China pitches for setting up of development bank for BRICS

A day ahead of the BRICS Summit, China today pitched for setting up of a development bank on the lines of global financial institutions, which will exclusively provide funds at low cost to the five emerging countries including India.

Yu Ping, Vice Chairman of China Council of Promotion for International Trade, who is the part of Chinese delegation here, said the meeting of the BRICS Business Forum today recommended the setting up of the development bank for furthering trade activities among the member-countries.

Heads of states and governments of Brazil, Russia, India, China and South Africa are meeting here tomorrow to discuss a host of issues in the backdrop of global economic slowdown.

"The delegates recommended that the five BRICS countries have lot of business opportunities and for the companies to engage in cooperation and have business activities they need financing services. Therefore, there should be an institutional guarantee for financial services," Yu said.

"So, the delegates put forward the idea of establishing a development bank to finance the business activity," he said.

Asked whether China is hopeful of a formal announcement of setting of the multi-lateral lending institution being strongly pushed by Chinese government, he said they have high expectations.

"We have a high expectation for establishment of the development bank. If it is announced, it will be big news for us. That is our common expectation," Yu said. The proposal for a new development bank is one of the many issues to be deliberated by the five fast-growing economies when their leaders meet for their fourth summit.

Brazil, Russia, India, China and South Africa account for 45 per cent of the world's population and a quarter of economy at $13.5 trillion.

It is to be noted that BRICS agreed to "strengthen financial cooperation" among their individual development banks at the Leaders Summit at Sanya in 2011.

For furthering this objective, the Forum recommended exploring the possibility of establishment and operational modalities of financial institutions such as a Development Bank and or an Investment Fund that can assist in the development of BRICS and other developing countries.

Besides, the BRICS member-nations would sign two agreements relating with line of credit (LoC) and letter of credit tomorrow.

"Local currency line of credit (LoC) facility among the member-banks and the other one is the letter of credit information facility," Chairman of Board of Directors of China Development Bank Chen Yuan said.

"The first one would facilitate member banks to extend lines of credit to each other and the second one is the letter of credit facility is that one member bank can issue letter of credit to be confirmed by another member bank of BRICS," Chen said.

Member banks include Export-Import Bank of India, Brazil's BNDES, China Development Bank, Russia's state development bank Vnesheconom bank and the Development Bank of South Africa.