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  • Dec 23, 2014
  • Updated: 2:20am
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FOREIGN RELATIONS

Indian PM Modi praised for rebuffing China’s power play on Brics development bank

Differences over technical issues are still being ironed out, deputy foreign minister says following Indian reports of China's 'bullying'

PUBLISHED : Monday, 07 July, 2014, 12:07pm
UPDATED : Tuesday, 08 July, 2014, 9:25am

Indian Prime Minister Narendra Modi was praised by leading Indian newspapers for standing up to China amid negotiations over the establishment of a multinational development bank, which could turn into the “next India-China flashpoint”.

The world’s two most populous nations along with Brazil, Russia and South Africa –  dubbed the “Brics” countries – are in their last week of negotiations prior to a widely expected announcement of a new development bank.

Indian media reported that the negotiation process had thwarted an alleged attempt by China to “dominate” the new lending institution by infusing more cash in it than suggested by India.

The “Brics” bank is being set up to counter perceived excessive American influence on existing international and regional lending institutions such as the World Bank and Asian Development Bank. Brics countries have in the past called for a reform of the international lending system.

Next week, the heads of state of these five largest fast-growing emerging markets are scheduled to meet in Fortaleza, in northeastern Brazil, to announce the establishment of their alternative lender at the first multilateral meeting attended by India’s freshly minted prime minister.

China “proposed to contribute more than its share to the bank, which would give Beijing greater control over its affairs,” the Hindustan Times reported on Monday, citing unidentified sources. The newspaper warned the bank could become the “next India-China flashpoint” amid a territorial dispute in the Himalayas and long-standing tensions over India’s hosting of the Tibetan exile government.

Another contentious issue is the bank’s initial capital and its distribution among the five founding members. The bank’s initial capital is widely expected to reach US$50 billion, with each  Brics country contributing US$10 billion.

The Calcutta Telegraph said on Sunday that the Chinese, however, proposed to contribute more than other founding members, raising the total endowment to US$100 billion. India rejected the Chinese proposal, the newspaper said.

One compromise could be equal shares of capital for all the founding members, and thus equal votes, but then have trust funds, where some countries contribute more, argued Stephany Griffith-Jones, an economist at the Initiative for Policy Dialogue at Columbia University. "I do not think these discussions are evidence the Brics bank lending decisions will be politicized," she wrote in an email. "We should let it start working, before we can evaluate."

The bank is expected to start lending in 2016, Brazilian officials have told Reuters. By then, its capital should increase from US$50 billion to US$100 billion through further contributions by the founding and possibly new Brics members, as well as debt emissions, the income from interests on loans.

The future seat of the bank’s headquarters has also not been decided yet and remains a contentious issue, Indian papers reported.

Sujata Mehta, India’s secretary in charge of economic relations at its External Affairs Ministry, told the Calcutta Telegraph that negotiations on the headquarters would continue this week.

New Delhi, Shanghai, Johannesburg and Moscow are competing to host it, but Shanghai, the financial hub of the world’s second-largest economy, is the widely favoured candidate.

A third issue yet to be tackled is the new bank’s first president. Unlike the World Bank and International Monetary Fund, where presidents are traditionally Europeans or Americans, the new Brics bank will have a rotating presidency among the five founding members. Modi’s government has already voiced its preference for a first Indian president, according to The Indian Express.

Six weeks into his administration, Modi has made overtures about improving ties with China. India’s army chief, General Bikram Singh, returned to India from China over the weekend, ending the first visit of India’s top soldier to the neighbouring power in nine years.

Vice-president Hamid Ansari also met President Xi Jinping on a visit to Beijing last week.

In the run-up to the summit in Brazil, which will include a first meeting between Xi and Modi, Indian media have already called on the Hindu nationalist premier to stand up to the neighbouring economic powerhouse.

The Times of India conluded: “Modi’s diplomatic skills in preserving India’s interests will … be tested as Xi attempts to turn Brics into a platform from which to advance China’s global agenda.”

