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BRICS target global economic reform

Updated: 2011-04-15 07:19
By Wang Xiaotian ( China Daily)

SANYA, Hainan - Leaders of the five BRICS nations vowed on Thursday to support reform of the international monetary system and the setting up of a broad-based international reserve currency system.

The pledge was made after a summit of the BRICS (Brazil, Russia, India, China and South Africa) group in Sanya, Hainan province.

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"Recognizing that the international financial crisis has exposed the inadequacies and deficiencies of the existing international monetary and financial system, we support the reform and improvement of the international monetary system, with a broad-based international reserve currency system providing stability and certainty," the post-summit communique said.

President Hu Jintao, Russian President Dmitry Medvedev, Indian Prime Minister Manmohan Singh, Brazilian President Dilma Rousseff, and South African President Jacob Zuma attended the summit on Thursday.

The leaders welcomed proposals to expand the Special Drawing Right (SDR), reserves held by the International Monetary Fund (IMF), and suggestions that the composition of a basket of currencies for the SDR should be broadened.

The BRICS also called for the rapid reform of the IMF, which was agreed at previous G20 summits. The leaders agreed the governing structure of international financial institutions should reflect changes in the global economy, especially by increasing the voice and representation of emerging economies and developing countries.

Vladimir Dmitriev, chairman of Vnesheconombank, Russia's development bank, said on Wednesday that the enhanced economic power of the BRICS should result in an increased role for their currencies in the international financial system.

On Thursday, five BRICS development banks signed a framework agreement on financial cooperation, vowing to gradually promote credit and settlement in local currencies.

Chen Yuan, chairman of China Development Bank, a leading lender among the five banks, told China Daily that although no specific details were settled in the framework agreement, he expected the bank's yuan lending to the other four BRICS members will reach as much as 10 billion yuan ($1.53 billion) this year.

Though the bank did not lend yuan to the other members of BRICS before, it had lent more than $38 billion to the group by the end of 2010, compared with total foreign exchange lending of $141.3 billion, according to Chen.

He expected loans to the other BRICS members to rise by as much as 20 percent year-on-year in 2011.

The framework also extended cooperation to capital markets, including bond issues and helping corporations to list, Chen said.

Lu Zhengwei, chief economist with Industrial Bank, said the large economic disparity among the BRICS means their room for manoeuvre on reform of the international monetary system may be limited.

It would be more practical to urge stabilization of major currencies, especially the US dollar, and coordinate their efforts against "hot money", speculative capital inflows of foreign capital, he said.

Emerging markets have been a favored destination for "hot money" and the BRICS should boost cooperation on the issue, Wu Hailong, China's assistant foreign minister, said on Thursday at a news briefing.