The infrastructure of power

Reasons to be enthusiastic about China’s answer to the World Bank

Reasons to be enthusiastic about China’s answer to the World Bank

safe assets, such as the highly rated bonds the AIIB proposes to sell.

Unlike the World Bank, which is pulled hither and thither by its members, the AIIB will keep a tighter focus on infrastructure. It has no sitting board or per manent branch offices in borrowing countries. It is also quick, approving four projects within six months of its launch date. More established multilateral lenders can take a year or two to do the same. Some fear the AIIB will deviate from prevailing nor ms in other, more troubling ways—undercutting environmental standards, say. But of its first four projects, three are joint ventures with existing institutions, subject to their protocols. Its $217m project to improve slumlife in 154 Indonesian cities, led by a veteran of the World Bank, seems alert to the dangers of soil erosion and groundwater pollution. Likewise, its road-improvement plan in Tajikistan, administered by the European Bank for Reconstruction and Development, will tactfully relocate a monument to Avicenna, a Persian polymath who memorised the Koran by the age of ten.

Any assessment of the AIIB’s safeguards must also consider the alternative. If the new institution did not exist, China would presumably lend the money bilaterally, escaping any scrutiny by its peers. It has instead invited outside participation, precisely because it wants the respectability such partnerships confer.

But if China is happy for its new bank to work with existing lenders, why not simply work within them? One reason is that they have been painfully slow to accommodate it. The IMF, for example, agreed in 2010 to give emerging economies a bigger say. But by the time America’s Congress ratified the deal five years later, China’s economy had grown by 80% (and Japan’s had shrunk by a quarter) in dollar terms. If international financial institutions make room for China, it may bypass them anyway, but if they do not, it definitely will. The AIIB’s first solo venture will bring electricity to 2.5m rural homes in Bangladesh. That is not the only kind of power distribution that needs moder nising. ©The Economist Newspaper Limited

AIIB careful with Avicenna