BRICS to Strengthen Ties, Establish Development Bank
With the next BRICS summit set to take place in Durban, South Africa, on 25-27 March next year, member nations are expected to agree upon a strategy for setting up a BRICS Development Bank, which will replace the role currently served by the International Monetary Fund and World Bank. Although the BRICS nations – Brazil, Russia, India, China and South Africa – are represented in the IMF, they reportedly only hold a combined voting share of 11 percent. The new BRICS Development Bank will also facilitate a bailout fund for which an estimated $240 billion will reportedly be set aside. This proposed breakaway from Western-dominated financial institutions comes as China recasts their gold reserves with the aim of pursuing a gold-backed currency system, along with their establishment in September of an oil wholesaling operation designed to bypass the US Dollar and the SWIFT central banking and currency system, seen by analysts as the first move towards creating a new global reserve currency.
In a recent interview, Vice-Minister of Finance Zhu Guangyao noted that the BRICS Development Bank, which is currently undergoing a feasibility study, was part of the ongoing efforts to strengthen economic cooperation between BRICS member countries. He also mentioned that the global economy will continue to face uncertainties in 2013 and he anticipated that there would be less participation in global trade by European banks. Moreover, he noted that BRICS countries are obligated to fight against trade protectionism and thereby ‘unleash their potential’.
Trade between BRICS countries was in excess of $320 billion in 2011, representing a six-fold increase in the past decade. China’s trade value with the other four member countries amounted to $280 billion in 2011 and had already exceeded $250 billion in the first ten months of 2012, with the country’s overseas investment in Brazil, India, Russia and South Africa reaching $23 billion.
Meanwhile the Conference Board in the United States has warned that the BRICS boom is over, predicting that China’s double-digit expansion rates will soon be a things of the past, with growth falling to 6.9 percent in 2013, dropping further to 5.5 percent from 2014 through to 2018, before falling even further to 3.7 percent from 2019 to 2025, citing the population aging crisis China faces as one of the reasons behind its dire predictions.