DEVON DOUGLAS-BOWERS: What are BRICS (An international financial alliance involving Brazil, Russia, India, China, and South Africa) and the Asian Infrastructure Investment Bank (AAIB) really about? Many people argue that it is these countries challenging the dominate US-based system. How is that true or not true in some respects?
JAMES CORBETT: Who is contending that the AIIB or the BRICS’ New Development Bank is in any way competitive with the Bretton Woods institutions (IMF/World Bank)? Certainly not anyone involved with any of these institutions.
In March, IMF chief Christine Lagarde pledged IMF cooperation with the AIIB.
In June, World Bank chief Jim Yong Kim issued a statement congratulating the AIIB on its formation and calling it an “important new partner” for the Washington-led development bank.
Also in July, the AIIB and the World Bank signed an actual cooperation agreement, promising to identify projects for joint financing later this fall.
No, these institutions do not view themselves as competitive. It is only various media pundits who have speculated that these new banks are in fact some sort of challenge to the so-called “Washington consensus.” What none of these experts has bothered to report (for obvious reasons) is the remarkable fact that the Vice President of the NDB is also an Executive Board member of the IMF, who then went on to pledge cooperation and joint action between the NDB and IMF. Also missing from this narrative is the fact that the NDB’s chief, Kundapur Vaman Kamath, is a former staffer of the supposed NDB “rival” Asia Development Bank. Or there’s Jin Liqun, widely tipped to be the head of the AIIB, who also happens to be a former Vice President of the Asia Development Bank and alternative Executive Director of the World Bank.
In fact, the only sign that these Beijing-backed development banks pose any challenge to the existing order whatsoever is that the NDB has already confirmed that their first loan will be denominated in yuan, not dollars, and the AIIB is considering a basket of currencies, including the yuan.
But even this is not as much of a challenge to the Bretton Woods institutions as it appears on first glance. Although Beijing is obviously seeking to bolster the yuan as an international settlement currency, this is not being done in an effort to make the yuan itself a world reserve currency in the same way that the dollar is today. Instead, this is being done in service of a policy goal outlined by People’s Bank of China Governor Zhou Xiaochuan in 2009 that is seeking to establish the “Special Drawing Rights” currency basket as the new world reserve currency….