Social Sciences in China (Chinese Edition)

No.9, 2014

 

The New Development Bank from the Perspective of International Financial Cooperation

(Abstract)

 

Tang Lingxiao, Ouyang Yao and Huang Zexian

 

The New Development Bank is a new form of international financial cooperation. The BRICS’ basic infrastructure suffers from a huge financing gap, whereas its massive foreign exchange reserves lack profitable outlets and member states’ self-contained management costs are extremely high. The coincidence of the need for basic infrastructure investment and the need for profitable foreign exchange reserves are the immediate reasons for the joint establishment of the BRICS Development Bank. Comparative advantage and the co-movement of fluctuations in the BRICS’ member states optimize their cooperative interests. Compared to other patterns of cooperation, virtual networks enable this financial cooperation to yield benefits within a short timeframe. The mutually supportive relationship between development and stability in the BRICS economies has laid the foundation for the establishment of the New Development Bank. As a cooperative financial organization of emerging powers in transition, the Bank should adopt appropriate mechanisms. Overall, however, it will still need to follow market rules and those of the international community and will still be reliant on governments and the market. It will also need to design an appropriate low-cost financing management mechanism for the medium to long term.