BRICS Bank:Bravo or Bravado

The BRICS Leaders Summit was just ended in Brazil. One of the most important achievements was the foundation of the BRICS National Development Bank， which is to be headquartered in Shanghai.

The concept of BRIC started from Goldman Sachs analyst Jim ONeill. The BRIC is a collection of the first letters of Brazil， Russia， India and China. Then South Africa is invited into this rank， forming the current concept of BRICS.

The BRICS bank， as announced by the five countries， is going to provide capital support for the longterm development of the countries. It will be either the supplementary to the World Bank， or a rival for this multilateral organization.

What it is going to challenge also includes World Banks sister organization IMF. The BRICS are thought to be ambitious to challenge the existing financial system formed after the World War II. However， are they able to do this？

There are numerous reports about the significance of this move. Chinese media would like to call it the start of moving the economic center of the world from the west to the east. However， there are a lot of people with a clear mind： they doubt that the BRICS bank could reach beyond the five countries to challenge the World Bank and IMF.

The most convincing fact is that the five countries vary greatly from each other. India， China and Russia are connected to each other geographically but Brazil and South Africa are in the other two continents. The geographical connection is a very important factor for the success of an alliance. EU， ASEAN and NAFTA are successful – if they are thought to be successful – cases that could prove this point.

Apart from the geographical affinity， the members of an alliance need a common goal for cooperation. Presently， the five countries strive to shatter the dominance of the U.S. and Europe in finance and economy. But the goal is quite unstable： the expansion of NAFTA might cover South America （Brazil included）， or the TPP might enlist India， or even China itself.

It seems unlikely for the BRICS to be a threat against the IMF and World Bank. Actually， the emerging countries made the same attempt in the past. From 1997 to 1998， the IMFs harsh and annoying conditions for providing loans greatly angered the Asian countries that were fighting against the Asian financial crisis. The Southeast Asian countries set up a system of swapping currencies to allot other countries resources in the crisis. However， this mechanism failed to work as expected.

The emerging countries are unwilling to sanction“their own people”. As an important ally of China， Pakistan once asked the Chinese government for the financial aid during the 2008 financial crisis. However， Beijing advised Islamabal to turn to IMF. The Chinese governments efforts in bringing competitive enterprises to the overseas markets have already angered the other countries. If China is given the task to tame the undisciplined countries， the result might get worse.

This is the biggest problem of the emergency system and the entire idea of the global financial structure proposed by BRICS. Even though IMF and World Bank have many defects， they know whats driving them and how to implement these rules. The great differences among them in financial and macroeconomic policies stop them from working together for the same goal.