Jin Liqun’s Asia Infrastructure Investment Bank

Jin Liqun’s Asia Infrastructure Investment Bank

A GRI Power Brokers feature on Jin Liqun.

Jin Liqun has been adeptly managing the development of the new Asia Infrastructure Investment Bank (AIIB). In this issue of GRI’s “power broker” series, GRI looks into how Jin’s leadership is benefiting economic development and political risk in Asia through the AIIB.

Jin Liqun, the newly appointed president of the AIIB, is set to have a profound impact on economic development throughout Asia. His experience and even temperament have helped guide the AIIB through its early stages of development, bolstering its chances of success while reducing political risks for prospective investors and borrowers.

Jin Liqun: From farmer to financier

Jin was born just prior to the Chinese revolution in 1947. Pulled out of grade-school and sent to work on a remote farm during the Cultural Revolution, Jin spent a decade of his young adult life laboring in rural Jiangsu. Jin claims that this experience drives his current passion for development finance.

After the Cultural Revolution ended, Jin earned an MA in English literature in Beijing. Known as an avid reader who quotes Andrew Marvell and Li Bai alike, Jin now stands out amid the CCP’s technocratic leadership, most of whom are engineers.

After finishing his MA in 1980, Jin joined the Ministry of Finance as the Director General and Assistant Minister, and rose to become its Vice Minister in 1998. Jin eventually went on to accrue extensive experience in international finance, working in leadership positions in the World Bank, the Asian Development Bank (ADB), and several major Chinese investment corporations.

In 2014 Jin was appointed as the head of the AIIB’s preparatory group. Jin’s work developing the AIIB cumulated in his election as the first President of the AIIB in January.

Banking on the AIIB

The brainchild of Chinese president Xi Jinping, the AIIB aims to provide loans – roughly $10-15 billion a year for the first five years – to back infrastructure investment in Asia. Despite its regional focus, the AIIB includes 57 prospective founding members from across the world, including Germany, Brazil, and South Africa. The AIIB boasts that it will approve loans faster and more efficiently than the bureaucracy-laden ADB and World Bank.

However, the AIIB has been the source of some controversy. The US in particular fears that the AIIB could become a rival for existing international financial institutions, undercutting international governance standards by providing loans without environmental, governance, or human rights conditions attached. In response, Jin has defended the AIIB as a supplement to existing financial institutions rather than a replacement, and has promised repeatedly to promote good governance alongside infrastructure investment.

A steady hand at the helm

Perhaps Jin Liqun most important contribution so far has been his shepherding of the AIIB through its early development as president of the preparatory group. Under Jin’s leadership, the AIIB is on the cusp of becoming a major promoter of development in Asia, offering much-needed capital for Asian infrastructure development. Jin’s extensive experience in multilateral development finance has bolstered confidence in the AIIB among prospective investors and borrowers.

Jin is also contributing to the alleviation of political risk involving the AIIB. Significantly, Jin has successfully alleviated key European countries’ concerns about the AIIB, bringing the UK, Germany, the Netherlands, and other major sources of capital on board. According to some sources, numerous European countries might have been more reluctant to join the AIIB were it not for Jin’s reputation and lobbying.

By co-opting numerous European states, Jin has not only broadened the bank’s membership and potential capital reserves – he has bolstered its legitimacy as a truly multilateral institution. This will reduce political risks to the bank and its borrowers posed by potential international opposition; the more legitimate the AIIB appears, the lower the chances that actors like the US will actively oppose it.

Jin has also set out to convince the global public that the AIIB will not simply be a puppet of the Chinese government. At the Brookings Institute and Boao Forum, Jin disparaged the idea that the AIIB would be beholden to the Chinese government and instead highlighted the bank’s multilateral character. This public relations campaign is not only designed to deflect US criticism but also to address perceived political risks for prospective borrowers. The more multilateral and autonomous the AIIB becomes, the less concerned borrowers need be that their funding will be interrupted or manipulated due to Chinese political interests. Jin’s reassurances will help alleviate some borrowers’ fears that the AIIB might, for instance, suspend loans for a major project because of frictions between the host-state and the Chinese government.

Jin’s work developing the AIIB also has the potential to decrease political risk for Chinese investors by providing a multilateral institutional cover for outbound Chinese capital. Chinese firms and financiers are eager to invest in projects abroad, but they face rising anti-Chinese sentiment in many Asian nations. Local populations in states like Myanmar and Sri Lanka often associate Chinese capital with neo-imperialism and poor corporate social responsibility. If Chinese investors channel their capital through a legitimate multilateral development financial institution, this might help mitigate some of the risks to Chinese investments posed by anti-Chinese sentiment.

Jin is also experienced in coping with political risk contingencies that can beset investment in more volatile emerging markets. As Vice President of the ADB, for instance, he dealt deftly with a nationalization crisis in Afghanistan, convincing the Afghan government to refrain from nationalizing an ADB-backed telecommunications project.

Jin Liqun’s successes so far bode well for the future of the AIIB. Although challenges will undoubtedly present themselves and political risks remain problematic, Jin’s leadership is improving the political risk climate for investors and borrowers looking to the AIIB as a new player in international development finance.

GRI Power Brokers features high-level individuals having a positive impact on political risk environments. Through interviews, in-depth analysis and insider profiles, GRI explores how power brokers affect the distribution of political or economic power, offering unique insight into those individuals that are shaping market trends in all corners of the world.

About Author

Erik French

Erik French is a PhD Candidate at the Maxwell School of Citizenship and Public Affairs, a supervisor at Wikistrat Inc., and a former Sasakawa Peace Foundation fellow with Pacific Forum CSIS. His research focuses on security, politics, and economics in East Asia.