The heads of state of three of the five BRICS countries - Russia, India and Brazil – pose for a photograph during the 2014 BRICS Summit. Credit: Official Flickr Account for Narendra Modi/CC-BY-SA-2.0

By Kanya D'Almeida
UNITED NATIONS, Jul 7 2015 (IPS)

Just days ahead of a summit of the BRICS group of emerging economies (Brazil, Russia, India, China and South Africa) in which the five countries are expected to formally launch their New Development Bank (NDB), 40 NGOs and civil society groups have penned an open letter to their respective governments urging transparency and accountability in the proposed banking process.

“In terms of the type of development the bank delivers, we don't have signs yet that the NDB will go in a qualitatively different direction than the Washington Consensus institutions." -- Gretchen Gordon, coordinator of Bank on Human Rights
The NDB is expected to finance infrastructure and sustainable development in the global South.

With an initial capital of 100 billion dollars, it was born from a combination of circumstances including emerging economies’ frustration with the largely Western-dominated World Bank Group (WBG) and International Monetary Fund (IMF).

According to a 2014 Oxfam Policy Brief, another factor leading to the creation of the BRICS Bank was a major gap in financing for infrastructure projects, with official development assistance (ODA) and funding from multilateral institutions meeting just two to three percent of developing countries’ needs.

Strained by economic sanctions as a result of the Ukrainian crisis, Moscow has been particularly keen to bring the fledgling lending institution to its feet and has been pushing international rating agencies to rate the bank’s debt, as a necessary first step for it to begin operations.

Even without counting the contributions of its newest member – South Africa – the four BRIC nations represent 25 percent of global gross domestic product (GDP) and 41.4 percent of the world’s population, or roughly three billion people.

In addition, the borders of these countries enclose a quarter of the planet’s land area on three continents.

But even as the five political leaders prepare to take centre stage in the Russian city of Ufa on Jul. 9, citizens of their own countries are already expressing doubts that the nascent financial body will truly represent a break from traditional, Western-led development models.

“The existing development model in force in many emerging and developing countries is one that favors export-oriented, commodity driven strategies and policies that are socially harmful, environmentally unsustainable and have led to greater inequalities between and within countries,” said the statement, released on Jul. 7

“If the New Development Bank is going to break with this history, it must commit itself to the following four principles: 1) Promote development for all; 2) Be transparent and democratic; 3) Set strong standards and make sure they’re followed; 4) Promote sustainable development,” the signatories added.

Gretchen Gordon, coordinator of Bank on Human Rights, a global network of social movements and grassroots organisations working to hold international financial institutions accountable to human rights obligations, told IPS, “[Although] the Bank’s Articles of Agreement have an article on Transparency and Accountability […] thus far we haven’t seen any indication of operational policies on transparency or anything relating to accountability mechanisms.”

“And unfortunately,” she added, “there is no open engagement with civil society on these questions.”

“In terms of the type of development the bank delivers, we don’t have signs yet that the NDB will go in a qualitatively different direction than the Washington Consensus institutions,” Gordon told IPS in an email.

“That is why civil society groups in BRICS countries are calling for a participative and transparent process to identify strategies and policies for the NDB that can set it on a different path and actually deliver development.”

A primary concern among NGOs has been that the BRICS bank will replicate the old “mega-project” model of development, which has proven to be a failure both in terms of poverty eradication and increased access to basic services.

A recent international investigation revealed that in the course of a single decade, an estimated 3.4 million poor people – primarily from Asia, Africa and Latin America – were displaced by mega-projects funded by the World Bank and its private sector lending arm, the International Finance Corporation (IFC).

Though these projects were ostensibly aimed at strengthening transportation networks, expanding electric grids and improving water supply systems, they resulted in a worsening of poverty and inequality for millions of already marginalised people.

Following closely on the heels of this damning expose, a major report by the international watchdog Human Rights Watch (HRW) found that the Bank’s lax safeguards and protocols resulted in a range of rights violations against those who spoke out against the economic, social and environmental fallout of Bank-funded projects.

Behind this track record, rights groups and NGOs are concerned that a new development bank operating on within a broken framework will contribute to the spiral of violence and poverty that has marked the age of mega-projects.

At a time when one billion people lack access to an all-weather road, 783 million people live without clean water supplies and 1.3 billion people are not connected to an electricity grid, there is no doubt that the developing world stands to gain greatly from a Southern-led financial institution.

