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CNA: New Development Bank Aims to Challenge Dollar Now Needs Dollar to Rescue

Primary Taiwanese news agency Central News Agency (CNA) recently reported that the New Development Bank jointly established by China and the BRICS is supposed to reshape international finance and reduce developing countries’ dependence on the U.S. dollar. However, after Russia invaded Ukraine, the bank may now become a “zombie bank.” Chinese President Xi Jinping and the leaders of Brazil, Russia, India and South Africa established the New Development Bank (NDB) eight years ago, headquartered in Shanghai. According to interviews with bankers and others familiar with the matter, NDB has now all but stopped making new loans and is having trouble raising dollar funds to pay its debts. Shortly after Russia’s foray into Ukraine last February, the New Development Bank froze all new loans to Russia to reassure investors. However, Russia owns nearly 20 percent of NDB, and Wall Street was quick to turn wary of it. Since then, NDB has had to take on increasingly high debts to service old debts and meet its own liquidity needs. After the establishment of NDB, members found it difficult to rely solely on China’s banks and capital markets. The bank began borrowing billions of dollars from Wall Street as well as Chinese state-owned banks. About two-thirds of its borrowing is in dollars. Given its own slowing economic growth, China has so far been reluctant to commit more money to boost the NDB’s coffers. To complicate matters further, according to the bank’s charter, the next country likely to be the NDB’s rotating president is Russia.

Source: CNA, June 17, 2023