Chinese President Xi Jinping secured an agreement from partner countries to set up a new development bank, realising a longtime ambition in a display of Beijing’s growing influence.
Members of the Shanghai Cooperation Organization agreed to establish the institution, Chinese Foreign Minister Wang Yi said Monday at the end of the two-day SCO summit that gathered Xi’s closest international allies in the Chinese port city of Tianjin.
“The initiative to form a development bank of the SCO more than 10 years ago by the Chinese side has finally come to a fruition,” he said at a joint press conference with SCO Secretary-General Nurlan Yermekbayev.
“This will give a strong boost to the infrastructure development and socioeconomic development in SCO countries,” Wang added.
While the top Chinese diplomat gave no further details, the agreement marks a win for Beijing, which had sought to create such a bank since as early as 2010. Moscow previously opposed the idea of a regional lender and suggested that China join a Russia-controlled development bank instead, according to an 2017 analysis published by Carnegie Moscow Center.
Bert Hofman, a former World Bank country director for China, said the new bank will likely provide non-USD financing to help members reduce the risk of sanctions and dollar volatility. That currency will probably be yuan, he said, as “none of the other members has the capital market to provide long-term finance needed for infrastructure.”
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The SCO development bank may also give Beijing more sway in global financial governance alongside China-led Asian Infrastructure Investment Bank, whose membership has doubled to over 100 since being established, including some US allies in Asia and Europe.
Hofman noted the narrower scope of the SCO bank and, unlike the AIIB, the absence of Western countries in its leadership. This may allow it to make more targeted lending among 27 members and partners.
Wang’s announcement followed remarks by Chinese President Xi Jinping earlier during the day calling for the bank’s establishment “as soon as possible.”
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Wang touted Xi’s announcement of a Global Governance Initiative as a significant result of the summit, criticising the “monopoly” of global governance by a few countries that he didn’t name.
His remarks dovetail those of Xi, who in an earlier speech called for the bloc to oppose “bullying practices” in a veiled swipe at the US.
Xi also promised to increase investments and loans to partners, backing the bloc with financial support and further boosting Beijing’s clout.
“All members are equal,” said Yermekbayev, a former defence secretary of Kazakhstan. “But we cannot overestimate the importance of China.”
In a joint declaration, member countries expressed opposition to unilateral coercive measures and vowed to facilitate trade within the group. They also condemned the military strikes by Israel and the US against Iran, calling the June attack a “gross violation” of international norms and an infringement of Iranian sovereignty.
Separately, Pakistan and Armenia announced their establishment of formal diplomatic relations and exchanged a joint communique on the sidelines of the summit.
The use of the occasion to resolve disputes adds to signs of the SCO’s growing influence. The summit — the biggest since its inception in 2001 — brought together Russian President Vladimir Putin and Indian Prime Minister Narendra Modi, as well as Iranian President Masoud Pezeshkian and Pakistani Prime Minister Shehbaz Sharif.
Modi’s first trip to China in seven years included a bilateral meeting with Xi, which saw the two leaders pledge to rebuild ties as both Beijing and New Delhi face steep tariffs from Washington.
