AIIB turns 10: Is there trouble ahead for the China-backed bank?

Ten years ago, Beijing launched the Asian Infrastructure Investment Bank with a bold promise: To be faster, leaner, and more efficient than the lumbering multilateral development banks that have long dominated global finance. Today, AIIB is a $100 billion institution with more than 100 members. It has lived up to its promise of efficiency — but its lean oversight structure has raised some eyebrows about whether the institution is putting enough resources toward accountability. The bank — dominated by China, which has 26.6% of the shareholding — has made impressive strides in the last decade, boasting 326 projects and approved spending of over $60 billion. It has built its shareholder base up from 57 in 2016 to 110 in 2025, including Western countries that were more skeptical of the institution at its inception. Most notably, AIIB has grown without dipping into financial uncertainty. In 2023, AIIB signed a guarantee agreement with the World Bank-based International Bank for Reconstruction and Development against sovereign-backed loans, allowing IBRD to access more capital despite being in financial straits. The loan also helped AIIB diversify its portfolio, decreasing its risk and protecting its credit rating. In 2024, the two institutions were in talks to repeat this arrangement. But AIIB has a long list of critics, who argue that an overly minimalist structure prioritizing speed and efficiency means that it cuts back on the workforce and resources needed for sufficient accountability, in practice leading to lower standards. Some sources told Devex that the bank has generally shown a policy of shrugging off its responsibility to monitor social and environmental impact. Experts and a former AIIB official told Devex, on condition of anonymity, that while the bank has managed to win itself a reputation as young and innovative, low implementation standards could mean a looming scandal. Critics are less concerned about the bank taking on risky projects, such as dams and hydropower plants, because most of those benefit from co-financing. Instead, the concern is the intentional miscategorization of projects — assigning projects with potentially irreversible environmental impacts as being low-risk, for example — to avoid the bank having to spend extra resources on preparation. They also voiced qualms about poorly managed risk in projects where there’s an intermediary financial institution, such as a bank or private equity funds. AIIB is not doing full due diligence on the final projects, they alleged, but rather only on the intermediary. This is the case for many banks, but the official said it’s particularly dangerous in the case of AIIB because it’s an infrastructure bank with high-impact projects that can have lasting impacts on communities and environments. “There’s a lot of rhetoric surrounding high social and environmental standards, but the practice and implementation is substandard and lacking, to say the least,” the former official told Devex. “There hasn’t been a major scandal yet emerging from AIIB projects, but my analysis is that the risk of one coming out, and soon — in the next three to five years — is quite high because of the way that the bank carries out its environmental and social due diligence.” In January, AIIB will set off on its next decade under new leadership of former Chinese minister of finance, Zou Jiayi, who’s also been an adviser to China's World Bank Executive Board Office. Her five-year term begins as foreign aid plummets and traditional donors are pulling back on development commitments. It could be a period, sources said, where AIIB’s lean mode of operation influences other development banks throughout the world as they attempt to fill the gap that foreign aid cuts are leaving. Lean, mean, efficient machine When AIIB was founded a decade ago, it was never meant to rival the World Bank or the Manila-based Asian Development Bank in size. With just over $100 billion in capital — a fraction of its peers’ war chests — AIIB positioned itself instead as a slimmed-down lender that could move faster, take fewer risks onto its books, and focus squarely on infrastructure. “You also see some real innovations in the AIIB” when it comes to implementing MDB reforms, Kevin Gallagher, director of the Global Development Policy Center at Boston University, told Devex. In a time when there’s a loud call for MDB reform, he felt that they are “carrying the flag,” when it comes to optimizing their balance sheet and working efficiently — something he theorized could help maintain momentum outside Western-backed institutions. Gallagher highlighted the guarantee of the IBRD loan, which helped relieve pressure on AIIB’s credit rating caused by its high concentration of Asia-focused projects, and the inherent risk in a narrow geographical focus. “They’ve come up with some of the more innovative approaches at the right time,” Gallagher said. “They’ve sort of left the nest.” Part of what keeps AIIB small and innovative is its governance structure. Unlike the World Bank or Asian Development Bank, it has no resident board in Beijing overseeing day-to-day decisions. Instead, board members dial in from their home countries, signing off on policies and projects remotely. The model trims costs and speeds up approvals — a conscious attempt to avoid the bureaucracy that slows older lenders. Though there is no conclusive research on how the lean aspects of the bank — a smaller staff size, faster approvals, and less overhead — is impacting the overall oversight of the bank, critics said that without a resident