Asia-Pacific, Coronavirus, International Trade & Finance The AIIB's Risky Pandemic Response

Crises create winners and losers. The Asian Infrastructure Investment Bank (AIIB), Asia’s newest multilateral development bank (MDB), has the opportunity to emerge as a winner from the pandemic, but only if it adapts without overstretching.

China proposed the AIIB in 2015 as an alternative to traditionally Western-dominated development banks, particularly the World Bank (WB) and the Asian Development Bank (ADB). It promised a streamlined approval process, a rejection of loan conditionality, and greater control for emerging economies, whose past efforts for an enhanced voice in organizations like the WB have been stymied by the dominant U.S. and European shareholders...

Now, during the global Covid-19 pandemic, the AIIB is on its way to proving itself as a vital regional lender: it has acquired several new borrowers, expanded its lending instruments, and lent several billion dollars already in emergency funding. However, for the institution to establish itself as a major player in the crowded field of multilateral lending, it also needs to ensure this new lending does not increase the credit risk of its portfolio as debt distress heightens in the wake of the pandemic. 

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