China's status deficit and the debut of the Asian Infrastructure Investment Bank

This paper seeks to explore whether the Asian Infrastructure Investment Bank (AIIB) has become an instrument of power led by China to fulfill her geopolitical interests. After an investigation of the AIIB's power structure, institutional design, and its 34 approved projects, this study finds that although the AIIB deviates to some extent from international standards while considering loan decisions, the bank itself does not appear to be a norm challenger so far. Instead, it has become more cooperative and inclusive, with a shifting focus towards mutually beneficial cooperation and reform of the international financial system. This paper argues that the AIIB's current configuration results from the decrease in China's status deficit-the gap between China's recognized international financial status and its own perception of its financial power. Quantitative and qualitative evidence shows that when the idea of the AIIB was first conceived, China's status deficit was large, which meant that in a global power struggle the AIIB was more likely to be manipulated by a dissatisfied China. As the AIIB evolved, China's international financial status gained positive recognition and the AIIB received wider acceptance; China's status deficit shrank. As a result, the AIIB has become a reform-minded multilateral financial institution that has made concessions to establish rules and has sought collaboration with its counterparts.