CHINA'S POLITICAL ECONOMY INTERESTS IN THE ESTABLISHMENT OF THE ASIAN INFRASTRUCTURE INVESTMENT BANK (AIIB) IN THE ASIAN REGION

CHINA'S POLITICAL ECONOMY INTERESTS IN THE

ESTABLISHMENT OF THE ASIAN INFRASTRUCTURE INVESTMENT

BANK (AIIB) IN THE ASIAN REGION

Introduction

Before becoming a giant of the world economy as it is today, China at the beginning of its

establishment was not a strong country and was a country that was backward and closed

itself off from international relations, China was also listed as the poorest country in the

world with all its problems. During the leadership of Mao Zedong, China's economic

conditions at that time were very unstable, this was the result of the application of the

merxism economic system adopted by China, where market activity was centralized in one

control and all economic output was fully controlled by the state and China was very closed

from international relations. This was done by the Chinese government with the intention of

making China's economy relatively independent which ultimately had an impact on limited

trade activities and all foreign economic activities, which then caused distortions in the

country's economy (Nurjannah, 2017).

However, after being under the leadership of Deng Xiao Ping in 1979 China began to

experience a revival in its economy with the reform strategy and open door policy, through

this policy China began to open up to foreign investment and began the process of

industrialization as the biggest door to the revival of its country (Sanjaya et al., 2015).

Starting from that time, China's economic system, which previously implemented a

centralized economic system, turned into a liberal economic system. China's economic

reforms brought China's foreign trade and economic activities to a level and structure that

was parallel to modern industrial countries. so that since the appointment of this economic

reform China has developed into the fastest growing economy in the world, and the success

of China's rise has continued and continued and even further improved during the leadership

of Xi Jinping, where the bamboo curtain country has managed to occupy the position of the

country with the largest and most complex economy in the world over the past few years

(Sanjaya et al., 2015).

China's success in its economic revival has led the country to become the second largest

economy in the world and at the same time become a world economic giant that can have an

influence on global economic conditions, and its achievements have succeeded in creating

interest for other countries in the world, ranging from developed countries, developing

countries to third world countries to interact and cooperate in various fields, especially in the

economic field in the hope of a mutually beneficial relationship with each other (Anggraini,

2019).

China in improving and expanding its wings in order to maintain the existence of its

country, especially in terms of the economy and achieving its hegemony status and

strengthening its dominant role in international relations, China makes various efforts and

strategies, one of which is by controlling various regions in the world and in achieving this

China utilizes and optimizes all its potential and advantages. And one of China's advantages

is in the economic field so that China has a lot of cooperation in the economic field with

other countries in various regions, besides that China also disburses a lot of financial loans,

foreign aid or investment to many countries, especially to developing countries, in doing so

China wants a mutually beneficial cooperative relationship between the country and the

recipient country.

China's foreign aid is given to developing countries in almost all regions of the world,

such as Africa, Latin America, and of course in Asia.If accumulated, China has provided

foreign aid to approximately 161 countries around the world in 2011. of which 30 countries

in Asia, 51 in Africa, 18 countries in Latin America and the Caribbean, and 12 each in

Oceania and Eastern Europe. This assistance is provided not only as cooperation that benefits

each other but also to be able to create dependence by the recipient countries on China which

will then automatically increase China's influence in countries in various regions (China

Government, 2011). China also established various international regimes and institutions

engaged in trade, investment to finance and one of the various existing institutions is the

establishment of the Asian Infrastructure Investment Bank (AIIB) in Asia (Debora, 2017).

However, the countries that are members of this bank are not only countries from the

Asian region, but also China managed to attract members from various other world economic

powers such as France, Australia, Germany and Italy. However, the establishment of

international financial institutions by China is considered or considered to contain elements

of China's geopolitical and geoeconomic interests and is also used as a tool used by China to

expand its hegemony in the region and the countries that are members of it (Fanny et al.,

2019).

