / resource mobilization

  1. Discuss the role and the importance of Multilateral Development banks for Infrastructure finance in India.

For more articles on Diplomacy and international relations, visit Mrunal.org/Diplomacy.

Mrunal recommends

  1. (free) NCERT, NIOS, TN-Books 4 History,Geo,Sci
  2. Indian Polity M.Laxmikanth (Hindi | English)
  3. Spectrum: Modern History (Hindi | English)
  4. Maths: Quantam CAT Sarvesh Kumar
  5. Objective General English SP Bakshi
  6. Word Power made Easy -Norman Lowe
  7. Topic wise Solved Paperset by Disha

65 Comments on “[Diplomacy] AIIB: Asian Infrastructure Investment Bank- purpose, structure, India’s interests- pro & anti arguments”

  1. Fantastic article.Nice Work Mrunal Ji+Rajtanil…One Word Missing ADB $10 > its has to be $10 billion i think Sir.

  2. Thanks to Mrunal once again

  3. Sir plz write an artical about ISIS !!

    1. please write detailed article on ISIS specially links of all countries of Middle eeast with IS

    2. I second this request, plz do an article on ISIS. If something big happens in future you can come up with a part 2 but right now ISIS starting with general outline of Arab Spring and geopolitics of central and west Asia is highly crave-able.

  4. Dear Mrunal sir

    11th Jinping is misleading please change to Xi …there is no need of criticism of Doordarshan report mistake has been done by her and got dismissed
    thank you

    1. hahahaha my observation is that once Mrunal gets hang of a word, he’ll not stop. whether desi liquor, mohan, chindu, lord curzon, rajan”bhai” or this 11th jingping.

      1. not,not one bit…

      2. ;-)……..because of mrunal’s use of 11th jinping… its now impossible to forget the name of chinese president…. not even in my sleep…

        lets concentrate on studies and lets not crib over these non issues.

  5. Thanxs a tonne for these articles Sir ! God bless…for your selfless efforts :)

  6. Please accept a little change in your pdf print option,,,,, I think their must be 1 more option for ‘save pdf’ directly,,,,

    1. Hi, when I click print pdf, even in chome, the document is not converted to pdf. Do I hqve to install some addon or extension to be able to do so? Please help Mrunal sir and others

  7. Hi all can anyone tell how will sea piracy decrease after the AIIB is setup and the world bank has more funding for Africa?

    1. I think it must be this :more development –>less recruits for piracy because i think they do it for money not for some ideology.So if they prosper they wont risk their life for piracy.

  8. am i the only one who fears may god nothing happen to sir mrunal for his selfless efforts;after reading every single article he posts

  9. Hatsoff to u guys,as i completed this AIIB topic from IDSA+Hindu+Et , but here u hv given some very unique points specially points n counterpoints…..thts the beauty of Mrunal.org….. stay blessed

  10. Super article…,…
    Thank you

  11. Rajtanil again mistakes in ua article if I am not wrong this time
    *21 countries signed MoU including China (not 21+China)
    *Afghanistan not the member and also many wrong entries in the list of members.
    .mrunal please correct the mistakes so that future readers will not be misguided
    . thanx in advance

    1. another correction: It should be $8 trillion (acc. to ADB report in 2009), and not ~$800 Billion, that Asia needs to invest in its national infrastructure capacity per year till 2020.

      1. hindu reported the amount as $ 800 billion

      2. Both of u r right. $800 billion every year=$8 trillion over the 10 yr period.

  12. Has any body applied for HR Marketing IOCL??

  13. what is the best book to prepare for upcomng RRB JR CIVIL ENGINEER exam? can any body suggest me efficient book plz?thank u

  14. Sir including china it is 21 members .

  15. Thanks. Mrunal ji… Good points.. Very useful

  16. What are the functions of cabinet committee on accomodation???

    Mrunal you are our mentor……Hats Off

  17. thanks mrunal sir

  18. Nice article…Mrunal Ji….

  19. Indonesia has decided to join the bank…

  20. Nice article..very useful for GS

  21. Hi Mrunal, there was an article in yesterday’s Hindu about RBI advising OIL PSU’s to ‘hedge’ their oil purchases. I have a very basic understanding of hedging, couldn’t really understand what that article was talking about. Could you make that part of the next Economy current affairs post?

    1. dnt think its specifically important topic,,, but shall understand what is going on around..This is the deal:
      since prices of oil are at all time low we would want to get long term contracts signed at this price, so that in case the price of oil rises in near future we still pay the lower price. Problem is this: what if the prices keep falling further (then we end up loosing), then who takes responsibility for such decision, oil PSUs are wary of these things.

  22. Excellent analysis Mrunal sir.Sir, I would like to underline that, it would be Xi Jinping instead of 11th Jinping.Thank you for guiding us through your analysis sir.

    1. Xi look like roman letter XI or 11.

    2. Mrunal did it intentionally, his super style of humor :) .
      By the way, it was all started by a reporter who read it wrong on national tv and was later fired during Xi’s visit to India.

  23. nice mrunal ,for this article
    plz ,reader ,guide me about jeywin study material has any standred for mcq solving or which other material will useful for multiplel choice question solving
    because i preparing for 2015 upsc

  24. after strong persuasions rather coercions frm the visiting chinese foreign minister, Indonesia has agreed to join AIIB… making it the 22 member

  25. sir,afghanistan is not a signatory and its 21 countries including china.

    1. Sir, The AIIB bank will alsogive loan to privtae real estate developer.Tks

  26. Yesterday economic times reported that indonasia is going to join AIIB…i think indonasia is going to be a member of it

  27. Indonesia has also decided to join AIIB.

  28. can any one advice me abook for medival period (history).

  29. Mrunal Sir,

    Indonesia agreed to be member of AIIB.

  30. After having filled up the United India Insurance form, I noticed that my date of passing is wrongly mentioned. INsted of 2012, it is 2014. What shall I do? Please help anyone.

    1. You should bring the matter later on by giving a simple affidavit about the correct passing date.But concentrate on exam now. does not matter to any extent.

  31. I have a doubt – when China has so much reserves, why it needs the mony from the bank for MSR?? it can easily use its own money directly…

    1. whats the diff bet AIIB or BRICS strategically?

  32. pls anyone help me.,.i have filled my father name in application form with a letter mistake in capf exam..does it cause any pblm???

  33. nice article sir

  34. Another reason for India joining AIIB is the reluctance of World Bank and ADB in granting funds for coal fired Power Plants as it causes climate change. India hopes that AIIB will provide it with the required funds.

  35. Fantastic article, so simplified but so meaningful.

  36. so nice …thanku a lot sir….

  37. Great article….simple and precise

  38. I am looking for Financial mechanism of AIIB therefore, can someone help me out? please

  39. thank u mrunal u have touched the key areas

  40. Sir , This Article is out dated now , Kindly Update it .

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