In contrast the AIIB plays to all of China’s strengths. Over the past two decades, Chinese construction companies have demonstrated
remarkable capacity to build infrastructure, be it power stations, expressways, ports or highspeed
trains. To some extent, China’s
infrastructure is becoming built out and Beijing is looking increasingly to exporting this capacity. On straight commercial grounds, China’s
construction companies would be well positioned to grab the lion’s share of the bank’s funded business. But as China has founded the
Bank and contributed the bulk of its capital, this is guaranteed.
Early proposals suggest that the AIIB’s initial capitalization might be in the order of US$100 billion, with China contributing about half. More
recently, this seems to have been wound back to around $50 billion, with countries only required to contribute a small portion of their
overall commitments, including China. China will still be the biggest contributor, but its approach is likely to be more measured than
originally suggested, and as such will still carry the most weight in the new organization.
China also wants to recycle its foreign exchange reserve holdings and to reduce the share held in US treasury notes. Its experience in
direct investment in major resource projects offshore has also been mixed at best with some investments resulting in massive losses.
Increasing the use of the Renminbi for both international trade and capital transactions is also a high priority for the Chinese government,
although the RMB’s status as reserve currency alongside the US dollar is a long way off.