Based on the existing background, the author is interested in discussing and further

examining what factors are behind China in the formation of the Asian Infrastructure

Investment Bank (AIIB) in order to achieve its interests. The main point to be analyzed is

how the efforts made by China in achieving its political and economic interests in the Asian

region through the formation of the Asian Infrastructure Investment Bank (AIIB). The

purpose of writing this article is to find out the reasons underlying China in its strategy to

achieve its country's interests in the Asian region through the establishment of the Asian

Infrastructure Investment Bank (AIIB). In working on this article, the author uses the

Hegemonic Stability Theory and the concept of national interest as a theoretical review to

discuss issues related to political economy interests carried out by China.

China in the Asian region through the establishment of the Asian Infrastructure

Investment Bank (AIIB). The theory of hegemony stability itself focuses on the role of

developed and powerful countries in the economic and political sectors, because basically the

implementation of hegemony aims to show how much position and role a country can play

towards other countries. As well as the concept of national interest or national interest itself

where the concept of national interest is generally used to explain the behavior of a country

or foreign policy taken by that country (Jackson et al., 1919). By using these two theories

and concepts, we can analyze why China has strong ambitions in the establishment of the

Asian Infrastructure Investment Bank (AIIB) to achieve its economic and political interests

in the Asian region (Burchill, 2005).

Methods

This research uses a Qualitative approach, this qualitative approach is taken by the author

because the qualitative approach itself is a research approach that starts from the design, data

collection process, data management, data analysis and formulation of

conclusions/generalizations of research results to theoretical reflection on the conclusions of

research results using aspects of non-numerical tendencies. numerical calculations. Because

this research will be exploratory or dig deeper in order to produce new knowledge findings

where in this research the author will also describe, explain and analyze in more depth about

the research topic being studied, namely China's economic and political interests in the Asian

region through the establishment of the Infrastructure Investment Bank (AIIB). then the

author also uses data collection techniques using the literature study method, namely the

author analyzes the topic of the problem to be studied and is supported by data taken from

documents, journals or books, as well as various other credible sources both online and print

media that are relevant to the research discussion.

Results and Discussion

In the international world, China has shown its existence as one of the world's economic

powers, seeing that China itself is a country that has succeeded in shifting the United States

as a world hegemony country since World War II. China's emergence in the international

arena is considered a great force, China became the country with the fastest economic growth

in the world which eventually led China to successfully occupy the second position as the

largest economic country in the world after the United States. China's increasing influence in

the global economic system is inevitable, where China has become a new center of gravity in

the world economy (Rafsanjani, 2020).

With the rapid growth and also its economic development, China managed to attract the

attention or interest of many countries in the world with its new axis of global economic

power. And since the emergence of China as a "great power", China has continued to expand

the economic power of its country (Natasya, 2018). In achieving this, of course, China

carries out various strategies to expand its influence in the international world order by

utilizing all the strengths and capabilities and advantages it has. Where China in achieving

the economic success of its country cannot be separated from its role in the formation of

various regimes and also international institutions engaged in trade, investment, and finance.

This is implemented by China's success in realizing the establishment of an international

financial institution called the Asian Infrastructure Investment Bank (AIIB). The discourse

on the formation of the Asia Infrastructure Investment Bank (AIIB) by China has basically

existed since 2010, but this discourse could only be echoed by the President of China, Xi

Jinping, during the APEC Leaders held in United States in October 2013 (Fanny et al.,

2019). Xi Jinping explained that the AIIB is a bank formed for multilateral development that

offers priority needs in funding for the infrastructure development needs of countries in the

Asian region. And the discourse on the formation of AIIB has received many positive

responses not only from countries in the Asian region but also several countries in the

European region (Juriani, 2020).

