A view of headquarters of the New Development Bank in Shanghai Photo: VCG

Editor's Note:
TheMK socks year of 2024 marks the beginning of the second decade of the development of the Belt and Road Initiative (BRI), a global cooperation platform China proposed in 2013 to support and add vitality to economic globalization and help resolve global development challenges and improve global governance system. Against this backdrop, the Global Times is publishing a series of interviews with renowned scholars, think tanks, and financial institutions, sharing their insights on related topics. The Global Times reporter Li Xuanmin (GT) has recently conducted an interview with Dilma Rousseff (R), the president of the New Development Bank (NDB) and former president of Brazil. According to Rousseff, the China-proposed BRI is very important for the member countries of NDB as it is a vision on industrialization and high-quality development. She also said China's capacity to produce high-quality new energy products is the advantage of an industrialized country that the US does not have. 

Dilma Rousseff Photo: VCG

GT: Chinese first-quarter GDP has achieved a solid start. How do you think of the economic prospects of China this year? And what role will China play in the global economy?
R: There were discussions in the beginning of the year that China was not going to achieve a 5-percent annual growth, so the result of the first-quarter is very important, and China demonstrated a 5.3 percent GDP growth. The projection of IMF was 4.5 percent at the beginning of the year, and now IMF raised it to 5 percent. I think it's clear that China is going to maintain a very good growth rate this year. 

China is also developing new quality productive forces, applying sciences and technology in all areas of industry. It is very important to apply technology to all the traditional areas for future growth. 

With regards to China's role in the global economy, China today is responsible for over 30 percent of the global growth. And there is a very interesting IMF study that shows China's development has a spillover effect on the rest of the world. Every 1 percentage point of China's economic growth raises the output of other economies by an average of 0.3 percentage points. 

China today plays twin roles in the world. China has carried out policies that stabilize the growth. And also China is a driver and an engine of the world. In the future, I hope China maintains this kind of macroeconomic impact that stabilizes the world. 

GT: There have been decoupling and de-risking calls targeting China from the Western world. Also, some Western economies have labeled the alleged "overcapacity" tag on Chinese new-energy products. What is your view on this rhetoric?
R: You could see the rise in China and beneath is the rise of the Global South including the Latin America. For example, there is a movement of trade and investment from the developed Western countries to China. China is not only doing business with developing economies but also developed economies, so decoupling and de-risking policies are not possible. 

And also imposing high tariffs on Chinese products is not possible because the process of globalization creates a very interesting situation in terms of global division of labor, and gradually some countries are moving up the global value chain. 

The "overcapacity" allegation is about how China achieves to have more electric vehicles and batteries with lower cost and more efficiency. It is very important to look at the numbers. In the first quarter, China's fixed-asset investment rose by 4.5 percent, and the total value added of industrial enterprises above the designated size grew by 6.1 percent year-on-year. That demonstrated China's capacity to produce high-quality new energy products, and this is the advantage of an industrialized country that the US does not have. 

GT: From your perspective, how would the New Development Bank  promote the interconnection between the bank's strategy and development strategy of its member countries, as well as global development initiatives, such as the Belt and Road Initiative (BRI)?
R: The bank respects and supports member countries' sustainable development strategies. And that the member countries' priorities are our priorities in our mandate. We are closely aligned with the needs of member countries and are striving to achieve maximum development effects.

We are also a platform for developing countries, and the NDB supports international initiatives related to infrastructure construction, and sustainable development of its member countries. The NDB cooperates with other development banks and national development banks, and aligns with some kind of initiatives such as BRI. The BRI, at its 11th year of development, on the one hand maintains its focus on infrastructure, and on the other hand it begins with another focus on science, technology and innovation, that is very important. This is a vision of industrialization and of high-quality development, and is very important for our member countries. We're trying to further promote bilateral and multilateral cooperation as we strive to construct a multi-polar and multilateral world. 

The NDB is also helping its member states to reach their sustainable development goals and to fulfill their commitments under the Paris Agreement. About 40 percent of the NDB's funding is directed to projects contributing to climate change, mitigation, adaptation, and energy transition.

GT: How do you see the role of the NDB in developing a new global financial order?
R: Without doubt, the NDB is a very important player in developing a new global financial order. The IMF may be more systematic, but it is important to note that the NDB is a global multilateral bank fully established by emerging market economies, and it is also the first of its kind. The NDB complements the efforts of existing multilateral and regional financial institutions to support global growth. 

