The newly formed development bank at the ongoing Brics summit in Brazil will strengthen the world financial system and help restore some balance to the structure long criticised for being tilted towards west-dominated financial institutions.
Calling it a long-held dream for developing countries, China’s state-controlled media said Wednesday that the development bank, formed within two years after it was first raised at an earlier Brics summit, will boost the confidence of investors in the capacity and competitiveness of the five Brics countries (Brazil, Russia, India, China and South Africa).
“The BRICS development bank and the contingent reserve arrangement (CRA) are expected to help the BRICS countries tap their market potential and diversify exports, and offers more options for them when developing their economies while avoiding risks,” the official news agency, Xinhua, said in a commentary.
“The ongoing Fortaleza summit is a launch pad for two financial institutions: the New Development Bank (NDB) and the CRA. This will signify a substantial institutional step forward” the state-controlled Global Times newspaper reported.
The Shanghai-headquartered bank will have an initial authorised capital of $100 billion and its initial subscribed capital of $50 billion will be equally shared among founding members.
“The shared portion means each member country shoulders equal responsibility and their cooperation is based on an equal footing from the start,” the Xinhua commentary said.
It added that the bank is expected to facilitate trade, enhance financial ties, tackle tax-related challenges and tap the cooperation potential in more fields.
According to the newspaper, the CRA, which will also be built up to $100 billion, is aimed at dealing with all emergencies during the time of a financial crisis.
It added: With a different shareholding structure and operation model from the World Bank and the IMF, the BRICS-led development bank and the reserve fund better embody democracy, which will attract more countries to join in, thus injecting an element of healthy competition among financial institutions.
“Consequently, competition could stimulate the World Bank and the IMF to promote reforms on shareholding and operation,” it said.
Expectedly, the commentaries sidestepped the apprehension that China was attempting to play a larger, more influential, role in the bank because of its economic clout. Instead, the tone in the state media was that the bank would act as alternative to the WB and IMF, seen to be heavily influenced by the US.