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BRICS launches New Development Bank in Ufa of Russia

Zhao Yinan
Updated: Jul 10,2015 7:44 AM

The Russian city of Ufa witnessed the launch of the New Development Bank on July 9, a joint initiative by Brazil, Russia, India, China and South Africa, and part of China’s efforts to build a multinational financial network.

So far China has joined, or proposed to establish, at least four new international financial institutions-the bank of the BRICS bloc; the $40 billion Silk Road Fund; the Asian Infrastructure Investment Bank; and a proposed Development Bank of the Shanghai Cooperation Organisation.

Chen Fengying, director of the World Economy Institute at the China Institutes of Contemporary International Relations, said these financial institutions could further lift China’s outbound investment, facilitate economic integration through Beijing’s Belt and Road Initiative and promote the use of the renminbi on the global market.

Chen said the new financial institutions share similar missions. “All of them aim to finance infrastructure construction projects to help with local industrial upgrading and urbanization, but they differ in the targeted market.”

Chen said the potential market of the New Development Bank will be huge because BRICS states account for a fifth of the world’s economic output and 40 percent of its population. Also the new bank’s objective to provide relatively long-term loans for strategic profitable projects better fits the need of most developing markets.

Tang Min, former Asian Development Bank chief economist, said the establishment of the New Development Bank is a milestone move because it is an alternative to the IMF and a platform for the bloc countries to take part in global financial and economic governance.

“Although these projects will be funded with US dollars instead of renminbi, the New Development Bank and other new financial institutions can increase China’s influence and say in global economic affairs and speed up the internationalization of the renminbi,” Tang said.

Representatives of 57 prospective founding countries of the AIIB met in Beijing last week to sign the constitution of the bank, creating a legal framework for the existence of the entity and laying out the bank’s objectives, membership, stakes, voting power and other vital issues.

Tang said the AIIB and the Silk Road Fund, which will become a major lender for both Asia and countries along the Silk Road Economic Belt and the 21st Century Maritime Silk Road, will facilitate trade and investment between China and these countries and the opening of a Chinese capital account.