“Crossing the River by Feeling the Gold”: The Asian Infrastructure Investment Bank and the Financial Support to the Belt and Road Initiative

• Published date: 01 September 2017
• Author: Giuseppe Gabusi
• Date: 01 September 2017
• DOI: http://doi.org/10.1111/cwe.12212

©2017 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 23–45, Vol. 25, No. 5, 2017

23

“Crossing the River by Feeling the Gold”: The Asian

Infrastructure Investment Bank and the Financial

Support to the Belt and Road Initiative

Giuseppe Gabusi*

Abstract

China’s Belt and Road Initiative (BRI) is, above all, a connectivity project. As

connectivity requires financial support, in the past few years China has undertaken

several institution-building activities at the national and international level, mainly

in the financial and economic sector, showing a new propensity to influence global

economic governance. In particular, the establishment of the Asian Infrastructure

Investment Bank (AIIB) has drawn attention worldwide. How does this institution-

building process connect with BRI? Are these institutions just a vehicle for exporting

China’s capital and overcapacity, or do they signal a potential wider challenge to the

post-World War II liberal international order? By analyzing the first loans approved

by the bank, the present paper argues that far from representing a China-led challenge

to the Western-led liberal order, the AIIB, while promoting Chinese commercial and

geopolitical interests, shows the resilience of the global nancial regime created by the

West.

Key words: Asian Infrastructure Investment Bank, Belt and Road Initiative, China,

international economic order

JEL codes: F02, F55, F63

I. Introduction

Starting from ancient times and stretching well into the middle ages, the Old Silk Road

was mainly the path travelled by merchants carrying their trade across Eurasia. Today,

many view the New Silk Road proposed in 2013 by President Xi Jinping as all about

projecting China’s power into Eurasia. A lot of media fuss has been generated about

the increased assertiveness of Beijing in the global political economy, juxtaposed to the

*Giuseppe Gabusi, Adjoint Professor of IPE and Political Economy of East Asia, University of Turin, Italy.

Email: Giuseppe.gabusi@unito.it. The author wishes to thank the editors of this special issue for their

commitment, Silvia Rosina for retrieving and graphically elaborating trade data, and Robert H. Wade for his

insight.

Giuseppe Gabusi / 23–45, Vol. 25, No. 5, 2017

©2017 Institute of World Economics and Politics, Chinese Academy of Social Sciences

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relative decline of the USA: a vast array of journalists, commentators and editors have

written pieces on how new Chinese initiatives in foreign economic policy would be

challenging (either dangerously or fruitfully) the US-led liberal economic order. Now

that the dust has settled, and the media circus has moved to “the next big story,” it is

time to step in and reect on the deep meaning of the New Silk Road and of Beijing’s

new activism in the world economy.

Undoubtedly, the fact that China has become recently – especially after Trump’s

victory in the US Presidential elections – the main advocate of globalization even though

it does not share all the liberal values usually attached to it (Kynge, 2017) is a puzzle

that is yet to be solved (Agamennone, 2017). This has prompted a crucial debate on

world order which is nally catching the attention of distinguished international relation

scholars (e.g. Ikenberry and Lim, 2017). Since it joined the World Trade Organization in

2001, China has beneted a lot from the international trade regime it did not contribute

to creating in the rst place. At the same time, it has never given up some mercantilist

policies, which are also related to the presence in its economy of powerful state-owned

enterprises (SOEs). Robert Keohane once elaborated the view that as soon as states learn

about the usefulness of institutions, they support them even when the liberal hegemon

which designed them loses interest in their correct functioning (Kehoane, 1984). Back

then, he probably had Japan in mind as the new kid on the block. However, can the same

logic work with China, a formally socialist regime which does not accept the Western

liberal concept of democracy? Is China’s behavior in multilateral economic institutions

so dierent from that of other great powers?

This paper explores the relationship between the New Silk Road project – initially

presented under the “One Belt One Road” (OBOR) label, and then officially dubbed

the “Belt and Road Initiative” (BRI) – and one of its main nancial arms, the China-

initiated Asian Infrastructure Investment Bank (AIIB) (often referred in this paper as

“the bank”). The BRI is above all a connectivity project (Lim, T. W., 2016, p. 155). The

construction of new transport infrastructures, the creation of new channels where goods

and services can be traded freely, and the opening of cross-border economic zones lie,

in fact, at the core of the geoeconomic and geopolitical vision proposed by President

Xi Jinping. As connectivity requires financial support, China has undertaken several

institution-building activities at the national and international level, mainly in the

nancial and economic sector, showing a new propensity to inuence and shape global

economic governance. In particular, the foundation of the AIIB has drawn attention

worldwide, especially since many Western states have joined the bank as founding

members. How does this institution-building process connect with the BRI? Are these

institutions just a vehicle for exporting China’s capital and overcapacity, or do they