The Shanghai Cooperation Organisation (SCO) is considering a new development bank, marking a shift towards economic cooperation. At a meeting in Tianjin, China’s President Xi Jinping proposed the establishment of this bank and pledged $1.4 billion in financial assistance over the next three years.
The SCO, a bloc encompassing 10 member states and 26 partner countries, represents a significant economic force, with a combined GDP of around $30 trillion. The organization is broadening its focus from security to include development, infrastructure, and social advancement.
The proposed bank is designed to mirror the structures of the BRICS New Development Bank and the Asian Infrastructure Investment Bank (AIIB).
Russia has endorsed the initiative, with President Vladimir Putin suggesting the issuance of joint bonds by SCO members and the creation of a payment system designed to bypass Western financial restrictions.
The bank’s primary focus will be on supporting green energy projects, digital economy initiatives, and infrastructure connectivity.
China aims to leverage this bank to promote yuan-denominated transactions, especially in Central Asia, utilizing digital yuan for renewable energy and infrastructure. This strategy is interpreted as an effort to present an alternative financial model to the IMF and World Bank.
India’s position reflects a dual approach, balancing opportunities with strategic considerations.
The bank could potentially facilitate regional connectivity and development projects.
India previously declined to endorse China’s Belt and Road Initiative (BRI) at the SCO summit. India will carefully assess the bank’s design and its potential political ramifications.
The Ministry of External Affairs (MEA) is evaluating the implications of the SCO Development Bank.
Former diplomat Ambassador Mahesh Sachdev explains that the original Shanghai Five was established in the 1990s to combat terrorism and cross-border crime. The SCO’s scope has since broadened. China’s current objective is to create an alternative financial framework, diverging from the IMF and World Bank. In the context of the Russia-Ukraine conflict and the dominance of the US dollar, China seeks to establish a market in Central Asia that is favorable to Chinese companies and free from competition.
SCO is accelerating discussions on the development bank
China has announced $1.4 billion in aid
Russia proposes joint bonds and a new payment system
Focus: Green energy, connectivity, and the digital economy
India: Opportunity and caution
It is evident that the SCO is evolving from a security-focused platform to a developing financial power, seeking to establish a stronger economic role.