The information on Asian Infrastructure Investment Bank (AIIB), which officially started in early 2016, is strictly limited. In fact, the only facts known about AIIB are as follows: China has spearheaded the establishment and operation; 57 states are the founding members, including some regional powers such as South Korea and India as well as the United Kingdom among other Western European powers; and the size of the registered capital, and the contents of the agreement. Since the first project was decided in June 2016, there is no single achievement. As such, it is not simple to grasp the reality of AIIB. Hence, the book has identified the major indirect variables that influence the AIIB and analyzed them to cast light on the AIIB.

First, as the name and the agreement suggest, the AIIB is a multilateral development bank (MDB); that is, it is a multilateral international financial organization. This implies that the basic characteristics of existing international economic organizations are also applicable to the AIIB. Thus, logically speaking, analyzing the multilateral organizations in operation will help in understanding the fundamental nature of the AIIB. Although the archetype of the AIIB is the World Bank, it has limitations in understanding multilateral development banks when simply discerning the World Bank. The World Bank is one pillar of the Bretton Woods system, and thus, the Bretton Woods system should be understood first. This is why the first part of this book deals with a comprehensive discussion related to the Bretton Woods system.

The domestic drivers in the Chinese economy served as another indirect variable to delve into the AIIB. Examining the domestic factors of the Chinese economy indicate a peculiar correlation between the establishment of the AIIB and the Chinese economy. Everyone knows that the input-centered and export-oriented economic development strategy has been the key to China’s high economic growth. However, as the rate of fair return distances from investment (meaning that the marginal efficiency of capital diminishes), it became difficult to maintain a high economic growth with the same input. Then, how about invigorating infrastructure investment abroad? This perspective gives an understandable account of the background of China’s One Belt One Road Initiative and the establishment of the AIIB.

 China’s economic diplomacy was another indirect variable to scrutinize the AIIB. The issue was whether China had second thoughts as the background of AIIB, viewing the patterns of China’s economic diplomacy. China’s economic diplomacy, which visibly appeared since the Hu Jintao leadership, had aims to expand influence at the international stage. Another attribute of this diplomacy was that it concentrated on bilateral approach, avoiding U.S.-led multilateralism. Nevertheless, the author analyzes the reality of China’s economic diplomacy which opted for multilateralism, having felt the shortcomings of bilateral approaches. Here, the fact that China, not the U.S., led the process differs from the previous international economic organizations.

The book touches on the issues such as the reason for U.S. opposition to the AIIB and Japan’s refusal to participate in it from the economic strategy point of view. Here, it is inevitable to include the power factor, entailing that the AIIB is more than an international financial organization. From the simple points above, it is easy to find out that it is not a simple task to systematically understand the AIIB. I believe this is the first comprehensive study of the AIIB in South Korea. Since it is the first attempt, it will have some shortcomings. However, I believe the book will have met its purpose if this book could serve as the cornerstone of the research on the AIIB and could help readers understand the basics of the bank.

Volume No.: 2017-5

Publisher: The Sejong Institute

Publication Date: April 20, 2017

Paperback: 222 Pages