The Shanghai Cooperation Organisation (SCO) is considering establishing a development bank, representing a new direction for economic cooperation. During a meeting in Tianjin, Chinese President Xi Jinping put forward the proposal to create a development bank and committed $1.4 billion in financial support over the next three years.
The SCO is a significant regional group with 10 member countries and 26 partner countries. Its combined economy is estimated at around $30 trillion. The organization is broadening its focus from security to development, connectivity, and social progress.
This proposed bank is intended to follow the models of the BRICS New Development Bank and the Asian Infrastructure Investment Bank (AIIB).
Russia has backed the proposal. President Vladimir Putin proposed that SCO nations jointly issue bonds and develop a payment system that would be shielded from Western sanctions.
The bank will primarily focus on green energy, digital economy, and infrastructure projects.
China aims to utilize the bank as a foundation to establish yuan-dominated transactions. It plans to promote the use of the digital yuan in Central Asia, particularly for renewable energy and infrastructure projects. This is perceived as an effort to provide an alternative to the Western-led IMF and World Bank models.
India sees this bank as an opportunity and a cause for vigilance.
It could provide financial assistance for regional connectivity and development endeavors.
India had previously refrained from endorsing China’s Belt and Road Initiative (BRI) at the SCO summit; as a result, India will be monitoring the bank’s structure and its political ramifications closely.
The Ministry of External Affairs (MEA) is assessing the potential of the SCO Development Bank.
Former diplomat Ambassador Mahesh Sachdev notes that the Shanghai Five was established in the 1990s to combat terrorism and cross-border crime, which later became the SCO. China now aims to establish a new framework, moving away from Western structures such as the IMF and World Bank. Amidst the Russia-Ukraine war and the dominance of the US dollar, China aims to create a market in Central Asia that benefits Chinese businesses.
SCO accelerates discussions on the development bank
China has announced $1.4 billion in aid
Russia suggests joint bonds and a new payment system
Focus: Green energy, connectivity, and digital economy
India: Opportunity and caution
It is evident that the SCO is transforming from a security platform to a developing financial power, striving to establish a more significant economic role.