The Asia Infrastructure Investment Bank (AIIB) was then officially established on

October 24, 2014, with the signing of the memorandum of understanding for the

establishment of the AIIB held in Beijing, China by 21 countries. then continued on June 29,

2015, where 57 prospective founding member countries signed the Article of Agreement

(AOA) which was again held in Beijing, China. Prospective founding member itself is a

naming for the 57 founding countries of the AIIB and has China as its chairman. The 57

member countries are mostly from countries in the Asian region, as they consist of 3 East

Asian countries, 10 countries from Southeast Asia, 6 countries from South Asia, then 7 from

Central Asia, 2 from Oceania, and 7 countries from the former Soviet Union then there are 9

countries from the Middle East and 17 from European countries as well as one from Latin

America and 2 from African countries (Sekine, 2015). Because AIIB is a bank that has a

main focus on development investment in the Asian region, so that more shares are held by

countries in the Asian region compared to non-regional Asian members. Until now, countries

that are members of the AIIB membership have reached 100 countries spread throughout the

world.

AIIB was established as an international financial institution that has a function or

purpose as a body that promotes and increases various public and private investments in the

Asian region based on development goals and especially for infrastructure development and

other productive sectors and also encourages sustainable economic development efforts and

creates prosperity and also improves infrastructure connectivity in the Asian region by

investing in infrastructure and other productive sectors by promoting regional cooperation

and partnerships in addressing development challenges in collaboration with other

multilateral and bilateral institutions (AIIB, n.d.).

The increase in infrastructure for economic development is an important thing in the

Asian region, seeing that in the 2016 - 2030 timeframe the Asian region is expected to

require considerable investment capital, which exceeds US $ 26 Trillion, which is annually

around US $ 1.7 Trillion with the procurement of US $ 14.7 Trillion for investment in the

electricity sector and for the transportation sector of US $ 8.4 Trillion, then investment in the

telecommunications sector will reach US $ 2.5 Trillion, as well as for clean water needs and

also handling sanitation is expected to be US $ 800 billion during that period. Based on this

data, the capacity of Asian countries and the private sector to finance infrastructure is less

able to meet the needs of growth in the Asian region until 2030 and from the investment

needs of 24 Asian countries amounting to US $ 26 Trillion can only be fulfilled around US $

881 billion per year. Seeing this, AIIB can be one of the best solutions in overcoming these

things, because considering that the formation of this Bank is designed to provide assistance

in improving infrastructure development and regional connectivity in Asia, where the

prospect of reference shown by AIIB in covering infrastructure with its priorities includes

such as the development of transportation, energy, industrial communications and agriculture

in the Asian region (ADB, 2017).

So that there will be a lot of benefits for the countries that join the AIIB, where with the

guaranteed development in the Pacific countries, countries can be connected to each other

through the transportation routes built, energy sources, communication connected to each

region, industry will increase with the assistance of development costs provided, farmers will

be more advanced, equipment is more advanced so that it can automatically ensure economic

development and integration and the potential of countries in the Asian region can grow

rapidly which ultimately creates benefits (Zhenglong, 2014).

The establishment of the Asian Infrastructure Investment Bank (AIIB) by China's

initiative is basically intended for the establishment or establishment as a new development

bank to build the economies of countries in the Asian region and the establishment of AIIB

in Asia is expected to be a way to bring the Asa region into a region that can grow quickly

and more advanced. But in addition to creating these benefits, China as the founding country

of AIIB certainly has underlying interests.

It cannot be denied that the formation of AIIB as an international financial institution is

considered as one of China's efforts to strengthen its influence in the Asian region and

increase its important role in the world economic system.seeing that the Asian region itself is

a region that is considered very strategic with all its potential, and this region is also the most

dynamic region in economic growth. The strategic position it has makes the Asian region an

important center of activity in the global political arena. So there are several reasons that are

considered to be China's political economy interests in the formation of this AIIB.

Seeing that the AIIB is intended to help capitalize financing in infrastructure development

in the Asian region through investment of both funds and resources by the state member

countries. And one of China's interests in the economic field is to expand the country's

foreign market, as it is known that China itself has more production capacity in key sectors

such as solar, cement, steel, and also construction. These sectors will certainly have an

impact on projects operated by AIIB and this will provide income for China and strengthen

markets abroad. Internally, AIIB also supports Beijing's banking policy to finance foreign

investment projects, and Chinese companies directly through AIIB will have the opportunity

to advance globally. So the existence of AIIB will have a good impact on China's efforts to

overcome China's own economic stability.

