Will China-led development banks get the coveted boost to shape a new financial world order?
AIIB and BRICS Bank aiming for same recognition as World Bank, ADB from global credit rating agencies
The two development banks established under Beijing’s leadership, widely seen as China’s tools to help shape a new financial world order, are seeking ratings from international rating agencies to pave the way for future borrowing and the issuance of bonds.
The Shanghai-based New Development Bank, commonly known as the BRICS Bank, and the Beijing-based Asian Infrastructure Investment Bank (AIIB), are seeking credit ratings from Moody’s, Standard and Poor’s and Fitch Ratings, a vital step for them to borrow money in global capital markets and a key factor in deciding their financing costs.
Lenders such as the World Bank and the Asian Development Bank have obtained top-notch credit ratings from the major rating houses, but it is not yet clear if the two China-led banks will receive the same recognition.
The lenders, together with China’s domestic institutions such as the Silk Road Fund and the China Development Bank, will be the key players financing China’s ambitious “Belt and Road” international trade initiative.
Chinese President Xi Jinping will host the first “Belt and Road” summit in Beijing next month, with 28 state leaders confirming they will attend, to sell China’s vision of reviving old trade routes.
The New Development Bank (NDB) with an initial capital base of US$50 billion - China, Russia, Brazil, India and South Africa each paying US$10 billion - started operations in July 2015, but the sovereign ratings of Russia, Brazil and South Africa have since declined.