The BRICS’ New Development Bank: Shifting from Material Leverage to Innovative Capacity

Abstract

This article argues that the BRICS’ New Development Bank (NDB) deserves more attention not because it is equivalent to the Asian Infrastructure Investment Bank (AIIB) but because of its differences. Unlike the AIIB the NDB does not possess impressive material capacity or overt connections to a wider state‐led geo‐political strategy. What distinguishes the NDB is its creative design with four significant elements of novelty. Unlike other multilateral financial institutions, including the AIIB, the NDB is committed to a principle of equality across its core membership. Product innovation is advanced by its promotion of sustainable development with an exclusive focus on niche clean renewable energy projects. The expressed aim of the NDB with regard to resources is to use green bonds denominated in BRICS’ national currencies. And the focus on delivery centers on the need for speed. Although each of these elements face severe tests, the ability of the NDB to navigate around serious internal tensions through improvisation and trade‐offs points to an original emerging pattern of collective policy making and global governance.

China's Role in Global Development Finance: China Challenge or Business as Usual?

“…The AIIB was up and running at the end of 2015 with $100 billion in capitalization. In the meantime, the NDB had been agreed by the BRICS countries (Brazil, Russia, India, China, and South Africa) on 15 July 2014, although it didn't open for business, with $50 billion in subscribed capital, until 2016. Cooper () maintains that the NDB is not China‐centered, pointing to its formal recognition of the equality of its five core members, but the fact that China successfully insisted that its headquarters be located in Shanghai suggests otherwise. The CADF, founded in 2006, predated all of these institutions by a decade, but received a major boost when Xi Jinping announced in December 2015 that its capital base would be doubled from $5 billion to $10 billion.…”

The New Development Bank and the Asian Infrastructure Investment Bank: China's Ambiguous Approach to Global Financial Governance

“…However, there are significant differences between the NDB and the AIIB. Cooper () contends that whereas the AIIB has material advantages (e.g. financial resources) over the NDB, the NDB is more innovative than the AIIB (including its green projects and local currency financing).…”

“…In 2012, the year India hosted the BRICS summit, the idea of a Development Bank emerged from the BRICS Academic Forum. China was initially uncertain about the idea; Chinese commentators questioned the impact of the proposed principle of equality on the bank's performance (Cooper, ). In the end, India's proposal received support from all the other members of the BRICS.…”

Rising powers and order contestation: disaggregating the normative from the representational

“…As Cooper has demonstrated, the New Development Bank has real significance for a number of reasons, including its commitment to a principle of equality across its core membership, and its promotion of sustainable development through renewable energy projects, as well as its financial underpinning. 79 The China-backed Asian Infrastructure Investment Bank (AIIB), although not a BRICS initiative, also demonstrates how aspirations have been translated into reality in a way that has structural implications for international finance. The announcement of a plan to establish a BRICS Local Currency Bond Fund at the 2017 BRICS Summit in Xiamen only adds to the picture of the group moving well beyond a yearly photo opportunity for the leaders of the five countries.…”