board keeping watch, AIIB risks weaker oversight and less accountability to its shareholders and to the communities affected by its projects. “The executive directors are not in the headquarters,” Nora Sausmikat, a senior campaigner focused on ADB and AIIB at Urgewald, a nonprofit organization that acts as a watchdog on multilateral development banks, told Devex. Instead, she said, they have a “built-in structure to hold oversight at arms length.” Sausmikat added that the president of the bank has “unprecedented power” because they can approve any project unilaterally. The project will only be stopped if an executive director files a concern. This runs differently from how most other banks work, in which project proposals go through the board of directors before they kick off. Other organizations are concerned about the bank’s lack of a robust mechanism to hear complaints. AIIB has a project-affected people’s mechanism, or PPM, where groups impacted by AIIB’s projects can file grievances and seek accountability. But civil society organizations said that AIIB pushes them to first go to the subcontract level with their complaint before the institution will get involved, according to Radhika Goyal, a policy associate at the Accountability Counsel, an organization that advocates for communities impacted by internationally financed projects. And often, she said, the project-level grievance mechanisms don’t exist or don’t function well. “When communities come to us, they’re saying that projects need to be significantly redesigned, paused, or completely stopped. But even the most effective project-level [the grievance redress mechanism] cannot consider this,” Goyal told Devex. When the issue is brought to the bank, Goyal said it recognizes the problem but responds to this by saying that it needs to respect the sovereignty of the borrowing countries and allow them to address the concerns. In a comment to Devex by email, AIIB disputed the claim that its structure often leads to a lack of accountability. “AIIB has established a robust accountability framework of safeguards,” the media team wrote, pointing specifically to independent oversight through a complaints resolution, evaluation, and integrity unit, as well as “clear anti-corruption safeguards … and redress for communities through our Project-affected People’s Mechanism.” Regarding the project-level grievance mechanism, the bank said that it does indeed “require clients to establish and operate grievance redress mechanisms at the project level.” But added that it also has a grievance mechanism in place led by the management team for “people who believe [they] have been adversely affected by AIIB-funded projects.” The email pointed to examples of these cases on its website. But with increased oversight comes bureaucracy. “By virtue of having a 200-person board of executive directors and a million advisors, of course, you get more scrutiny,” Clemence Landers, vice president and senior policy fellow at the Center for Global Development, told Devex. “But, and I think this is something that the World Bank is grappling with, you also end up with a pretty slow institution that’s bogged down in bureaucracy.” AIIB also slimmed down its operations by co-financing with bigger banks. For example, it worked with the World Bank to build a new transportation route in Kazakhstan and a hydropower plant in Tajikistan. It has also partnered with the Asian Development Bank on building a green corridor between Central Asia and the South Caucasus, and collaborated with the African Development Bank to provide €260 million for reliable and affordable energy in Rwanda. Around 60% of the bank’s contracts are co-financed. In those projects, AIIB follows the protection and accountability guidelines of the larger, leading bank. In the cases where AIIB is the sole financier, the former AIIB official said the bank tends to let its clients — whether that’s certain countries or corporate clients — prepare projects in their own way and then “greenlight them from the back end,” reducing the need for AIIB resources to be as involved. “Substandard and lacking implementation is clearly seen not only in co-financed projects, where the bank delegates fully the preparation, monitoring, and resolution of environmental and social issues to the main financier, but also in stand-alone projects, where the bank might have standards aligned with other institutions, but then in practice, it fails to implement them,” the official said. When criticized in the past over such shortcomings, the bank has argued that it’s still young and improving. But critics said that it has grown out of this excuse. “When we criticize the bank, the first and most used argument is ‘we are a young bank, please be patient, we are learning.’ But leading management all comes from established Bretton Woods institutions, and they have 50 years of looking back on other banks,” said Sausmikat, adding that it’s not an equal comparison between the first 10 years of AIIB in 2016 and the first years of the World Bank, which was founded in 1944. The underdog For all the criticisms, AIIB has overcome one of the primary concerns that plagued its early years: that it would undermine the World Bank-led development finance structure. When AIIB was born, it immediately put the United States on edge. “From the beginning, the United States didn’t like countries joining forces with China to establish this new institution,” Jing Qian, an assistant professor at New York University in Shanghai with expertise on AIIB influence on the World Bank, told Devex. In the years prior to the establishment of