BRICS nations have been calling for a reform of the international monetary system in recent weeks, even proposing a “BRICS bank” to support investment and transactions of the rising economies, but internal divisions have weakened the unified front. Brazil, Russia, India, China, and South Africa all strongly oppose the status quo at the current global lending institutions, but have been unable to indicate a common preference for the next president of the World Bank. Despite the stalemate, China has taken a leading role in the quintet and has been playing actively on the international chessboard. China’s economy is larger than those of the other BRICS members combined, and the creation of any new international institution aimed at promoting development in the five nation club will undoubtedly be Sino-centric, while it continues to explore new markets for investment. For years, Chinese activities abroad were focused mainly on gathering energy and raw materials to feed its giant manufacturing sector, “the factory of the world,” but recent moves have demonstrated a more versatile attitude towards new opportunities.
This last development has seen Chinese flags popping up in the Caribbean, America’s backyard. Far from being a military strategic agenda, China’s Caribbean interest is mainly in tourism, and cultivating friendships with small but important nations in a sensitive part of the world. China’s courtship of the Caribbean has seen government loans, corporate investment, and gifts of goodwill to the impoverished region. The New York Times reported with disguised alarm that China has been financing stadiums in The Bahamas, schools and roads in Dominica, and power plants in Antigua and Barbuda; even construction of the Prime Minister’s new residence in Trinidad and Tobago was contracted out to Chinese companies.
In a region where the USA’s presence was once paramount, China has become the prime benefactor. Assistance to the local governments is punctual and without delay, dispensing with multilateral mediation and complicated procedure, but not without strings attached. When China is writing the checks, pragmatism prevails over ethics.
Recent developments are just a perpetuation of a foreign policy that has led China to the top spot among financiers of the African continent, surpassing even the World Bank according to the most recent data from 2010. China’s Exim Bank is one of the most prolific lenders (China Development Bank being the most important), and its financing alone outstripped the World Bank in some African countries. The same kind of story is being told in Latin America and Asia. China’s aggressive, and at times unscrupulous, economic expansion has also been a de facto vehicle to internationalize its currency. Transactions are regulated in renminbi, pushing it to progressively be more widely accepted and preparing it to become fully convertible in the near future. In some cases loans have been purely figurative, with any currency figures attached only as a way to quantify the value. For example, China may agree to build a hospital in a region that cannot afford it; the capital, labor, and technology are all provided by China, in return for oil or other natural resources. In the end, the investment is paid off with energy.
Using barter-trade and other complex operations, China is proving to be more effective than multilateral institutions in providing help to emerging countries. What remains unclear is if this is a case of third-world solidarity or a new target of nationalistic interest. Whatever the case may be, the World Bank should begin thinking about ways to maintain its eroding relevance in the developing world.