The press departments of India’s ministriy of foreign affairs were not available for immediate comment. 

Speaking at a press briefing on President Xi Jinping's trip to Brazil, Vice Minister of Foreign Affairs Li Baodong said discussions are still "ongoing in an intensive manner". Li said he was confident that consensus on remaining "technical issues" could be reached before the summit.

The ministry's press office issued a similar statement shortly after Li made his comments. 

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This article is now closed to comments

I Gandhi
BRICS isn't really an important organisation. Without China and the remaining BRIS wouldn't even be worth being set up. If Indian PM Narendra Modi doesn't want China to provide the additional US$50 billion can he get India to provide it? Without China's support BRICS is just an empty dead duck.
req
India should focus on building better sanitation facilities before it disputes with China on anything. The lack of education and sanitation is inhumane.
537106d2-c814-4548-9b03-34f10a320969
If the miserable Chinese stopped taking everyone's land then people would not have to flee. The Tibetans are taking shelter in India because they cannot stand the Chinese. Who can?
53919dad-e488-45a8-a2e5-0bca0a320969
bye-bye Modi and India, you just missed the train to escape dollar serfdom.
53919dad-e488-45a8-a2e5-0bca0a320969
and lose the caste system while they're at it.
53b625c6-e688-4f69-b873-743d0a320969
If China was America, India would have been bombed and attacked for harboring terrorist group led by Dalai. long ago
The Bush Doctrine says that any country sheltering terrorists hostile to America sill be attacked and bombed.
The Tibet terrorists have carried out terror acts against China and yet China has not responded in the slightest violent way towards India.
Wonder what would India do if terrorists causing bloodshed in India is being harbored by China in Chinese land?
India is too wise a nation not to put itself in the other's shoes.
537106d2-c814-4548-9b03-34f10a320969
Well how about china return the land it stole from india. At least india is a democracy. As for China, nobody wants to be under its rule except maybe the Chinese themselves.
webbocybase
This is a good idea, given that China's voting power in the IMF and World Bank is less than the Benelux countries, which is a ridiculous situation. But it is lazy journalism to call the BRICS the " five largest fast-growing emerging markets". They aren't particularly fast growing these days. Brazil, Russia, India and South Africa are all under-performing, and even China is slowing down though it alone is still growing well at the moment. Hopefully Modi will turn India round, and hopefully this new bank will help.
53b625c6-e688-4f69-b873-743d0a320969
India was a colony and China was a quasi colony of the west.
Both have risen from centuries of oppression and exploitation.
They should feel a special affinity with each other instead of feeling alienated from each other.
India should act like a truly independent nation by disposing the remnants of its ruler, the British Empire.
The land acquired by Britain in 1900 by negotiating and bullying the Tibetans should not be part of India as it was virtually stolen from China. Tibet had and still has no authority to negotiate with anyone.
India can show the world that it has rid of all colonial vestige by returning lands belonging to the real owner.
It takes a nation of great heart and courage to do so and I think India has great potential to be such a great nation
53c5d002-fcd4-4cfd-bfd2-52b60a3209cb
Whenever India steps into the world stage there are detractors and the Chinese are always jealous and so is their pooch Pakistan. Modi is now seen as the man that can relatively measure up against the atrocities of both these thrashy countries. The last time an Indian leader send shivers through Chinese spines and Pakistan hearts was Indira Gandhi and its about time a leader such as Modi teaches both China and Pakistan about humility and respectability, as Pakistan after all was born out of India. The way China shuts down dissent in Tibet and Xinjiang is a blatant violation of human rights and its about time the world starts punishing China for their arrogance. After all it was the Americans that handed down the economic might to China by continually handing over the MFN status to China for 10 years at a stretch. Instead they the Americans could have worked out with Indians and brought about stability in Asia through economic prosperity and social integration the Indian way. Well like it or not its going to be India's period of glory in history from now on.

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