What is Asian Infrastructure Investment Bank ?

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The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank that provides financing for infrastructure projects in Asia. Like other development banks, its mission is to improve social and economic outcomes in its region, Asia, and beyond. It has 106 member countries and $100 billion of capitalization, as of 2023.The AIIB was proposed by Chinese leader Xi Jinping to provide developing countries with an alternative to Western lending institutions, like the World Bank and the International Monetary Fund. It began operations in January 2016.

Definition

The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank focused on providing financing for infrastructure projects in Asia. Its mission is to improve social and economic outcomes in Asia and beyond by supporting infrastructure development.

Origin

The AIIB was proposed by Chinese leader Xi Jinping in 2013, aiming to offer developing countries an alternative to Western lending institutions like the World Bank and the International Monetary Fund. The AIIB officially began operations in January 2016.

Categories and Features

The AIIB is characterized by its multilateral nature and focus on infrastructure project financing. It differs from other development banks through its more flexible lending conditions and special focus on the Asian region. The AIIB has 106 member countries and a capital base of $100 billion.

Case Studies

A typical case is the AIIB's financing of the Karachi-Lahore Motorway project in Pakistan, aimed at improving the country's transportation infrastructure and promoting economic development. Another example is the AIIB's investment in Indonesia's power projects, helping the country enhance its electricity supply capacity to support economic growth.

Common Issues

Investors might be concerned about the AIIB's lending conditions and project selection criteria. Generally, the AIIB offers flexible lending terms but requires projects to meet certain sustainability and economic viability standards. Additionally, the AIIB's project selection is typically based on assessments of regional development needs.

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A liquidity trap is an adverse economic situation that can occur when consumers and investors hoard cash rather than spending or investing it even when interest rates are low, stymying efforts by economic policymakers to stimulate economic growth.The term was first used by economist John Maynard Keynes, who defined a liquidity trap as a condition that can occur when interest rates fall so low that most people prefer to let cash sit rather than put money into bonds and other debt instruments. The effect, Keynes said, is to leave monetary policymakers powerless to stimulate growth by increasing the money supply or lowering the interest rate further.A liquidity trap may develop when consumers and investors keep their cash in checking and savings accounts because they believe interest rates will soon rise. That would make bond prices fall, and make them a less attractive option.Since Keynes' day, the term has been used more broadly to describe a condition of slow economic growth caused by widespread cash hoarding due to concern about a negative event that may be coming.

Liquidity Trap

A liquidity trap is an adverse economic situation that can occur when consumers and investors hoard cash rather than spending or investing it even when interest rates are low, stymying efforts by economic policymakers to stimulate economic growth.The term was first used by economist John Maynard Keynes, who defined a liquidity trap as a condition that can occur when interest rates fall so low that most people prefer to let cash sit rather than put money into bonds and other debt instruments. The effect, Keynes said, is to leave monetary policymakers powerless to stimulate growth by increasing the money supply or lowering the interest rate further.A liquidity trap may develop when consumers and investors keep their cash in checking and savings accounts because they believe interest rates will soon rise. That would make bond prices fall, and make them a less attractive option.Since Keynes' day, the term has been used more broadly to describe a condition of slow economic growth caused by widespread cash hoarding due to concern about a negative event that may be coming.

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Liquidity Crisis

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Liquidity Event

A liquidity event is an acquisition, merger, initial public offering (IPO), or other action that allows founders and early investors in a company to cash out some or all of their ownership shares.A liquidity event is considered an exit strategy for an illiquid investment or equity with little or no market to trade on. Founders of a firm push toward a liquidity event, and investors like venture capital (VC) firms, angel investors, or private equity firms expect one within a reasonable amount of time after initially investing capital.

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Liquid Alternatives

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Zero-Coupon Convertible

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Zero-Investment Portfolio

A zero-investment portfolio is a collection of investments that has a net value of zero when the portfolio is assembled, and therefore requires an investor to take no equity stake in the portfolio. For instance, an investor may short sell $1,000 worth of stocks in one set of companies, and use the proceeds to purchase $1,000 in stock in another set of companies.