BRICS bank opens in China
July 21, 2015
The World Bank and the International Monetary Fund got a run for their money on Tuesday as the BRICS group of emerging economies opened its New Development Bank (NDB) in China's commercial hub Shanghai.
The bank will start out with $50 billion (46.1 billion euros) in authorized capital, provided by Brazil, Russia, India, China and South Africa - collectively known as the BRICS countries - which have pledged to double the amount in the coming years. Operations are scheduled to begin early next year.
Tipping the scales?
The five member states put the final touches on the NDB earlier this month during a summit in the Russian city of Ufa, where they also agreed a joint currency pool.
At the time, Russian President Vladimir Putin said "the New (Development) Bank will help finance joint, large-scale projects in transport and energy infrastructure, [as well as] industrial development."
Putin, who has fallen out of favor with Western leaders over his role in the Ukraine crisis, hailed the new bank as an "alternative to the existing US-dominated World Bank and International Monetary Fund."
The Washington-based institutions currently control much of global lending operations aimed at boosting economic growth and reducing poverty, but have in recent years been the target of much criticism, with developing nations complaining they don't have a big enough say.
By joining forces, the BRICS group, which represents some 40 percent of the world's population and accounts for about a fifth of global economic output, is betting that the New Development Bank can correct this perceived imbalance.
Despite this thinly veiled power grab, the World Bank said it hopes to work with the newcomer.
"We are committed to working closely with the New Development Bank and other multilateral institutions, offering to share our knowledge and to cofinance infrastructure projects," World Bank president Jim Yong Kim said in a statement.
The Red Dragon
With Beijing supplying nearly 40 percent of the bank's funds, the NDB represents China's latest effort to assert itself on the international stage - a role many in the country see as more fitting of the world's second-biggest economy.
However, the Chinese government has gone out of its way to dispel any notions of the newly established institution as a geopolitical weapon.
"The NDB will supplement the existing international financial system in a healthy way and explore innovations in governance models," Finance Minister Lou Jiwei said at the opening ceremony in Shanghai.
Chinese analysts echoed such sentiments: "It's a complement, instead of a challenge, to existing international institutions," said Li Daxiao, chief economist of Yingda Securities.
"It can help strengthen the currency markets and maintain a stable financial order through the internal stabilization of the BRICS countries," he added.
All eyes on Asia
Still, it will do little to appease skeptics in Washington and Tokyo, who are keeping a close eye on the Red Dragon's global ambitions.
The NDB's launch follows hot on the heels of another eyebrow-raising effort spearheaded by China, the Asian Infrastructure Investment Bank (AIIB). The Beijing-based institution has secured the backing of 57 nations from five continents, including Germany and Britain. At 30 percent, the communist-capitalist leadership by far controls the biggest stake. The US and Japan have refused to back the initiative.
pad/hg (AFP, dpa, Reuters)