What remains to be seen is to what extent the new bank will move away from the old model of financing and truly set a standard for inclusive and pro-poor development.

Edited by Kitty Stapp

The five BRICS leaders pose for the cameras at the sixth annual summit in the Brazilian city of Fortaleza. Credit: Agência Brasil/EBC

By Mario Osava
FORTALEZA, Brazil, Jul 16 2014 (IPS)

The BRICS alliance (Brazil, Russia, India, China and South Africa) launched the New Development Bank (NDB) and Contingency Reserve Arrangement (CRA) during its sixth summit, institutionalising a new financial architecture for the emerging powers.

Two other agreements, one for Cooperation among Export Credit and Guarantees Agencies and another on Cooperation for Innovation among national development banks, complete the structure established Tuesday Jul. 15 by the five heads of state in the northeastern Brazilian city of Fortaleza.

The BRICS Summit concludes Wednesday with a meeting between the five leaders and the presidents of the Union of South American Nations (UNASUR) held in Brasilia, as well as several bilateral meetings.

The NDB and CRA are not being created “against anyone,” but as a “response to our needs,” said the summit host, Brazilian President Dilma Rousseff, at a press conference after the meeting with Vladimir Putin (Russia), Narendra Modi (India), Xi Jinping (China) and Jacob Zuma (South Africa).

BRICS leaders reject interpretations that the mechanisms have been created in opposition to or as alternatives to the World Bank and the International Monetary Fund (IMF), part of the Bretton Woods global financial system established in the 1940s.

The NDB will complement existing multilateral and regional financial institutions, whose lack of resources constrain financing of infrastructure projects in developing countries, according to the summit’s final declaration, signed by the participating heads of state.

The CRA, a mechanism through which the five countries make available a total of 100 billion dollars from their reserves, is a currency pool that provides financial security for its members, without departing from the IMF, summit speakers said.

If one of the BRICS countries wishes to borrow more than 30 percent of the sum it is entitled to, in order to overcome threats to its balance of payments, it will have to face questions from the IMF about conditions of payment, said the Brazilian finance minister, Guido Mántega.

Brazil, Russia and India can withdraw up to the value of their contributions of 18 billion dollars each. South Africa may take out twice the five billion dollars it will contribute to the mechanism, and China up to half its 41 billion dollar commitment.

The new institutions “consolidate” the BRICS alliance, Mántega said. Before they become operational, they must be ratified by the countries’ parliaments, he said.

The bank and the reserve fund are so constituted as to prevent aspirations of dominance, Rousseff said. The countries will have equal shares in the NDB, of 10 billion dollars each, and equal voting rights. The capital may later be doubled.

Bank presidents and its governing councils will be appointed on a rotating basis.

China will contribute 41 percent of CRA funds but decisions will be taken by a broader majority, reaching consensus for the negotiation of larger loans, Mántega said.

But the NBD headquarters will be located in the Chinese city of Shanghai, and it will be difficult to avoid the economic and monetary weight of the Asian power from translating into greater decision-making power for Beijing.

The NDB’s composition avoids inequalities at the outset, but equal participation is only a formality as “in practice the future trend will be towards greater Chinese influence,” according to Carlos Langoni, former president of the Brazilian Central Bank.

To be effective, the bank will have to increase its initial capital of 50 billion dollars, recruiting new financing resources, and in this as well as in crises the “dominant role” of the country offering most capital and guarantees is an influential factor, added Langoni, who is the present director of the World Economics Centre at the Getulio Vargas Foundation.

China is interested in diversifying its investments, in multilateral and regional institutions as well as bilaterally. In recent years it has become the largest investor in Latin America.

It already participates in several regional financial mechanisms, such as the Chiang Mai Initiative, similar to the CRA and involving countries of the Association of Southeast Asian Nations, and it is seeking to establish the Asian Infrastructure Investment Bank, as an alternative to the Asian Development Bank in which Japan has decisive influence.

Langoni believes that the BRICS, with the CRA resting on “mega-economies” with their enormous currency reserves, will in the long term be able to “grow faster and have more weight than the IMF, which is already facing difficulties raising funds because of its rules.”

However, the IMF will remain the most powerful multilateral financial body over the next decade, he said.

The rise of the BRICS reflects a multipolar world, as the alliance includes military powers like Russia and China, nuclear powers like both these countries and India, and “moderators” without military ambitions like Brazil and South Africa.

Progress in strengthening and institutionalising the group at its Fortaleza summit could help reduce border tensions existing between China and India, or between Russia and the West, Langoni said.

