Analysts have welcomed the establishment of the New Development Bank (NDB) by leaders of the BRICS (Brazil, Russia, India, China and South Africa) nations, saying it will strengthen cooperation between the bloc’s members and give developing countries a greater say on the world stage. The announcement was made at the sixth BRICS summit on July 15 in Fortaleza, Brazil.

Headquartered in Shanghai, the NDB will have initial authorized capital of $100 billion. Its initial subscribed capital of $50 billion will be equally shared among founding members.

Along with the NDB, an independent Contingent Reserve Arrangement will also be set up to combat any potential liquidity crisis.

Functionally similar to the World Bank, the NDB will be responsible for financing infrastructure and development projects by BRICS nations and other developing countries, while the CRA is equivalent to the International Monetary Fund (IMF) to cope with financial emergencies with a precautionary effect, said Chen Zhimin, dean of the School of International Relations and Public Affairs at Fudan University.

Zhang Yonghong, vice dean of the Institute of International Studies at Yunnan University, hailed the two mechanisms as a breakthrough in cooperation between BRICS members.

The deepened BRICS cooperation will change the West-dominated global pattern and drive developing countries to innovate as they develop, unleash their potential and bridge the widening wealth gap, thus balancing global development, stabilizing the world economy and maintaining international security, Zhang said.

“Firstly, cooperation between BRICS nations aims to solve bottlenecks in the face of developing countries, and can therefore facilitate ‘South-South Cooperation.’ Secondly, BRICS nations are not ‘challenging’ the current international system. They are instead proposing an alternative model based on equality and openness to build a bridge for sound interaction between the South and the North,” Zhang said.

“From a global standpoint, BRICS cooperation will accelerate both ‘South-South Cooperation’ and ‘South-North Cooperation,’” he added.

According to Xu Xiujun, an associate research fellow at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences (CASS), BRICS nations are highly complementary in resources endowment and have distinctive industrial structures. Domestically, they have the strategic need to galvanize economic and social development, while externally, they demand a bigger say in the international community.

However, economic development of BRICS-led emerging countries has slowed down in recent years.

Pang Zhongying, a professor of the School of International Studies at Renmin University of China, explained that every emerging country “inevitably” faces economic restructuring after high-rate growth, adding that the slowdown is “normal” in the process of restructuring.

But Xu took notice of a positive trend, citing that emerging countries have maintained a high economic development level while the growth rate of developed economies stands only at 1.3 percent.

The NDB will provide an important platform for emerging countries to pull together, Xu said, stressing that BRICS nations should deepen their cooperation and expand their clout among developing countries and regions to create new opportunities for cooperation and development continuously.

Pang claimed that the NDB will set a good example and usher in a new type of international relations because it will not adopt the old-fashioned mode characterized by holdings by great powers, as has been the case with the World Bank and IMF. The NDB will “nip potential disputes in the bud” through its “open, promising and inclusive” mechanism, he added.

The Chinese version appeared in Chinese Social Sciences Today, No. 622, July 18, 2014.

The Chinese link: http://sscp.cssn.cn/zdtj/201407/t20140718_1258803.html

　　Translated by Chen Mirong

　　Revised by Tom Fearon