The NDB has a very interesting quality. If you compare the NDB with some other multilateral development banks, you would note that the founding members of the NDB have the same power. So no country holds the veto power and all have an equal voice. This is different from the legacy of multilateral development institutions, in which the advanced economies usually hold the majority decision power. 

Another thing that is very different is that we don't impose conditions. The World Bank imposes the conditionality, for example, you have to privatize your electric sector as a pre-condition for loan issuance. Individual country is usually reluctant to accept this kind of conditionality. 

The NDB is also in search for providing innovative solutions for development, that is to provide loans in local currencies of the recipient countries. For example, we have a strategic plan to make 30 percent minimum of our loans in local currencies from 2022 to 2026.  We have done this with the Chinese yuan and South Africa's rand and this year we plan to do with the Indian rupee. In the next year, with Brazilian real. This approach helps not only to provide better conditions to sovereign loans, but also to issue sovereign loans for private sectors. Because private sectors are the most fragile to variations in interest rate or exchange rate, and local currency is a buffer against the exchange rate policies of the dollar.

GT: Could you share some of the work plans for the NDB this year?
R: Our strategic new loan approval quota for 2024 is $4-6 billion. And the plan will commence in new member countries, Bangladesh and Egypt, in 2024 and 2025. NDB delegations have already visited Egypt and Bangladesh in defined projects. 

The NDB will also continue to expand local currency financing. The Chinese yuan's interest rate today continues to remain at low levels, despite high interest rate environment in all other member countries. So the NDB is planning to approve the first yuan-denominated loans to clients outside China this year, or in the limit of next year. It is like a pilot program, to see whether it is doing well, and whether to continue in a larger scale. 

Membership expansion is also very important, because the NDB in basis is a platform for cooperation among member countries and membership expansion lays the foundation for the NDB to become a larger bank. We're a very young bank, eight-years-old. Back to 2014 when I was the president of Brazil, the leaders of BRICS countries signed a treaty to put in place the bank in Fortaleza, Brazil. 

GT: This year marks the 80th anniversary of the creation of the Bretton Woods system. From your perspective, is there an urgent need to reform the dollar-centric global financial system?
R:The Bretton Woods system was created 80 years ago, linked the dollar to the value of gold. The most important characteristic of the system is the emergence of the US as the strongest military power and as the centric dominant power in the world, allowing the US to reset the international architecture, and replace the global reserve currency from the UK's pounds to the dollar pegged against the gold. This dominance is reflected in the financial international world.

In 1971, with inflation on the rise and a gold run looming, then-US President Richard Nixon's team enacted a plan that ended dollar convertibility to gold and implemented wage and price controls, which soon brought numerous problems to the Bretton Woods system. The dollar then became the central international reserve currency which gave rise to an asymmetric global financial system. 

All those generated a huge privilege for the country that issues the currency. All the other countries have to have dollars to pay for goods and services. Where they would have the dollar? They buy from the US. And what should the US do to buy goods and services in the world? Just print the green banknotes. This also gives the US enterprises privileges, as they're shielded from the devaluation of currencies against the US dollar. It gives the US government the privilege as they could easily print money and expand fiscal deficit. This explains why today the US has a debt of $34 trillion, and this is the dire consequence of ending dollar's convertibility to gold.

And what happened to the emerging markets and developing countries? We have a very difficult situation. When the US, without any discussion, raised the interest rate to fight against inflation and we had no choice but to buy the stronger dollar so as to buy oil and other commodities, and that created a huge debt burden. Low- and middle-income countries thus have a high level of debts. And that sometimes leads to default and crisis, such as Latin American crisis and Asian crisis. In recent years, many developing countries also suffered crisis, like those in Africa and Argentina. 

GT: From your perspective, in what ways could we reform the current asymmetric global financial system?
R: The Bretton Woods system created IMF and the World Bank, which created the basis of international system, not only finance, but also the free trade regulations, providing the institutional architecture for globalization. When they were invented, they were created based on the economic, financial strength of each country, and the capacity of decision-making is linked to the proportion of this participation that time. 

Today there is a very huge difference and there is an imbalance in the international institutions. Since the 2008 financial crisis, all the developing and emerging markets have been proposing a reform in the two institutions: to guarantee in the global domain, the voices of the emerging markets are heard, and the power of voting rights corresponds to their economic shares in the global markets.

