ALTHOUGH the creation of a Brazil, Russia, India, China and South Africa (Brics) bank is a first step towards the institutionalisation of the alliance, the divergences between its member states will continue to render co-operation a difficult task going forward, says Teneo Intelligence.
Brics countries held their sixth summit in Fortaleza, Brazil on Tuesday and Wednesday where it was agreed to establish a $50bn development bank and a $100bn reserve fund.
But analyst and a senior vice-president at Teneo, Anne Frühauf said on Wednesday "the asymmetry of contributions to a Brics IMF-type fund" would probably lead to the dominance of China in future decisions involving the use of the pooled funds.
"The size and scope of the initiative suggest that it will chip away at, rather than dramatically challenge, the global financial order," she said.
According to a research report from Teneo on Wednesday, China hopes to gain more international alliances through this multilateral effort and may concede on some of the other member states’ demands in exchange for a more dominant role of its currency — the renminbi — in the bank.
Picture: THINKSTOCK
ALTHOUGH the creation of a Brazil, Russia, India, China and South Africa (Brics) bank is a first step towards the institutionalisation of the alliance, the divergences between its member states will continue to render co-operation a difficult task going forward, says Teneo Intelligence.
Brics countries held their sixth summit in Fortaleza, Brazil on Tuesday and Wednesday where it was agreed to establish a $50bn development bank and a $100bn reserve fund.
But analyst and a senior vice-president at Teneo, Anne Frühauf said on Wednesday "the asymmetry of contributions to a Brics IMF-type fund" would probably lead to the dominance of China in future decisions involving the use of the pooled funds.
"The size and scope of the initiative suggest that it will chip away at, rather than dramatically challenge, the global financial order," she said.
According to a research report from Teneo on Wednesday, China hopes to gain more international alliances through this multilateral effort and may concede on some of the other member states’ demands in exchange for a more dominant role of its currency — the renminbi — in the bank.
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