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Biggest challenge for BRICS success? Big brother China

July 16, 2014 4:23 AM
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In two years of tough negotiations to create the new BRICS development bank, the main stumbling block was not a lack of resources or commitment, but fellow partner China.

The Chinese initially wanted a bigger share of the bank that was formally launched on Tuesday by the leaders of the five BRICS countries in a direct challenge to the West's tightly-held grip over global finances, officials involved in talks said.

In the end, Brazil and India prevailed in keeping capital participation equal among members, but fears linger that China, the world's No. 2 economy, could try to assert greater influence over the $100 billion bank to expand its political clout abroad.

"It is inevitable that the Chinese will dominate the new bank," said Riordan Roett, a political scientist at Johns Hopkins University. "The Chinese don't get involved in these ventures unless they are going to have, not total control, but a significant amount of influence."

Known for their striking differences in economics and politics, the BRICS face the challenge of containing China's drive to control institutions that were supposed to give each partner an equal voice.

Internal discord became evident on Tuesday when the group struggled to overcome a last-minute stalemate in negotiations as China and India vied for the headquarters of the bank. To overcome the snag, Brazil withdrew its request for the bank's first presidency in favor of India, a senior official involved in the discussions said.

The objective of the bank is to break away from a model that gives little voting rights to emerging economies and perpetuates the dominance of the United States and Europe over the International Monetary Fund and World Bank.

"This is a big challenge for the BRICS. Sometimes when you get down to the actual negotiations and countries want more say, they forget about some of their lofty aspirations when they were criticizing the IMF and World Bank," said Kevin Gallagher, professor of international relations at Boston University.

China already has the largest share of the new reserve fund, also launched on Tuesday and known as the Contingent Reserves Arrangement. It pledged $41 billion while Brazil, Russia and India promised $18 billion each and South Africa $5 billion.

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Source: financialexpress.com

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