AIIB is also intended by China as a tool to be able to cover areas that have the potential to

unite the flow of Chinese power and help smooth out the previously created program, namely

OBOR, which allows the position of the silk route which outlines countries in the Asian

region by making China the center. Where AIIB's priorities have further indicated that this

bank will systematically promote China's economic interests in Asia and other regions to

support the OBOR initiative. The establishment of AIIB is nothing but a new form of

initiative at this time by attracting the attention of Asian countries through capital assistance

and investment that plays in infrastructure issues (Raharyo, 2018).

In the political field, China's interest in the formation of AIIB in the Asian region is one of

course as a country that has a large economy, China must be able to maintain and also

expand its influence in various regions and even the world. And Asia itself is a region that

has quite high potential in various fields such as in terms of economy, resources and this is

an important region for superpowers such as the United States and of course China. The

formation of AIIB is also based on China's interests which seek to reduce or shift the power

of the United States which has been considered to have a lot of roles in these Asian countries

both in the form of cooperation and regarding the issue of loan funds (Fanny et al., 2019).

China's emergence as a "great power" in the international world makes this country

continue to have ambitions to expand its economy and increase the role of its country

towards other countries in order to maintain its existence in the international world and

become a country that can "control" other countries by increasing its influence. China's

efforts are an illustration of the term hegemony itself, which means an attempt to express the

dominant and oppressive status of an element towards others.

As a hegemon state, China is considered to have the capacity to carry out Hegemonic

Stability with its main task as the guardian of world political stability and security, as well as

the guardian of economic stability. And the formation of AIIB is one of the strategies made

by China to achieve this, where China formed AIIB as a new international financial

institution in the region to offer convenience - convenience for many countries in the Asian

region and countries incorporated in it to utilize and use AIIB funds in their country's

infrastructure development needs, and this is what will then make countries in the Asian

region dependent on China as the founding country of AIIB. This dependence will indirectly

lead to hegemony and this materializes China's leadership towards countries in the Asian

region as proposed by Charles Kindlebeger regarding Hegemonic Stability, whose focus of

attention lies on the role of developed and strong countries in the economic and political

sectors carried out against other countries.

Then, in addition to achieving China's status as Hegemonic Stability, the establishment of

AIIB is also a tool in achieving China's national interests, where national interest itself is a

concept in international political discourse and the concept of national interest is used to

explain state behavior or foreign policy taken by the state. As for some of China's interests to

be achieved through the establishment of the AIIB, among others, for political stability, then

sovereign security, territorial integrity and also national unification and of course to create a

sustainable economy and national development.

In the fulfillment of its interests, of course, every country will make every effort that it

thinks is best to carry out its interests. In addition, referring to what Waltz said that state

leaders will automatically know when and where they should move in realizing the

fulfillment of their country's interests, this is relevant as what Xi Jinping did as the president

of China in initiating the formation of AIIB in the Asian region which was created as a bank

for multilateral development that offers priority to the Asian region funding for the

infrastructure development needs of countries in the Asian region, when seeing that

infrastructure development is important for countries in the Asian region with limited

investment capital owned by these countries, so that AIIB is considered as one way out of the

problem and at the same time makes China make this AIIB an effort in achieving the national

interests of the country.

Conclusion

China's rise as a superpower in the economic field began with economic reforms that

occurred in the country which eventually now leaves an impact throughout the world. With

its enormous economic power, China is trying to secure its national interests in the future

through various projects and initiatives such as OBOR and the establishment of AIIB. For

China, the formation of AIIB in Asia is to maintain China's national interests and influence

in the region, but the formation of AIIB is not only to expand its influence and interests in

the region but also to increase international trade connectivity which will also help China's

domestic economy. So it is natural for China to consider countries in the Asian region as a

"sphere of influence" because considering its rivals, namely the United States and Japan,

have a fairly large and strong presence in the region. And as a new superpower, China

considers it an obligation to have a sphere of influence like the previous world superpowers,

especially seeing the presence of the United States in the Asian region, so it is important for

China to maintain security and national interests in this region, and the formation of AIIB is

one of the strategies in realizing this.