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Chapter IV: Case Study - China in Asian Development Bank
Unlike the WB which is a global MDB under the Bretton Woods system, the ADB is a regional MDB that speaks more directly to filling the infrastructure gap in Asia. However, the ADB is reported to be adjusting its long-term focus since the creation of the other regional MDB, the AIIB, has become the major MDB that endorses infrastructure projects in the region. Nevertheless, from the annual reports, researchers could compare that the ADB annual commitments to each Asia sub-region is either the same or ⅔ amount of that of the World Bank’s, meaning that the ADB’s lending capacity and influence in the region is not to be underestimated.
The relationship of China and the ADB is thus becoming more intricate since the meaning of more influence in the ADB is getting more geopolitical and economic interests. To avoid competitiveness with the AIIB and the BRI, the ADB now turned to optimize its role of promoting general development practice and regional integration, where China still has a hand in the game. A 2019 CSIS report states that though China has emerged as a major contributor in regional integration, the plan is more likely to face impediments as the BRI and AIIB practices are under more scrutiny in the world’s eyes. Also, as the US-China tension continues to be high, ‘the ADB can leverage its respected role in the region to bypass sovereign disputes and connect ASEAN economies with one another.’1 Thus, it makes sense for China to ramp up its clout in the ADB to guide its agenda towards syncing up with the BRI ambitions and the AIIB projects. As performed in the previous chapter for the World Bank analysis, the structure of the ADB would be discussed before we dive into project
1 Runde, D. F., & McKewon, S. (2019, December 18). The Asian Development Bank: A Strategic Asset for the United States. Center for Strategic and International Studies. https://www.csis.org/analysis/asian-development-bank-strategic-asset-united-states
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details.
1. Asian Development Bank’s formal structure and voting mechanism
The organizational structure of the ADB is designed similarly with the WB. Instead of 25, the ADB Board of Governors appoint 12 Board of Directors that are in charge of the Bank’s general operations. According to the charter of ADB, the Board of Directors ‘(i) takes decisions concerning policies of the Bank, and loans, guarantees, investments and technical assistance by the Bank, (ii) approves borrowings by the Bank, (iii) clears the financial accounts of the Bank for approval by the Board of Governors, and (iv) approve the budgets of the Bank.’
Thus, just like in the World Bank, the real decision-making power for project, loan, budget, and policy approvals all reside in the Directors.
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Figure 4.1 Asian Development Bank Functional Organizational Chart
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Source: Asian Development Bank. (2021, January). ADB Functional Organizational Chart [Chart]. Asian Development Bank.
https://www.adb.org/sites/default/files/page/532576/adb-organization-chart-functional.pdf
The President of the ADB not only chairs the Board of Directors, but it also leads a management team of six Vice-Presidents supervising departments of different functions, including regional operations, private-sector operations, knowledge management, finance and risk management, and corporate administration. For two terms in a row, the position of the Vice-President for Operations 1 (South, Central and West Asia) has been served by Chinese officials, Zhang Wencai and Chen Shixin, since 2013. Both served as one of the Board of
2 Asian Development Bank. (2021, January). ADB Functional Organizational Chart [Chart]. Asian Development Bank.
https://www.adb.org/sites/default/files/page/532576/adb-organization-chart-functional.pdf
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Directors in the ADB and the World Bank, respectively, prior to joining the ADB as Vice-President. The background of Chen Shixin, the current Vice-President Operations 1, especially hints at a plan to align the agendas and practices of multilateral institutions in the region, as he was one of the Board of Directors in the New Development Bank and the AIIB from 2016 to 2018. Also, it gives China possibly more control for rhetoric and room for facilitating co-financing projects with the AIIB for BRI projects that falls into the “connectivity” theme in South, Central and West Asia.
Voting mechanisms are also the same between the WB and the ADB. With a weighted voting system, the voting share of each member state is distributed according to its capital shareholdings. To be precise, as the annual reports noted, 20% of the aggregate sum of the basic votes and proportional votes plus proportional votes that are determined by each member’s subscribed capital make up the voting share of each member.3 According to the latest 2019 annual report, Japan and the US have each taken up over 12% of the total voting share, asserting dominance in the Bank, followed by China who holds 5.437% voting share.
Aside from some other non-regional members who hold a mid-sized voting share, major South Asia and South East Asia countries such as Pakistan, India, the Philippines, Indonesia, and Thailand also hold a fairly mid-sized voting share over 1% each. Central Asia countries altogether account for 3.3% voting share. West Asia countries such as Georgia, Azerbaijan and Armenia also account for over 0.5% each.4 Those could all be counted as small to mid-sized member states that could become pivotal in votes if China found issue-linkages to form coalitions with them. Even so, China might want to seek more soft influence within the World Bank, while the voting power between China and the top two member states are very different.
3 Asian Development Bank. (2020, July 14). ADB Annual Report 2019. https://www.adb.org/documents/adb-annual-report-2019.
4 ibid.
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Moreover, there are not enough members of the Asian Development Bank as global organizations to become China's allies for them to win through the hard structure.
For ADB’s sovereign financing project cycle, the Bank has combined the Appraisal Stage of the WB’s project cycle with the Approval Stage. Procedure wise, the two banks practice almost identical procedures, both containing back and forth confirmation and negotiation stages during Preparation and Approval stages while stakeholders have time and space to maneuver and lobby. One can find more detailed descriptions from the ADB webpage where the figure below was borrowed from.
Figure 4.2 ADB Project Cycle
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Source: Asian Development Bank. (2020, September 29). Public Sector (Sovereign) Financing: Operations - Project Design and Management: Project Cycle.