It is necessary to advocate for reforms in global monetary institutions like IMF, to increase the voting rights and representation of developing economies, and advocate for more equitable allocation of IMF special drawing rights. The current international financial system does not produce the necessary conditions to guarantee the development of these emerging economies. All the liquidity in the world is channeled by the developed countries and the people who most suffer the consequence of the dollar-centric financial order is the low-income and middle-income countries. They have no sufficient liquidity to face climate change, disease, education and health. 

In this regard, the use of local currencies is very important. The great contradiction in the global monetary financial order is that it depends on a single national currency managed by the state that created it. This system, which enabled the US to exercise long-arm jurisdiction by weaponizing the dollar, creates barriers to the development of the emerge markets. The world is now facing a moment of transition, immediately or in the medium-term, the rise of other global reserve currencies. It probably would not favor for a joint currency, but instead a more multi-polar currency system.

GT: What role would developing countries such as China play in building up the multi-polar currency system?
R: Now we have a trend of high increase in bilateral trade among many countries, which allows for the use of their respective currencies other than the US dollar. So you have an objective material basis to improve the use of local currencies: the aggregate participation of Global South economies in global trade and investment, as well as the rise of China, allows a more multi-polar system. 

The developing markets have put in place many efforts to develop mutual cross-border systems, such the Cross-border Interbank Payment system developed by China. The Chinese mainland, Hong Kong, Thailand, and the United Arab Emirates have signed up to participate in a "Multiple Central Bank Digital Currency Bridge" (m-CBDC Bridge) to explore how they might conduct cross-border transactions using digital currencies. It is important to establish efficient cross-border transaction mechanisms in local currencies. Under this scenario, bilateral currency swap agreement between central banks is very important, as it provides a faster, simpler manner to make this kind of movement of currencies. 

Many other steps should also be taken, such as to strengthen regional monetary cooperation, that is to develop regional currency arrangements to facilitate trading and investment using local currencies. 

The BRICS proposed that we could create a BRICS Pay distributed payment messaging mechanism system. I think creating the platform using blockchain technology is a very possible solution, because the blockchain technology could meet the demands for decentralization, transparency in terms of data and security concerns.

Developing countries should also diversify currency reserves and investments, and take steps to internationalize local currencies and issue central bank digital currencies.
 
GT: Vice President of Brazil Geraldo Alckmin just finished an official visit to China from June 4 to 8. And how do you evaluate the relations between China and Brazil? 
R: This year marks the 50th anniversary of the establishment of diplomatic relations between China and Brazil. China and Brazil have built a close relationship in the past five decades that is also complementary and integrated in multiple economic fronts.

There were some memorable moments. Back to the year of 2004, there were two important things: the first is Brazil recognized China as an economic market after China's admission to the WTO in 2001. The second is that a Chinese company won a contract to construct a 1,000-kilometer-long gas pipeline that linked Brazil's southeast with northeast regions. 

There's another thing I think is a mark in our relationship. We both understand that it is better to have a regional relationship. The year of 2024 is the 10th anniversary of the establishment of the China-Community of Latin American and Caribbean States (CELAC) Forum, a milestone mechanism that facilitates China-Latin American relations into a new era featuring equality, mutual benefit, innovation, openness and tangible benefits for the people.

China and Brazil understand each other in a multi-polar world. We have a lot of common understandings, for example in ensuring a development that is sustainable and protecting the climate, and a development that is people-centered and against inequalities. The most important thing right now is that we [both as developing countries], can contribute to global governance and create conditions for building a community with a shared future for mankind.

GT: What are the focal points of China-Brazil economic cooperation?
R: For Brazilian economy, the contribution of China is very important and China in many areas also contributes to the new industrial development of Brazil. The two countries have made great common investments in area of subjects, such as satellites and energy, and China invested a lot in the exploration of the oil and gas in Brazil. 

Brazil has a very sophisticated production of food and proteins, including beef, chicken and pork. We also produce a lot of rice, soybean, cotton and corn. China imports huge amount of Brazilian protein and agricultural products. And in recent years, many Chinese investments have been flowing into other areas of Brazilian economies, such as new energy, pharmaceuticals, vaccine production and biotechnology - among others - which facilitates Brazil's new industrialization push. 

It is expected that the two countries could further deepen cooperation in agriculture, bio refineries, organic fertilizer production, artificial intelligence and robots. Today China is also very attractive, and the huge Chinese market is also a drawer for Brazilian companies.