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Delhi foils China bid to control new bank

New Delhi, July 6: India has successfully blocked China’s attempts to dominate a development bank the neighbours are expected to launch this month jointly with three other major emerging economies as a counter to western financial institutions, but Shanghai may still emerge the bank’s headquarters.

Prime Minister Narendra Modi and the Presidents of Brazil, Russia, China and South Africa are likely to unveil the BRICS Development Bank when they meet for the group’s summit in Brazil’s northeastern coastal town of Fortaleza on July 15 and 16.

The five nations have agreed to invest equal capital — $10 billion each — to create a $50 billion corpus. It was a plan India insisted on, rejecting China’s proposal to fund a higher fraction of the bank’s capital, senior Indian, Russian and Brazilian officials have confirmed.

Allowing any one nation to contribute more than the others in building the bank’s corpus would also give it unparalleled clout over an institution the grouping hopes to use to bolster its growing geopolitical clout.

The BRICS nations plan to lend money from the bank to other developing and poor nations to wean them away from institutions like the International Monetary Fund and the World Bank that emerging economies view as too influenced by the West.

“The bank’s initial capital is now final,” a Russian official said. “China’s proposal was unacceptable to India and, quite frankly, even we had concerns.”

So had Brasilia, a senior Brazilian official confirmed.

Russia, India, South Africa and China have each proposed a candidate city to host the bank’s headquarters. India has proposed Mumbai but Shanghai, China’s offer, appears the favourite at the moment, the Russian official said.

However, Sujata Mehta, secretary in charge of economic relations in India’s foreign office, today said that negotiations on the bank’s headquarters would continue over the next week. Mehta will leave for Fortaleza on Monday.

Modi’s visit to Brazil is also critical because the BRICS summit will form the backdrop for a series of firsts for the new Prime Minister.

Modi is expected to hold bilateral talks not just with Brazilian President Dilma Rousseff but also with China’s Xi Jinping, Russia’s Vladimir Putin and South Africa’s Jacob Zuma, none of whom he has so far met as Prime Minister.

Rousseff, for whom the success of the ongoing World Cup and the BRICS summit are crucial ahead of presidential elections this year, has also invited the Presidents of each of the other 11 South American nations to meet Modi and the other leaders of the grouping.

They include Argentina’s charismatic president Cristina Fernandez de Kirchner, Chile’s Michele Bachelet, Venezuela’s Nicholas Maduro, Bolivia’s Evo Morales, Ecuador’s Rafael Correa and Colombia’s freshly re-elected Juan Manuel Santos.

Although India has increased its economic partnership with South America over the past few years, many of these nations are looking to Modi hoping he can strengthen New Delhi’s ties with them at a time China is pumping dollars into the continent.