In his view, what cements the group is its “frustration over the action of multilateral bodies, particularly the IMF,” in the face of the financial crises. These institutions are very complex and made up of a large number of countries.

The BRICS countries can operate with greater ease with their own financial instruments, which can also supply their urgent needs for investment in infrastructure, especially in Brazil and India, he argued.

The BRICS “found their identity” by working with the Group of Twenty (G20) industrial and emerging countries to defend the stimulation of growth, rather than recession-inducing austerity, after the 2008 global financial crisis, Mántega pointed out. Later they came to demand reform of the IMF, which spearheaded response to the crisis.

Some reforms to grant emerging countries greater participation in IMF decision-making were approved by the G20, but then stalled because they were rejected in the U.S. Congress.

The IMF is regarded as extremely undemocratic, because the United States has power of veto and some countries of the industrial North have a majority of votes, in contradiction with the present correlation of economic forces and the weight of emerging powers.

The absence of reforms “negatively impacts on the IMF’s legitimacy, credibility and effectiveness.” The reforms must lead to the “modernisation of its governance structure so as to better reflect the increasing weight of emerging markets and developing countries (EMDCs),” says the Fortaleza Declaration, signed by the five BRICS leaders.

Mega-projects like the Itaipú hydropower station shared by Brazil and Paraguay could in future be financed by the new fund and new bank to be launched by BRICS leaders in the Brazilian city of Fortaleza. Credit: Mario Osava/IPS

By Mario Osava
FORTALEZA, Brazil, Jul 12 2014 (IPS)

The first common institutions to be set up by Brazil, Russia, India, China and South Africa – the BRICS – are financial, and have arisen as a result of reforms to an international system that continues to largely ignore the growing influence of emerging countries.

But the Contingency Reserve Arrangement (CRA), the BRICS countries’ monetary fund, will also be unbalanced in the composition of its resources, leading to the possible reproduction of these inequalities. The cement that binds the BRICS together is their aspiration to wield more power in international economic bodies.

The CRA and a development bank will be formally established at the Sixth BRICS Summit, to be held in Brazil on Tuesday Jul. 15 in the northeastern city of Fortaleza and on Wednesday Jul. 16 in Brasilia. On Monday, preparatory meetings will take place between ministers, members of the business community and the group’s central banks.

The reserve fund will have 100 billion dollars to come to the rescue of any of its members suffering an exchange crisis. China would contribute 41 percent of the total, South Africa – the smallest partner – five percent, and the other countries 18 percent each.

These percentages reflect the size of each country’s economy. However, participation in the New Development Bank (NDB), the other instrument that will be established at the summit, will be on the basis of equal shares: 10 billion dollars each and equal voting rights for each member.

This is the big difference between the NDB and the World Bank, of which it is a reflection. “The NDB is democratic,” Christopher Wood, a researcher for the South African Institute of International Affairs in Johannesburg, told IPS.

This aspect of the NDB is also very different from the CRA, where China, as the largest country, “will probably have a disproportionate influence,” but it is hoped that the design of the institution will prevent it from being overly one-sided, Wood said.

Negotiations have been under way to create the development bank and the monetary mechanism since 2012, and now only a legal review is required before they are signed by the five BRICS leaders in Fortaleza, announced José Alfredo Graça Lima, the undersecretary- general for political affairs at the Brazilian foreign ministry.

BRIC, an acronym coined in 2001 by U.S. economist Jim O’Neill for the four emerging powers that are changing the shape of the world, began to hold meetings of heads of state and government in 2009, forming “a coalition” that was joined by South Africa in 2011.

“It is not a bloc” that adopts common policies for trade and other sectors, Brazilian diplomats said in response to critical observations about the discrepancies between the countries in different economic or political international forums.

The huge countries, or “whale-economies,” are getting to know each other and have expanded their dialogue. They have “a positive role in democratising international relations,” Graça Lima said.

Cooperation between the five countries is already ongoing in more than 30 areas, and their societies are also interacting through business and academic forums and other means, said Flavio Damico, the head of the Brazilian foreign ministry’s department of inter-regional mechanisms.

But the cement that binds the BRICS together is their aspiration to wield more power in international economic bodies. “The structure of power and privileges” of the global financial and political system “has remained set in stone” since 1945, and will have to change “to adjust to present reality,” he said.

