1) The AIIB’s investment in infrastructure will help grow the economies of both China and its neighbors due to the significant impact of infrastructure on the country’s GDP.
Xingjie Sun, a post-doctor who is interested in theoretical economics, stated in one of his articles:
“In the past few decades, investment in domestic infrastructure has brought significant GDP increase to China. Today, in a time of economic transformation for China, the government is seeking to expand its infrastructure development capacity and investment internationally.”
To strengthen the importance of infrastructure to a country, the author mentioned Brazil as an example. There was once an anti-government parade consisting of millions of people in Brazil protesting the continuing rising price of bus tickets. But here, we should notice that the fundamental reason for this situation was a lack of infrastructure. If citizens could have other convenient transportation choices, such as subways, light rail, and rapid shuttles, there would not be such a mess. This definitely lagged the economic development in Brazil. (Xingjie Sun, “The Prospect and Challenge of Asian Infrastructure Investment Bank” 2014)
Another researcher from the International Finance Institute in Bank of China, Youxin Wang, expressed a similar opinion:
“Many of China’s neighboring countries, such as the Philippines, Vietnam, and India, will need a high level of investment to build their infrastructure in the next decade. China has the top foreign exchange reserve. Therefore, by making loans or exporting technique and management to support these countries’ economic development, China can earn a large profit, as well as develop a good relationship with these countries.” (Youxin Wang, “The Establishment of Asian Infrastructure Investment Bank is a Multi-win Choice” 2014)
The financial crisis in 2008 reminded people around the world of the importance of global financial system reformation. In fact, some international institutes, such as World Trade Organization (WTO), International Monetary Fund (IMF), and the World Bank (WB), are taking steps to make the financial system more stable and efficient. However, many problems still exist.
Wei Li, an associate professor in college of international relations in Renmin University of China presented an interesting statement,
“These institutes, such as WB and IMF, are actually under control of the United States. They often take the profit of US and other developed countries in the first place and overlook developing countries. AIIB is needed in order to expand the impact of developing countries in the global financial system and break unfair rules in those institutes that mentioned. The establishment of AIIB is to refine our current Global Financial System, to make it more healthy and fair for the whole world.” (Wei Li, “Asian Infrastructure Investment Bank will Construct a New Financial System” 2015)
3) The AIIB can help internationalize the Chinese currency (RMB) to avoid potential losses.
In the past few decades, China has relied heavily on the US dollar. Many researchers worry that China’s large amounts of foreign exchange reserves for US dollars may generate a huge loss of Chinese economy once the US dollar loses value. Internationalizing the RMB to become an SDR currency through the establishment of the AIIB is one preferred step toward avoiding these future losses.
Da Wang, an associate professor of the American Research Institute at Jilin University, mentions, “China has changed from the biggest beneficiary to the biggest victim of US dollars after the 2008 Financial Crisis because the devaluation of the US dollar against the RMB generated a huge loss for China.” Wang further explains this situation by referencing “China’s Dollar Trap”, created by Paul Krugman in 2009. (Da Wang, “The Worldwide Meaning and Practice in China of Asian Infrastructure Investment Bank” 2015)