China, other developing BRICS nations seek change in global economic order

BOAO, CHINA — With the United States and Europe still reeling from the 2008 financial crisis, five disparate developing countries led by China — large, populous, with growing economies — are using their combined clout to demand a larger voice and to upend the world’s traditional councils of power.

Brazil, Russia, India, China and newcomer South Africa, collectively known by the acronym BRICS, used their third summit meeting here on this southern Chinese resort island to call for a restructuring of the World War II-era global financial system and an eventual end to the long reign of the U.S. dollar as the world’s reserve currency.

Video

April 11 (Bloomberg) -- Andrew Sheng, chief adviser to the China Banking Regulatory Commission, talks with Bloomberg's Michael McKee and Sara Eisen about the outlook for the Asian economy and currencies.

Video

April 8 (Bloomberg) -- Billionaire investor George Soros talks about China's economic growth and inflation. Soros also discusses the European Central Bank's decision to raise its benchmark interest rate and the U.S. dollar.

More on this Story

• China combats real estate run up
• China’s $3 trillion dilemma
• A new economic world order?

View all Items in this Story

• PostPartisan: China's fizzy real estate
• Graphic: China's way to the top
• More news from Post Business

The five run the gamut politically, from vibrant democracies to authoritarian regimes. Economically, they are as much competitors as partners. But what they share is a common sense of exclusion, and the idea that the main institutions of global governance — the World Bank, the International Monetary Fund, the World Trade Organization and the U.N. Security Council — were formed in a different era when the countries were economically weak and the United States was the world’s dominant superpower.

“They were really the biggest countries kind of left out,” said Amar Bhattacharya, a former World Bank official who now runs the Washington-based Group of 24 forum of developing countries.

The Obama administration came to office trying to engage China to become a “responsible stakeholder” in the established global order. But China, now with the backing of the other BRICS countries in a forum that it dominates by virtue of its size, has argued that the existing order is unfair and needs reshaping.

“The governing structure of the international financial institutions should reflect the changes in the world economy, increasing the voice and representation of emerging economies and developing countries,” the group’s final statement said.

Of the United Nations, it said, “We reaffirm the need for a comprehensive reform of the U.N., including its Security Council, with a view to making it more effective, efficient and representative.” It added, “China and Russia reiterate the importance they attach to the status of India, Brazil and South Africa in international affairs, and understand and support their aspiration to play a greater role in the U.N.”

The countries called for “a broad-based international reserve currency system providing stability and certainty,” a slap at the U.S. dollar and Washington’s monetary policy, which they think has allowed the dollar to depreciate.

The statement, more strongly worded and specific than one expressing similar sentiments at the group’s 2009 summit, said these emerging-market countries should have more of a say in how the world’s financial system is run, including which currencies should be in the emergency “basket” of drawing rights managed by the IMF.

In one of the first concrete steps, the five leaders agreed to have their development banks provide credit to one another, denominated in their local currencies and not, as is typical, in U.S. dollars.