The news today is that the establishment of a BRICS Bank has (finally) been confirmed. It is officially called the New Development Bank. Headquartered in Shanghai, the US$100 billion development bank will feature a 5-year rotating presidency, and provide financing for infrastructure and sustainable development projects in BRICS countries and in other emerging and developing economies. India will take first turn at the presidency.
Importantly, each member has equal voting power. This 'one member, one vote' system marks its difference from the World Bank and IMF (which the BRICS countries have been critical of for their Western dominance and unequal power structures). The initial subscribed capital of USUS$50 billion will also be shared equally among the founding members.
Some commentators are touting it as a challenge to the World Bank. The World Bank itself sees the new bank playing a complementary role. Much will depend on whether developing countries start snubbing World Bank financing in favour of the less-conditional BRICS support.
It seems like every few months we hear about China's involvement in another development bank or financing instrument. So I thought I'd pull together the main banks and instruments that receive Chinese financing for international development purposes. I think it indicates that it isn't as simple as World Bank v BRICS.
China has traditionally been a recipient of World Bank assistance, celebrating a 30-year partnership in 2010. But China also became a donor to the World Bank in 2007. Its contributions to the International Development Association (IDA) replenishments have grown dramatically.
- IDA15 (2008-2011): total donor contribution US$19.68 million.
- IDA16 (2011-2014): total donor contribution US$107.02 million
- IDA17 (2014-2017): total donor contribution US$743.84 million (including a US$197.77 million grant and US$663.49 million in concessional loan)
Asian Development Bank (ADB)
China joined the ADB in 1986 and is its second largest borrower. But it also provides funding to the Asian Development Fund, contributing US$110 million between 2004-2012. In the most recent replenishment (ADF-XI) China contributed US$45 million. It has also established a Poverty Reduction and Regional Cooperation Fund through an initial US$20 million contribution in 2005, and a renewed contribution of US$20 million in 2012 to support the ADB's technical assistance program.
African Development Bank (AfDB)
China joined the AfDB in 1985 and has taken part in eight replenishments of the ADF, the concessional lending arm. Its contribution is growing, albeit slowly:
- ADF-11 (2008-2010) US$122 million.
- ADF-12 (2011-2013) US$125.8 million.
- ADF-13 (2014-2016) US$127.1 million.
More significantly, in May 2014 the People's Bank of China and the African Development Bank established a US$2 billion co-financing fund, known as the African Growing Together Fund, for development projects in Africa.
China Eximbank was established in 1994 as one of China's main policy banks, designed to support its 'go global' strategy. Like other export-import banks, most of its financing is provided as export credits or other financing at largely commercial rates. But it also serves as the Chinese Government's concessional loan arm. Data on China's concessional loan program is sketchy, but latest calculations suggest it is between US$3-3.5 billion per year.
China Development Bank (CDB)
China Development Bank was also established in 1994. It provides funding for domestic projects as well as projects in other countries, including developed countries. Again, data on loans is sketchy, but a 2011 Financial Times investigation found that together with China Eximbank, CDB offered more loans to developed countries than the World Bank. It is best known for its large energy deals.
Chinese officials have also proposed new regional banks: the Asian Infrastructure Investment Bank (AIIB) and Shanghai Cooperation Organisation (SCO) development bank. If they are anything like the BRICS bank, they will take a while to get off the ground. The AIIB was initially proposed by Xi Jinping in October 2013 and is seen as a potential rival to the (Japanese-dominated) Asian Development Bank, particularly if China ends up contributing half of the bank's proposed US$50 billion capital. The SCO development bank was proposed by Li Keqiang at the 2013 SCO meeting, though it has received little mention since.
China's role in each of these development banks will be interesting to watch. As will the influence, geopolitical dynamics, and cooperation between them.