Brazil’s President Dilma Rousseff, second from right, proposes to other leaders of the BRICS nations, from left, Russia’s President Vladimir Putin, India’s Prime Minister Narendra Modi and China’s President Xi Jinping, to join hands for their group photo at the BRICS summit in Fortaleza
A developing nation version of the World Bank was formally agreed this week two years after India proposed the idea to Brazil, Russia, China and South Africa. Yet even as the five governments hailed its formation, there were questions about whether four of them might simply be paying to move from U.S. financial hegemony to dominance by another economic superpower: China.
India ensured a sense of parity with its insistence that each of the countries behind the New Development Bank contribute equal shares of $10 billion to its initial USD50 billion capital. Like the World Bank, the new institution plans to fund development projects in poor countries.
But India failed in its bid to host the new bank’s headquarters in New Delhi. It will be located in Shanghai instead.
The headquarters skirmish was part of a larger struggle to keep China, the world’s second-biggest economy, from dominating the new bank the way the United States has dominated the World Bank and International Monetary Fund. Losing out to Shanghai set off a flurry of concern in Indian media that instead of the consensual approach that India originally envisioned, the new institution could be used to promote China’s priorities.
“At worst, India has been conned by China into giving Shanghai $10 billion, to start off with, to pursue Chinese interests in the developing world,” columnist Mihir S. Sharma wrote in the Business Standard newspaper.
India has long been suspicious of its giant neighbor to the north and border disputes still fester. Plus, for about a decade, India hoped to match or even outpace the Chinese economic juggernaut when its own economy was growing at 8-9 percent. That dream has crumbled in recent years. India’s economy slowed to less than 5 percent growth in the last two years and China, while also slowing, continued to outpace it.
In another concession to parity, the New Development Bank will have a rotating presidency shared among the member nations. But there is no doubting that China’s priorities will carry significant weight.
The Chinese economy is four times the size of India’s and larger than the combined economies of India, Russia, Brazil and South Africa. Take the C out of BRICS as the five are known and it becomes a much less muscular grouping.
Still, some economists argue that the significance of the development bank and the Contingent Reserve Arrangement, a $100 billion financial safety net similar to the International Monetary Fund, also agreed at the summit in Brazil, is useful as an alternative to the U.S.-dominated global economic system. AP
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