The Emergence of the Asian Infrastructure Investment Bank: The Very Rational Choice of Legitimacy

Jens Brandt Nellegaard & Julian Plucnar Jacobsen

Student thesis: Master thesis


Development finance has never been a more vibrant and interesting field of study. With the economic and political rise of China, and the recent establishment of the Asian Infrastructure Investment Bank (AIIB), international multilateral development banking is back on the high-level political agenda. In our research question we ask, what are some of the key factors that led to the emergence of the AIIB, and what role these factors played in the emergence and design of the institution? Furthermore, we ask who benefit from the AIIB and what are some of the key barriers for private capital to enter into financing of infrastructure projects in developing countries? We conducted a disciplined interpretive two-stage case study based on critical realism. New Institutionalism has been our theoretical frame for answering the first part of our research question. To answer who benefits in stage II, we applied Susan Strange’s four pillars framework to identify structural power change. The key factors we focused on were based on three selection criteria. 1) Uneven Representation in current institutions, 2) Infrastructure Finance Gap in Asia, and 3) Chinese Capital Capacity. Our analysis of these factors revealed that the emergence of the AIIB was a very rational choice by China, and furthermore an important stepping up the latter in development finance in regards to be perceived as a legitimate actor. The design of the AIIB is a balancing of domestic interests and structural and normative pressures from the MDB community. In our Strangeian structural power analysis we concluded that the emergence of the AIIB is benefiting various actors. The European member states have the potential to benefit from an increased demand for their companies expertise. Our analysis revealed that China is the only actor benefiting across all four pillars. Finally, we identified three major barriers for private capital. 1) Lack of a real infrastructure market caused by poor project development and limited pipeline, 2) complexity in the current guarantee system, which make investors withdraw from investments, and 3) paradigmatic discrepancies between private investors and the MDB community, which complicates cooperation. In the end we discussed the AIIB in relation to Varieties of Capitalism and suggested some further research.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
Publication date2016
Number of pages147