AIIB, former U.S. President Barack Obama’s administration had made an effort to bring China deeper into the rules-based international order, according to CGD’s Landers. The efforts paid off — China’s shareholding at the World Bank went up in those years prior to AIIB’s establishment, and its contributions to the International Development Assistance increased. “This was an important part of the strategic dialogue at the beginning of the Obama administration,” said Landers. “So the United States got very, very nervous when China — and this idea of AIIB — came up. They saw it as China serving its dominance and also trying to build a parallel international system to the one the U.S. had built.” Qian wrote in his research that during this period, the U.S. selectively “punished” close allies that joined the AIIB as founding members by casting less supportive votes on their World Bank project proposals, “signaling Washington’s discontent toward in-group defiance,” he said. “We found a pattern of the United States trying to punish its allies who it felt ‘betrayed’ them in helping China establish this institution,” Qian said. Additional research put a number to the claim, finding that since 2016, AIIB founding members have received 22% fewer World Bank infrastructure projects annually than they would have had they not been AIIB founders, based on historic trends. Over time, this dynamic has shifted. AIIB, for its part, showed willingness to cooperate and to partner with Western-founded finance institutions. Qian said its decision to provide the guarantee to IBRD is “symbolic.” “It shows that the AIIB is trying to work alongside these traditional institutions, not only in the old-fashioned ways, but also in the process trying to carry out innovative arrangements that can actually benefit both sides,” he said. “The AIIB is a really interesting institution because it really didn’t turn out to be what the real naysayers at the start said it would be,” said Landers, referring to the largely Western critics who were concerned that it would try to establish its own international finance framework. “It turned out to be a truly multilateral institution by virtue of its shareholding.” The future of AIIB There are still worries from the bigger, older institutions that feel AIIB could threaten their future. “Some MDB officials told us that they can feel some countries distancing themselves from the World Bank since the AIIB was founded,” said Qian. Countries know that they can get funding much faster at AIIB and avoid long bureaucratic processes. Qian said that the difference in wait times is significant — something that he said could take over two years at the World Bank could take just a couple of months at AIIB. Qian added that he doesn’t think the lack of oversight itself is the draw. Sovereign shareholders like the efficiency, he theorized, and private investors like the AAA rating. The big banks are telling experts that they now feel pressure to “win back” these countries. “This really puts the World Bank in a dilemma,” said Qian, adding that if the World Bank makes special arrangements to attract countries, it creates an incentive to challenge the global financial institution that could spur other countries to set up their own institutions. Qian is looking into this. He told Devex that his ongoing research finds that the World Bank is “subtly accommodating founding members with more favorable project evaluations.” In the meantime, AIIB is expanding both physically and thematically. It opened a regional office in Abu Dhabi, United Arab Emirates, in 2023, has plans to open another in Hong Kong, and is in discussions for offices in London and Singapore, Qian said. It also published a report in February with plans to prioritize health, climate, and nature — a shift that began during COVID-19. The report focuses on how nature-focused infrastructure can benefit health, like reducing air pollution and building resilient health care infrastructure that can withstand climate disasters. “The global health landscape has evolved, and so must our response. All infrastructure – whether energy, transport, water, or digital – should be guided by health impact,” said AIIB chief economist, Erik Berglöf, in the report’s press release. “The bank definitely has ambitions of expanding that role from its current Asia base into other continents and regions,” said the former AIIB official. “It also has the ambition to expand from a base that's very infrastructure-focused to cover more sectors and types of financing.” In an email to Devex, AIIB said that it is “committed to strengthening [its] policies and procedures in a transparent manner, with regular progress reporting and independent oversight of key processes.” It noted that a policy review process of its project-affected people’s mechanism was launched in 2023, and that a revised policy draft has recently been released and is “currently under consultation with the aim of ensuring the mechanism meets international best practices and fulfills its role as an accountability tool.” Though not mentioned in its comments, AIIB has recently expanded its targets for private-sector financing and introduced more lending options, such as results-based financing and climate-focused financing, the former AIIB official told Devex. But they do not think that its offerings differ enough from other multilateral development banks to make it significantly more desirable. “Whether that global ambition can be met in the current geopolitical context and the current way the bank manages its relationships with other institutions remains to be seen,” the official added.