A joint foreign reserves contingency mechanism will be at the centre of the next round of talks

Chinese officials have acknowledged the complications in long-running discussions on a deal for a BRICS (Brazil, Russia, India, China, South Africa) Development Bank and a joint foreign reserves fund between the five emerging countries, but said they expected “positive progress” at next week’s summit in South Africa.

The BRICS Development Bank and a joint foreign reserves ‘contingency’ mechanism will be at the centre of talks at the fifth BRICS Leaders meeting in Durban on March 26, which will be attended by Prime Minister Manmohan Singh, the new Chinese President Xi Jinping and other leaders.

The first meeting between Dr. Singh and Mr. Xi, expected to take place on the summit’s sidelines, is, however, expected to be a brief affair.

Assistant Foreign Minister Ma Zhaoxu, on Wednesday, told reporters at a briefing that China hoped “there will be positive progress in taking forward a BRICS Development Bank, a contingency reserve arrangement and a BRICS think-tank council”.

Discussions this past year on setting up a development bank and a “contingency foreign reserves” fund— reported to be in the range of $240 billion—have proved to be complicated. The Development Bank idea has, in particular, run into obstacles on account of a number of differences, from the amount of capital to the location of the bank.

“On the specifics of a development bank, including the size, functions, composition, and hosting city of such a development bank, all these details are still under discussion,” Mr. Ma said.

The foreign exchange reserve pool, he added, was proposed with the aim of “establishing a financial safety net for BRICS countries to reduce risks of flow of capital and risks in the financial sector”. Officials in China’s banking regulatory authority and Export-Import (EXIM) bank have indicated their backing to the development bank idea, but have voiced caution.

Wang Jianye, Chief Economist, EXIM Bank of China, told The Hindu in an interview last year the bank needed to be “as simple and non-political as possible” in order to “reduce risk of turf fighting.”

He said the bank could serve as the “operator” or “manager” of a settlement system. Xu Qinghong, section chief of the Banking Supervision Department at the China Banking Regulatory Commission, told a preparatory meeting between the five countries held in Chongqing in 2012 that there “are vast differences between us”. “Looking at the history of other multilateral institutions, I think such a feasibility study will take a long time. Since the Delhi Summit, there have been a lot of doubts in China about a proposal,” he acknowledged.

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