Thinking like a creditor : risk, leverage and multilateralism in China's development finance

The establishment of the Asia Infrastructure Investment Bank (AIIB) by China has raised many questions from global public. Most importantly, what are China’s motivations behind the decision of the AIIB? And why does multilateralism become a favored approach in China’s international development finance? Contrary to existing explanations which mainly focus on China’s strategic and geopolitical ambitions, this thesis provides a functionalist and pragmatic perspective: the economic rise of China has enabled the communist state to become a major sovereign creditor in international finance landscape in recent years. However, this new position in global financial system also brings China many structural challenges faced by other similar sovereign creditors, namely management of various lending risk and private fund leverage. To safeguard its valuable financial resources, China turns to multilateralism and multilateral institutions such as the AIIB, because they could be utilized as reliable and effective financial vehicles to help sovereign creditors like China in collecting information, hedging credibility problem, sharing burden and risk with others, as well as tapping private capital to supplement its financing goals.Arts, Faculty ofPolitical Science, Department ofGraduat