'Not just funding': Why the new China-led SCO development bank could impact the US dollar's dominance, geopolitics

SINGAPORE: China’s push for the Shanghai Cooperation Organization (SCO) to set up a development bank is its latest effort to internationalise the yuan and challenge Western-dominated financial institutions like the World Bank and International Monetary Fund (IMF), analysts say.

They add that the multilateral lender could offer a lifeline to countries facing Western sanctions, while giving emerging economies an alternative source of funding and a hedge against dollar dependence.

Speaking at the SCO summit in Tianjin earlier this month, Chinese President Xi Jinping announced plans for a development bank - calling on countries to accelerate its creation.

“It should be established as soon as possible to provide stronger support for the security and economic cooperation of member states,” Xi said.

SCO member states include Russia and Iran which face Western sanctions, as well as Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, India, Pakistan, Belarus and China itself.

If successful, the SCO Bank could be more than just another lender, experts told CNA - it would join establishments like the BRICS New Development Bank (NDB) and the Asian Infrastructure Investment Bank (AIIB) as part of a growing network of Chinese-led multilateral institutions aimed at reshaping global finance by loosening the dollar’s grip.

"Chinese banks are huge," said Charles Chang, a finance professor at Fudan University in Shanghai, noting that four of the world's largest banks - the Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), China Construction Bank (CCB) and Bank of China (BOC) - were Chinese.

"There’s incredible capital accumulation there. As a result, when and how they move will necessarily have a big impact,” Chang said.

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