China’s Parliament has ratified the creation of the $100 billion New Development Bank (NDB), also known as the BRICS Bank, China’s state-run Xinhua news agency reports on Wednesday.
The BRICS grouping of emerging market nations consists of Brazil, Russia, India, China, and South Africa.
The Standing Committee of the National People’s Congress, China’s legislature, on Wednesday approved the agreement between Brazil, Russia, India, China, and South Africa to create the New Development Bank, Xinhua said.
The newly minted BRICS bank will be used to finance new infrastructure and development projects in the BRICS countries, in addition to other emerging market countries.
In July 2014, a historic milestone for the BRICS group was reached as the group signed a document to form the the $100 billion New Development Bank (NDB) in addition to a reserve currency pool worth over $100 billion, known as the Contingent Reserve Arrangement (CRA).
The bank will be headquartered in Shanghai, and will first be led by India, followed by Brazil, and then Russia.
The launch of the BRICS bank is seen as a first step in breaking the dominance of the U.S. dollar in global trade, as well as dollar-backed institutions such as the IMF and the World Bank, both U.S.-based institutions that BRICS countries have had little influence within.
China has pledged to contribute a total of $41 billion to the NDB bank, which will give it the largest voting rights, at 39.5 percent.
An agreement has already been ratified by India and Russia, also an African regional center of the NDB bank has been agreed to be established in South Africa.
South Africa is expected to present ratification documents in July during a meeting of BRICS countries in the Russian city of Ufa.
In June, during the first-ever BRICS Parliamentary Forum held in Moscow, Zhang Dejiang, the Chairman of the Standing Committee of China’s National People’s Congress (NPC), said that the BRICS should move toward a single trade and economic market, in addition to creating and promoting projects and tools for global economy control.
“We must strive for moving towards the creation of a single market in trade and economic cooperation, the creation of a multi-level mechanism of currency agreements, new infrastructure projects and strengthening cooperation on the basis of the people’s support. The key tools here include the BRICS Bank and the BRICS reserve currencies pool,” said Dejiang.
Alexsey Pushkov, the head of Russia’s State Duma Foreign Relations Committee, said during the forum that the combined gross domestic product (GDP) of the BRICS group will exceed that of the Group of Seven (G7) member states in the next two to three years.
In addition to the new bank and reserve currency pool, Russia has recently proposed an alternate to the SWIFT global interbank payment system for the BRICS group in a move which would further ramp up de-dollarization efforts and threaten the U.S. dollar’s global hegemony.
A rating agency for the BRICS group is also being discussed at an expert level, as an alternative to the western dominated ‘big three’ rating agencies.
Russian President Vladimir Putin has said that he expects to launch the new BRICS bank in addition to the currency reserve pool during the July summit of the Shanghai Cooperation Organisation (SCO) and BRICS.
On Friday, South Africa’s Finance Ministry said that the new BRICS bank will be in operation by the end of 2015.
The summit of SCO and BRICS is set to take place in Ufa – the capital city of the Republic of Bashkortostan, Russia – on July 8-10, 2015.
In related news, The Chinese-led Asian Infrastructure Investment Bank (AIIB) officially launched on Monday following a signing ceremony of the bank’s articles of association that took place in Beijing.
The AIIB will complement not only the NDB, but China’s broader regional infrastructure plan, known as “One Belt, One Road” initiative, or the New Silk Road project, which aims to increase connectivity by building infrastructure such as a network of railways, highways, oil and gas pipelines, power grids, internet networks, maritime, and other infrastructure links across Asia, Europe, the Middle East, Africa, and even as far as South America.
“This proposal was designed to meet Asia’s infrastructure development and promote Asia’s connectivity and also deepen regional cooperation for the sake of development,” Chinese President Xi Jinping told delegates during the signing ceremony on Tuesday.
China’s Finance Minister Lou Jiwei also said on Monday that he was confident that the AIIB will start functioning before the end of 2015.
Established in 2014, the AIIB, China’s alternative and potential rival to the Asian Development Bank (ADB) and the western-led International Monetary Fund (IMF) and World Bank is aimed to finance much-needed Asian infrastructure projects such as construction of roads, railways, and airports. The bank’s headquarters will be located in Beijing and English will be its working language.
The BRICS group was established in 2010, when South Africa joined Brazil, Russia, India, and China in what was previously known as BRIC. The BRICS group represents 42 percent of the world’s population and roughly 20 percent of the world’s economy based on GDP, and 30 percent of the world’s GDP based on PPP. Total trade between the countries is $6.14 trillion, or nearly 17 percent of the world’s total.