The blocking of a proposed reform of the International Monetary Fund (IMF) in the U.S. Congress spurred the BRICS countries to make headway with their own solutions. The CRA will probably “not substantially change the world economic order in the short term, but it certainly could erode the centrality of the IMF in the long run,” said Wood.

The CRA is being formed in the context of persistent after-effects of the 2008 financial crisis and the “systemic imbalances in the global economy, perpetuated by the monetary policies of advanced economies, such as the United States and the European Union,” Vivan Sharan, an expert on BRICS with the Observer Research Foundation in India, told IPS.

With the “monetary safety net,” BRICS will be signalling “lesser levels of dependence on Bretton Woods institutions such as the IMF, which urgently requires structural and governance reform,” he said. But the group is not aiming at “a recalibration of the global economic order,” he said.

Brazilian economist Fernando Cardim, professor emeritus of economics at the Federal University of Rio de Janeiro, doubts the CRA will be successful. Its resources will be too few, as its entire funds would not even be able to protect Brazil alone from mass capital flight, he argued.

Moreover, it will not necessarily prevent potential intra-BRICS strife, as China will have decisive powers “similar to or even greater than those of the United States over the IMF,” and is likely to wield power with less subtlety, he said.

But the BRICS institutions are not seeking to substitute for or confront the IMF or the World Bank. The CRA’s goal is to “complement” them, as “an additional line of defence” for the five countries, which are not facing balance of payment difficulties, according to Graça Lima.

The IMF’s resources total 937 billion dollars, more than nine times the value of CRA funds, and it will continue to play a key role for the CRA itself and other monetary mechanisms created to combat financial crises, Wood said.

In the Chiang Mai Initiative, a similar mechanism adopted by the Association of Southeast Asian Nations after the region’s 1997-1998 crisis, and which is backed by China, South Korea and Japan, countries must first request IMF assistance if they wish to draw a large loan from the funding pool, said Wood.

The NDB, already known as the BRICS Development Bank, is less controversial, although it has drawn criticism from social and environmental activists. The plan is for it to begin financing infrastructure and sustainable development projects in two years’ time, after obtaining parliamentary approval from member countries.

Its starting capital of 50 billion dollars is limited in comparison with the needs of BRICS members and other developing countries that could benefit from loans and even join the bank. It is less than the amount loaned annually by Brazil’s National Bank for Economic and Social Development (BNDES).

The Indian government, for instance, estimates that one trillion dollars are needed for financing domestic infrastructure projects over the next five years, around half of which is to come from the private sector.

However, new sources of funding are important because Indian infrastructure projects are facing serious liquidity challenges, as they are over-dependent on banking sector finance due to “the non-existence of a robust corporate bond market,” said Sharan in New Delhi.

“South Africa has a lot to gain,” as the NDB will focus on large infrastructure projects, a common problem amongst all the BRICS, and can offer long-term financing which is often difficult to obtain, particularly from the private sector, Wood said.It will also support project preparation, like surveying work, which often needs to be done before financing for the project can be accessed.

The NDB is authorised to double its funds, but its key importance is that co-financing projects acts as a catalyst, by reducing the risk and cost burden for other lenders and so attracting resources from private investors and national and multilateral development banks around the world, according to Wood and the Brazilian diplomats.

With additional reporting from Ranjit Devraj in New Delhi and Brendon Bosworth in Johannesburg.

Congress of South African Trade Unions says a BRICS Development Bank must promote development and industrialisation and job creation in the country. Pictured here is Pal Mfunzana, a resident from the poverty-stricken township of Diepsloot, in Johannesburg. Credit: Chris Stein/IPS

By John Fraser
JOHANNESBURG, Mar 28 2013 (IPS)

Although leaders of the Brazil, Russia, India, China and South Africa group agreed to launch a new development funding institution, giving the club a major infrastructure boost, some here are sceptical about the potential impact of the new bank.

“I don’t think it will have much impact in South Africa, where capital is not the problem, but policy is,” Frans Cronje, deputy chief executive officer of the South African Institute of Race Relations, told IPS. The fifth BRICS summit was held in Durban, South Africa from Mar. 26 to 27.

There are concerns that some of the key details still remain to be agreed upon and announced, and also because the operation of the new BRICS Development Bank will need to be closely monitored if it is to convince observers that it will have a real impact on funding development.

“This new bank will be way smaller than the World Bank or International Monetary Fund (IMF), so it will have a marginal impact compared to those institutions,” Cronje said.

