Critical Junctures and the Birth of the AIIB

In the fall of 2013 Chinese President Xi Jinping first proposed creating a new Chinese-led development bank to focus on infrastructure development. Many were suspicious about China’s intentions. After all, the World Bank, Asian Development Bank (ADB), and other regional development banks already operated in Asia, with most lending plenty of money to China. What need was there for a new Asian Infrastructure Investment Bank (AIIB)? Meanwhile, the BRICS countries, which include China, were also setting up another development bank, the New Development (NDB). In the United States, the Obama administration actively urged other countries not to join the proposed AIIB amid concerns it could undermine the existing development banks while unfairly benefitting Chinese companies. It is now evident that the AIIB is an extraordinary development in global governance, as China’s first major foray into leading an international organization with global membership that may serve as a showcase for its multilateral leadership. Today, the AIIB has the second largest membership behind the World Bank. Why would China propose creating a new development bank given the existence of other such banks operating in Asia, banks that include China among their membership. This paper examines the factors behind the AIIB’s birth. It draws upon and seeks to extend historical institutionalism’s recognition that critical junctures may be important factors behind the birth of new international organizations. In this sense, the critical juncture was not something as dramatic as the end of a major war, but rather three factors that created the right timing, or window of opportunity to create a new bank. These include Chinese president Xi Jinping’s desire to turned China into a more outward-looking, actively rising global power; the huge unmet need for infrastructure in Asia; and China’s frustration with its inability to gain a larger voice in major international organizations.