Bank China built to challenge USD now needs dollars

A development bank China launched with its fellow Brics countries was supposed to reshape international finance. Russia’s invasion of Ukraine now risks turning it into a zombie bank.

- Alexander Saeedy

Eight years after Chinese leader Xi Jinping and his counterparts from Brazil, Russia, India and South Africa established the New Development Bank, with headquarters in a swanky Shanghai skyscraper, it has all but stopped making new loans and is having trouble raising dollar funds to repay its debts, according to an examination of its finances and interviews with bankers and others familiar with the matter.

The New Development Bank is the lesser-known of two China-based multilateral lenders. Its larger cousin, the Asian Infrastructure Investment Bank, this week landed in the middle of a public-relations crisis after a disgruntled executive accused it of being controlled by members of China’s Communist Party.

Trouble at both banks, as well as at China’s giant Belt and Road infrastructure push, which has seen China spend $1 trillion to expand its influence across Asia, Africa and Latin America, spotlights growing difficulties for Beijing’s strategy to rearrange an international order it considers biased in favor of the West.

Both the AIIB and the New Development Bank were set up in large part to reduce developing countries’ dependence on dollar-based funding—alternatives to the International Monetary Fund that would help finance development in some of the world’s fastest-growing economies.