It has been suggested that all BRICS nations will initially be paying 10 billion dollars towards the seed capital of the bank, and Cronje said that it is “odd” that South Africa should be paying its full share when it has just two percent of the GDP of the BRICS.

“Is this a vanity project for South Africa?” he questioned. “Is shifting the balance away from the World Bank and the IMF simply ideological romanticism

It is already clear that the bank will focus on infrastructure projects, but there is still uncertainty about several details, including the geographical footprint of the bank, its site and the currency or currencies in which it will operate.

“The first focus of the bank is on infrastructure, which is as it should be,” independent Johannesburg economist Mike Schussler told IPS.

“There will be discussion on where you put the money, as South Africa, Brazil, Russia and India all need infrastructure, and there will be a shortfall of funds.

“So the challenge will be on how to commit the initially inadequate resources.”

Memory Dube, a senior researcher at the South African Institute of International Affairs, a non-governmental research institute, described the agreement to go ahead with the bank, which was taken by BRICS finance ministers in Durban on Tuesday Mar. 26, as “significant” in the evolution of the BRICS grouping into a solid and sustainable alliance.

“It provides an institutionalisation for the BRICS. Until now, it has been a loose grouping, but this new bank will glue the members together.

“This is an actual institution that belongs to the BRICS and will be run by the BRICS. There is now no doubt that the BRICS will exist 10 years from now, 20 years from now – there is something tangible,” she told IPS.

Spokesperson for the Congress of South African Trade Unions, Patrick Craven, was guarded about the new bank.

“It is too early to assess it,” he told IPS. “We want a lot more detail on how the bank will operate and who will be in charge of it.”

“We will insist its mandate is very different to that of the World Bank and the IMF – which are used to reinforce the domination of the North American and Western European economies and have had a very negative effect on developing countries, by imposing constraints on lending.

“A BRICS Development Bank must promote development and industrialisation and job creation.”

Entrepreneur Sandile Zungu is one of the five South African delegates who sit on the new BRICS Business Council, which was also launched at the Durban summit.

“Often infrastructure projects in South Africa and in the rest of Africa have the potential to benefit one or more of the BRICS countries,” he told IPS in a telephone interview from Durban.

“With the new BRICS Development Bank, these projects will have a better chance of getting funding than they would have done from the World Bank. There will be a wider pool of funding.”

Dube said she was keen to learn about the site of the new BRICS Development Bank, as this had not been announced at the time she spoke to IPS from the summit on Mar. 27. South Africa has been keen to host it, but China is also a strong candidate.

However, Zungu said that he believes South Africa is the strongest candidate among the BRICS nations to host the new institution.

“Arguably, South Africa has the best financial services system of all the BRICS countries, and the World Bank says we have the best.

“We are also closest to the area of greatest need for infrastructure development.”

Dube also expressed an interest in seeing a lot more detail on other issues concerning the new bank. “If they structure it right, it might make a real difference,” she suggested.

“But the devil will be in the detail.”

She said it would be important to see the funding structure of the new bank.

“We have heard each BRICS country will contribute 10 billion dollars,” she said. “But will that be enough?  Will further funding be raised on the open market? I also want to see more detail on the BRICS Development Banks’ decision-making structure.

“We also need to see the regions in which it will operate – will it be for all developing nations, or for the BRICS members only?

“Then we need to look at spending priorities, and what currency it will operate in. Will it be the United States dollar, or will the BRICS nations decide it must operate in their own currencies?”

The political hurdle has been overcome with the decision in Durban to found the BRICS Bank.

However, the credibility of the bank itself and of the BRICS alliance now rests on the skill and efficiency with which it is brought to life and on the degree to which it can make a real difference to development in the BRICS nations and beyond.

Sandile Zungu, the Secretary of South Africa’s Black Business Council said there is no doubt that the BRICS Development Bank will be a welcome development. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG, Feb 28 2013 (IPS)

Emerging market leaders want their Brazil, Russia, India, China and South Africa club to be taken seriously, and next month they are expected to make a decisive move towards setting up a development bank to give it real substance and credibility.

“There is no doubt that the BRICS Development Bank will be a welcome development,” Sandile Zungu, the Secretary of South Africa’s Black Business Council, told IPS.

“The need for the bank is fairly obvious if you look at the growing trade among the BRICS countries and the frustrations these countries have had with existing development financing institutions like the World Bank and the IMF,”  he said.

