The Political Economy of Aiib Lending

As the Asian Infrastructure Investment Bank (AIIB) enters its second decade in early 2026, this study examines the determinants of its lending behavior, focusing on the interplay between Chinese influence and multilateral institutional safeguards. Drawing on a comprehensive dataset spanning 2016-2024, we employ a two-stage empirical approach to distinguish between factors driving loan selection and those determining allocation amounts. Our findings reveal institutional complexity: while loan selection exhibits a "supplementary" logic, where trade integration with China and less democratic governance significantly increase the probability of approval, loan allocation follows a "remedial" logic, characterized by smaller funding amounts for close diplomatic partners and countries heavily indebted to China. Furthermore, the analysis provides evidence of a strategic "division of labor," with the Bank exercising greater caution toward lower-income, less democratic Belt and Road Initiative (BRI) participants. Finally, we observe a temporal shift toward a more pragmatic, trade-oriented focus following the COVID-19 pandemic. These results suggest that the AIIB has matured into a sophisticated multilateral actor capable of balancing shareholder-driven strategic interests with the established norms of multilateral development finance.

China · Corporate governance · Democracy · Loan · Politics · Banking stability, regulation, efficiency · Global Financial Crisis and Policies · International Development and Aid