‘Debt trap’ in the 5th year of AIIB launch… China’s World Bank dream shakes

Asia Infrastructure Investment Bank 5 years

– AIIB is the first international financial institution led by China. It was founded to support investment in infrastructure (infrastructure) in developing countries with the dream of becoming a’Chinese version of the World Bank (WB)’. After President Xi first proposed its establishment in 2013, it successfully started out as 57 member states despite US checks. AIIB, which has challenged the US-led global financial order, has been inaugurated for 5 years.

Although it got bigger… ‘Good light dog apricot’

–

–

AIIB headquarters in Beijing, China. [로이터=연합뉴스]

– The bulk has grown. According to Shinhwa News, 103 countries have joined AIIB. It has nearly doubled compared to when it was launched. It exceeded the number of member states (68 countries) of its rival Asian Development Bank (ADB). The number of projects invested in five years was 108. The amount of investment also increased from $1.69 billion (about 1.87 trillion won) in 2016 to $9.98 billion last year.

However, in reality, it is evaluated as’good light dog apricot’. The number of member countries outpaced ADB, but compared to the size of funds and loans, the game does not work. According to the US Think Tank Institute for International Strategic Studies (CSIS), the total amount of AIIB funding was $37.8 billion as of September last year. It is 8 times different from ADB ($250 billion). That’s one 20th of the World Bank ($600 billion).

–

Loan status of major international financial institutions. Graphic = Reporter Kim Young-ok [email protected]

– The Wall Street Journal (WSJ) said, “Although loans surged last year due to the novel coronavirus infection (Corona 19), AIIB still accounted for only 5% of loans to international financial institutions.” “At the time of the launch of AIIB, the World Bank and ADB He was described as a challenger, but five years later, the reality is far from the hype at the time.”

AIIB is one of China’s foreign economic strategies to weaken the US-led financial hegemony. In 2014, it invested in infrastructure instead of U.S. government bonds with its foreign exchange reserves, which reached $4 trillion, while making use of overseas infrastructure construction to relieve overproduction in China. For this purpose, the’Daiiru (一帶一路: land and sea silk road)’ project called the’Chinese version of the Marshall Plan’.

–

Graphic = Reporter Kim Joo-won [email protected]

– AIIB was established to efficiently finance the Idairu project. As it provided money to Asian developing countries in need of funding, multilateral investment could also be expected to reduce the burden of China’s sole investment in infrastructure investments in developing countries with low profitability and high risk. While contributing to the internationalization of the renminbi, it was also seen as a means to strengthen China’s soft power.

In the criticism of’debt trap’… Bad loan boomerang

–

–

Growing AIIB loan size. Graphic = Reporter Kim Young-ok [email protected]

– China’s enormous ambitions, led by the Idairu Project and AIIB, are in trouble. Faced with criticism that the Idairu project is a’debt trap’.

Countries that participated in the Idairu project started to build SOCs such as roads and ports with funds borrowed from AIIB and state-owned banks of China, but could not repay the borrowed money at a relatively high interest rate, so they had to hand over the right to use the facility to China I fell into a situation where I was doing. Tanzania, Africa and others have also declared defaults. There was even controversy over’new imperialism’.

In 2019, the President of the International Monetary Fund (IMF) Christine Lagard said, “The World Bank and the IMF are working together to increase transparency in order to specify the size, conditions and maturity of loans (related to the Dairu project).” did.

The’debt trap’ can return to the AIIB as a boomerang. Nikkei pointed out that “the loan repayment problem is likely to become a matter of AIIB’s asset quality and credit rating in the long term.” AIIB’s provision for bad debts in the first half of last year was $190 million, more than ten times higher than in the first half of 2019. Provision for bad debt is money prepared in advance for losses that the debtor cannot properly pay off the principal and interest. This is why AIIB’s net profit has halved from the previous year.

–

Increasing amount of AIIB loan loss provision. Graphic = Reporter Kim Young-ok [email protected]

–

Economic retaliation and armed suppression of Hong Kong protests… “I lost heart to the member states”

– Relations with member countries within AIIB, a multilateral organization, are also creaking. In particular, these are countries that have joined the AIIB due to China’s economic influence even in the midst of the US. India, which has the second largest stake in the AIIB after China, is showing a strong anti-Chinese sentiment by boycotting Chinese products after a border dispute with China last year.

China is retaliating against Australia, which has discussed China’s responsibility for COVID-19, by banning imports of iron ore and coal. The British also turned their backs to China in the course of the Hong Kong democratization protests for reasons such as Chinese suppression. WSJ said, “China has lost the hearts of major AIIB member states,” and said, “This overshadows China’s claim that AIIB is a multilateral financial institution.”

–

AIIB President Jin Jin-qun is holding a press conference in Beijing, China on the 13th.[신화=연합뉴스]

–

Trying to reverse the corona crisis… “Vaccine purchase support by loan”

– As the situation is unfavorable, AIIB is targeting the Corona 19 incident as an opportunity for reversal. Last year, countries in Asia and Africa, including Bangladesh, who received $250 million in loans from the $10 billion Corona 19 Response Fund, benefited. To date, they have spent over 7 billion dollars.

The Corona 19 vaccine is another card. On the 13th, AIIB Governor Jinjin Jin-wun said, “We will set the loan size to 13 billion dollars in 2021 and support the purchase of vaccines.” However, the cost of purchasing a vaccine is also a difficult money for developing countries. You can also fall into a’debt trap’.

CSIS pointed out that “the aim of the establishment of AIIB is to develop economies in developing countries through investment in infrastructure,” and pointed out that “support for vaccine purchases is out of the scope and not sustainable.”

Reporter Seungho Lee [email protected]

–

Related posts:

Lollobrigida after the breakup with the prime minister's sister: "No political problems with Giorgia...

Coca-Cola withdraws ads from "all social media platforms worldwide"

Rioting Escalates in Marseille Following Teenager's Death: Clashes and Arrests Reported

under pressure in the face of massive mobilization, Justin Trudeau raises his voice

Share this:

• Facebook
• X

Related