Zungu particularly pointed to existing bureaucracy, the criteria for lending, the conditions attached to loans and the slow pace in processing applications.

“Then there’s the fact these countries have such massive infrastructure roll-out programmes, which gives all the more reason to create this bank – the need is there.”

Infrastructure financing within BRICS will indeed be a key focus of the bank, along with alternative models of cooperation to finance such projects, according to Hannah Edinger, head of Research and Strategy at emerging-markets consultancy group Frontier Advisory.

South African Finance Minister Pravin Gordhan earlier this week told parliament that the the bank’s establishment is “intended to mobilise domestic savings”  to co-fund these infrastructure projects in developing regions.

Talking to IPS, Edinger said that at least 15 trillion dollars is required in the BRICS countries over the next 10 to 20 years to finance such projects, especially in India and South Africa.

At a recent press briefing, Lynette Chen, Chief Executive Officer of the New Partnership of Africa’s Development Business Foundation, estimated that there cirrently is a 480-billion-dollar deficit in funding for infrastructure in Africa, which the new BRICS bank should help to tackle.

“The BRICS Development Bank could become the lender of choice for Africa,” Chen said.

“Other areas of finance include green technology projects, biofuels, dams and nuclear power plants in Africa,” according to Edinger. “Yet, financing to the African continent is expected to be a smaller share of total financing extended to the BRICS.”

While there will be some scope to fund environmentally friendly projects in Africa,  this will not initially be the prime focus of the new Bank, the strategist said.

Projects with a focus on sustainable development and climate change will be part of the mix particularly where they concern “larger and cross-border infrastructure-type projects in the transportation and power sectors, to promote regional integration and regional market building,” according to Edinger.

While the upcoming BRICS Summit in Durban at the end of March will be the first to be hosted on African soil,  officials have been holding a series of meetings in countries to ensure that the political club is given a real economic backbone.

Zungu predicted that the new bank would “cement” the BRICS spirit of co-operation by giving a tangible institutional foundation.

Edinger agreed. “The establishment of the BRICS Development Bank will be an important milestone for the BRICS grouping as it would add credibility, substance and ownership of the BRICS concept as the first institution coming out of this club.”

She said that while a number of working groups and forums exist as part of the BRICS mechanism, the establishment of the bank would signal a move away from just being a political discussion forum that proposes reforming the international financial system, creating a vehicle that is more attuned with the interests of the BRICS emerging markets, as well as the interests of the greater Global South.

Experts at South Africa’s Standard Bank believe that the BRICS Development Bank will initially be capitalised at 50 billion dollars, with 10 billion dollars from each of the BRICS members.

“The bank would also give a sense of assurance to private financiers,” according to Chen. She agreed that many infrastructure projects in Africa would be cross-border, involving “development corridors.”

Eyes on Durban

Economist Jeremy Stevens of South Africa’s Standard Bank, who is based in China, told IPS that more clarity about the bank would emerge in Durban.

“The main ambition of the bank is to direct development in a manner that reflects the BRICS’ priorities and competencies. Therefore, the bank will focus on infrastructure development and providing auxiliary support for project preparation, like feasibility studies,” according to Stevens.

“Later the working group will establish technical commitments and governance structures.”

The BRICS Development Bank provides an institutional underpinning to the group,  Stevens said,  while “contributing constructively to the development of more robust and inter-dependent ties between the BRICS members.”

He predicted that the scope of the bank’s activities might initially be limited, but could expand as it grows over time. He also asserted that its role would not be as a rival to existing development financing institutions, but as an auxiliary source of funding.

The symbolism of Shanghai

China is the largest economy in the BRICS and is expected to press for the new BRICS Development Bank to be headquartered in Shanghai, and for it to operate in the Chinese currency, the yuan.

“As part of its development process, China needs to deepen its financial markets,” John Cairns, currency strategist at South Africa’s Rand Merchant Bank, told IPS.

“One part of this is to have a stronger and more flexible, market-determined, exchange rate. This, in turn, requires that the currency be traded openly like any other currency, and therefore be internationalised.

“China’s authorities hope that the currency will become as important as its economy, so as to allow local (Chinese) companies and investors the ability to quote in their own currency.”

He said that progress on this has been “slow but steady” but was not convinced that the benefits to China from its currency being used by the BRICS Development Bank would go much beyond the symbolic.

“I’m not sure that it means very much,” he said.

“This would just be the currency of denomination – practically, the yuan would have to be converted into dollars or another international currency when transactions with third parties are being made.”