THE BRICS nations stepped onto the stage of global finance yesterday with the launch of the New Development Bank (NDB) in Shanghai.
Chinese Finance Minister Lou Jiwei, Shanghai Mayor Yang Xiong and NDB president Kundapur Vaman Kamath attended the opening ceremony.
“Our objective is not to challenge the existing system as it is, but to improve and complement the system in our own way,” said Mr Kamath.
Mr Lou said the NDB would serve as an alternative to the existing international financial system and focus its efforts on innovation and governance.
However, the bank creates an alternative to the larger, Western-controlled Bretton Woods institutions — the International Monetary Fund and the World Bank — founded near the end of World War II.
The NDB, launched with an initial capital of $50 billion (£32bn), will invest in development and infrastructure projects. It aims to increase its worth to $100bn (£64bn).
The six Brics nations — Brazil, Russia, India, China and South Africa — agreed to set up the bank at the bloc’s sixth summit in Brazil in July 2014.
Details were finalised at a joint Brics and Shanghai Co-operation Organisation summit in Ufa, the capital of the Russian republic of Bashkortostan, earlier this month.
On the sidelines of that summit, the five developing nations also agreed to set up a $100bn (£64bn) reserve currency pool, the Contingent Reserve Arrangement (CRA), to help members if they suffer a liquidity crisis.
China has contributed $41bn (£26bn) to the CRA, Brazil, India and Russia $18bn (£12bn) each and South Africa $5bn (£3bn).
Chinese economist Li Daxiao said: “It can help avoid another crisis through establishing a fund pool within the Brics which can help cushion instability in the currency market.”
Unlike the World Bank, whose members’ voting power is based on the size of their investment — and is therefore dominated by the US — each of the NDB’s members will have equal say in its running.
Earlier this month, Venezuelan President Nicolas Maduro proposed that the anti-imperialist Alba bloc of Latin American and Caribbean nations join the NBD “in order to build new financial realities.”