China's announcement comes as Brazil, China, and India get ready to increase the clout of their economies with the creation of a new World Bank-type institution.
One week into his tenure as China’s president, Xi Jinping is already stressing his country’s ties to the African continent and the interconnected future of the world’s developing economies, in what may be an effort to highlight China's growing economic clout.
"No matter how international landscape may change, China will continue to support and promote Africa's efforts to achieve peace, stability, prosperity, and development, seek strength through unity and participate in international affairs on a basis of equality," Mr. Xi told a group of reporters from the BRICS countries – Brazil, Russia, India, China, and South Africa – gathered in Beijing Tuesday.
The timing of the announcement may be key. That seemingly magnanimous declaration comes on the heels of the Chinese Foreign Ministry’s announcement Monday that the new president will make his first trip to Africa beginning later this week, visiting Tanzania and the Congo Republic and attending a BRICS summit in Durban, South Africa.
At that summit, the BRICS countries are expected to announce the creation of a new global development bank, a World Bank-like financial institution to be based, for the first time, in the so-called global south.
The bank is meant to increase the economic clout of the world’s developing economies whose stature in global financial institutions has trailed behind their explosive economic growth. By 2020, the combined economic output of just three of the BRICS – Brazil, China, and India – will overtake that of the United States, United Kingdom, France, Germany, Italy, and Canada combined, according to the 2013 United Nations Human Development Report.
Despite this potential rising economic power, however, no BRICS leader has ever run the World Bank or the International Monetary Fund.
"These are 20th century institutions dealing with 21st century realities," says Khalid Malik, lead author of the UN report.
BRICS leaders say the new bank will be a significant step in realigning the orientation of global economic power. And for the world’s most aid-dependent countries, which are disproportionately concentrated on the African continent, the bank would continue the growing trend of looking east – not west – for development.
“I believe the proposed BRICS-led bank … provides the opportunity to mobilize funding for infrastructure development, which is needed in most emerging markets, and in particular in South Africa at present, and which would benefit the wider region as well,” said Anil Sooklal, South Africa’s BRICS ambassador, in an interview with Voice of America.
All BRICS are not created equal, however.
The gap between Xi’s China, the world’s second-largest economy, and South Africa, the 27th, is cavernous. According to a report by South Africa’s Standard Bank, each of the BRICS would be expected to pay $10 billion into the new bank. For China, that’s well under 1 percent of its gross domestic product – for "little bric" South Africa it’s about 3 percent.
But whatever balance of power the BRICS strike with its new bank, China under Xi will likely continue its blitz of private and public investment in the African continent. Over the past decade, China has sped past the US to become Africa’s largest trading partner, and its direct investment in the country rose from $200 million to $12 billion between 2003 and 2011.
Whether that investment is, as Xi claims, strengthening Africa’s ability to “participate in international affairs on a basis of equality,” however, is contested.
“Africa must shake off its romantic view of China and accept Beijing is a competitor as much as a partner and capable of the same exploitative practices as the old colonial powers,” wrote Nigerian central bank governor Lamido Sanusi in a recent Financial Times op-ed. “China takes from us primary goods and sells us manufactured ones. This was also the essence of colonialism.”
China’s ministry of commerce flatly denied that charge.
"I suggest the governor carefully study the history of colonialism," said ministry spokesman Shen Danyang at a press conference Tuesday. "The trade and economic cooperation between China and Africa has nothing to do with colonialism."