After a year-long negotiation, strenuous bargaining and test of wills between the world’s top two emerging-market nations, China appears to have gained the upper hand over India with regard to a development bank for the BRICS group of nations.
Beijing and New Delhi both sought a higher role for themselves in the new financial institution, which is seen as an alternative to Western-dominated entities like the World Bank and the International Monetary Fund in meeting the needs of developing nations.
After a summit in the Brazilian city of Fortaleza, leaders of Brazil, Russia, India, China and South Africa — the so-called BRICS group — signed off this week on the establishment of the new development bank, reaching agreement on issues such as the bank’s headquarters location and members’ capital contribution.
It was decided that the bank would be based in Shanghai, China’s financial capital, handing Beijing a crucial victory in its one-upmanship game with New Delhi.
China and India had both contested fiercely to be the host nation for the new bank ever since financial authorities from BRICS nations kicked off the first round of negotiation in August last year.
China wanted to have the headquarters in Shanghai while India wanted it in New Delhi.
Even just a day before the final decision was announced, Onkar Kanwar, chairman of India’s BRICS Business Council, told the media that he still hopes the bank’s headquarter will be in New Delhi, First Financial Daily noted in a commentary Thursday.
In the end, India lost out on its bid. However, it was agreed that the bank’s first president will be an Indian, for a period of six years. The presidency will then be rotated among Brazil, Russia, South Africa and China, in that order.
China had offered to contribute a larger share of capital to the bank, but India opposed the idea as it felt it would give Beijing more say in the bank, First Financial Daily noted, citing Zhu Jiejin, an associate professor at the Center for BRICS Studies in Fudan University.
Finally it was decided that the bank will have an initial subscribed capital of US$50 billion, with each country contributing an equal amount.
The member states will also set up a contingent reserve arrangement (CRA) with an initial size of US$100 billion to help countries with short-term liquidity pressures.
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