The Asia Infrastructure Investment Bank (AIIB) was established on Oct 24 with an initial capital of $50 billion and 21 participant states. AIIB is a diplomatic victory for China, despite opposition from the United States, says an article in the 21st Century Business Herald. Excerpts:

The AIIB will be another international financial organization independent from the financial system dominated by the West after the New Development Bank (NDB) of the BRICS states, Brazil, Russia, India, China and South Africa.

The establishment of the AIIB and NDB is a turning point in the transformation of the global structure after the 2008 financial crisis. The International Monetary Fund and World Bank should have done more to construct fairer rules, but the United States resists changes of the status quo. History proves that these organizations are actually tools of some developed countries to defend their own interests while preventing emerging economies from participating and establishing a new order in the global financial industry.

The emerging markets and economies have no choice but to unite with each other to set up their own financial organizations.

In fact, China takes the lead in building AIIB not only to counter the West’s influence, but more importantly to serve its own interests and those of the other Asian countries. Many Asian countries are in the initial or accelerating phase of industrialization and urbanization. They have strong demands for infrastructure construction in the energy, telecommunication and transportation sectors. The lack of funding, technology and experience is the main obstacle for them.

According Asian Development Bank, the main economies in Asia will need $8 trillion to ensure their domestic infrastructures reach the world average by 2020. The regional infrastructure constructions need another $300 billion.

China has the largest foreign exchange reserve in the world, and a strong motive to invest abroad. Currently, China is restructuring its industries and economies. Some industries are suffering from overcapacity and labor-intensive industries are seeking opportunities to relocate around the world.

Chinese enterprises have mature technology and experience in infrastructure constructions. The AIIB is a win-win cooperation between China and its Asian neighbors.