China sees itself taking key role in proposed BRICS international bank
Teddy Ng in Beijing and Agence France-Presse in Fortaleza, Brazil
China is positioning itself as a major player in providing alternative financing to emerging markets as they meet for their summit in Brazil.
Leaders of the five big emerging economies known as the BRICS, which also include Russia, South Africa and India, were due yesterday to sign off on a new development bank and a reserve fund they hope can act as a counterweight to Western-led financial institutions.
The bank will have initial capital of US$50 billion, with each country contributing an equal share. In addition, a US$100 billion reserve would also be established, with US$41 billion coming from China, US$5 billion from South Africa, and Brazil, India and Russia each putting in US$18 billion, officials said.
The leaders are still negotiating the location of the bank's headquarters, although Shanghai is said to be the front runner.
In his talks with Russian President Vladimir Putin before the summit, President Xi Jinping called for more co-operation among the five countries to enhance their bargaining power on the global stage.
Wang Dehua , a professor at the Shanghai Institutes for International Studies, said China was aiming to boost its influence in the bloc by contributing more of the funding.
"As the world's second largest economy, it is expected China would want to have more influence in the bank," Wang said.
Oliver Rui, a professor of finance and accounting at the China Europe International Business School in Shanghai, said the new bank would offer the five nations a united front against the Western-led World Bank and the International Monetary Fund, which did not offer favourable terms to developing nations.
"They want a platform where they can actively participate in it and have influence," Rui said.
For China, the new bank allows it to diversify the concentration of its US$3.9 trillion in reserves away from US treasuries. Financing projects in developing nations could also expand the yuan's role as an international currency, Rui said.
But Wang said China might face opposition in its bid to exert greater control over the bank's operations.
"China needs to constantly convince the other nations that it is not seeking to dominate the bank," he said.