Ten years have passed since the establishment of the Asian Infrastructure Investment Bank (AIIB). Headquartered in Beijing, it is the first multilateral development bank (MDB) to be designed and promoted by the People’s Republic of China (PRC). This has generated suspicions in Washington and elsewhere about China’s intention to create an alternative to the World Bank and other existing international financial institutions. With 109 approved members, however, the AIIB has also become the second-largest MDB behind the World Bank, reflecting China’s growing ability to reshape the world order with new ideas and institutions that better align with Beijing’s national interests.

In this book, Tamar Gutner – a former financial journalist who covered sovereign debt negotiations, and now an associate professor of international relations at American University’s School of International Service – provides a nuanced and objective account of the origins and evolution of the AIIB within the context of China’s increasing involvement in the global development aid and finance regime.

Drawing on interviews with AIIB management team members, board of directors members, chief negotiators, and senior officials from the World Bank, the Asian Development Bank (ADB), the US Treasury, and international NGOs, the author analyses the motivations behind the AIIB’s creation, reviews its early days, focuses on the environmental and social framework, and reflects on the relationship between the AIIB, China’s Belt and Road Initiative (BRI), and other international financial institutions. The final pages speculate on three possible future scenarios for the AIIB.

Since Xi Jinping “laid out his vision for the bank in a speech at the Asia-Pacific Economic Cooperation (APEC) CEO Summit” in 2013 (p. 32), policy-makers, academics and journalists have debated the following: given that China’s overseas aid and investment disbursements are well known for lacking transparency and respect for global standards, is Beijing promoting lower standards in global finance by setting up a new MDB? This would ultimately undermine the traditional efforts of international financial institutions to link funds to the adoption of good governance frameworks in recipient countries through conditionalities.

For this reason, among others, the United States officially decided not to join the AIIB as a founding member, while successfully lobbying Tokyo to ensure that Japan would not be part of the project either. Much to the surprise of the Chinese, who had conceived the AIIB as a pan-Asian regional MDB, the AIIB became a global institution when the Europeans decided to join. First Luxembourg, and then – more significantly – the United Kingdom chose to engage with China in this new venture, with the clear objective of promoting their financial markets as places to increasingly trade in renminbi and renminbi-denominated financial instruments. It was a very different era compared to today’s international tensions. France, Germany and Italy followed suit, and together, the European members contributed to the AIIB’s adoption of global social and environmental standards.

Tamar Gutner attributes the establishment of the AIIB to “an alignment of political, economic, and institutional factors” (p. 40). Firstly, the leadership change in Beijing clearly mattered, as Xi Jinping embraced the idea of a new MDB as part of the PRC’s more proactive and assertive foreign policy. Secondly, the ADB has frequently emphasized that Asia is in desperate need of new infrastructure. With the AIIB, China seized the opportunity to mobilize resources to address this issue and, at the same time, create a market for its domestic overcapacity. Thirdly, the AIIB can be seen as a response to the institutional inertia of international financial institutions: it took the US Congress five years (from 2010 to 2015) to approve the reform of voting shares at the IMF, thereby increasing China’s voting power. By that time, however, “the train of actions creating the AIIB and NDB [New Development Bank] had already left the station” (p. 38).

So far, the AIIB has proved its critics wrong. Due to its weak origination capacity, the bank has mainly co-financed projects designed by other MDBs, who were happy to share their policies with the newcomer in the mutual hope that it would gain credibility. Indeed, the AIIB’s management team consists primarily of professionals who were formerly employed by the World Bank, the ADB or other MDBs. There is a complex interaction and exchange of knowledge and practices between the AIIB and the large and varied community of international lenders.

Of course, the AIIB is not the only instrument that China – or, as the author argues, its different institutions and actors, which defy the idea of China as a monolithic actor – has for financial engagement in the so-called Global South. Furthermore, its financial mobilization power is limited. China’s development and policy banks are much more active alongside the BRI corridors and do not necessarily abide by global standards. This shows a “variation in China’s institutional approaches to global economic governance” (p. 102). The risk for the AIIB is indeed to remain “an important island of the rules-based order in multilateral development banking in a larger ocean of authoritarian China’s bilateral lending” (p. 123).

The future will depend on which of the three scenarios Gutner depicts unfolds. In the first scenario, the AIIB could become an “exemplary MDB that shows Chinese leadership in its best light” (p. 125), leading all “major Chinese lenders to follow global norms for environmental and social standards, and transparency and accountability” (p. 126). The author considers the most likely scenario to be “business as usual,” in which the AIIB will further integrate into the global financial system without any significant easing of geopolitical rivalries between the West and China’s authoritarian system. In the backtracking scenario, the ocean will submerge the island and, perhaps after losing some Western members, the AIIB could “move more closely to the murkier work being undertaken under the umbrella of BRI” (p. 128).

Whatever the future holds, this book provides a comprehensive account of the AIIB’s first ten years. By mixing technical details with wider perspectives, Tamar Gutner has produced a book that will appeal to policymakers, students and scholars alike, and one that is destined to become a reference work for anyone interested in China’s new global role in development and finance.