The Shanghai Cooperation Organisation (SCO) has signaled a new direction in development. At a meeting in Tianjin, China’s President Xi Jinping proposed the establishment of a development bank under the organization. He also announced the provision of $1.4 billion in loans over the next three years.
The SCO is the largest regional group in the world, comprising 10 member countries and 26 partner countries, with a combined economy of approximately $30 trillion. The organization now aims to move beyond security cooperation and focus on development, connectivity, and social progress.
This bank would be modeled on the BRICS New Development Bank and the Asian Infrastructure Investment Bank (AIIB).
Russia has also supported the proposal. President Vladimir Putin suggested that SCO countries jointly issue bonds and develop a payment system that would not be affected by Western sanctions.
The bank will focus on green energy, digital economy, and connectivity projects.
China intends to use this bank as a foundation to establish yuan-centered transactions. It plans to promote electro-yuan in Central Asia, particularly for renewable energy and infrastructure projects. This move is seen as an attempt to establish an alternative to the Western IMF-World Bank model.
For India, this bank presents both an opportunity and a cause for caution.
On one hand, regional connectivity and development projects could receive financial support.
On the other hand, India had refused to support China’s Belt and Road Initiative (BRI) at the SCO summit. Therefore, India will be closely monitoring the bank’s structure and its political implications.
The Ministry of External Affairs (MEA) has stated that the possibilities of the SCO Development Bank are currently under consideration.
Former diplomat Ambassador Mahesh Sachdev says that in the 1990s, the Shanghai Five was formed to prevent terrorism and cross-border crime. Later, its scope expanded to become the SCO. Today, China’s intention is clear: to create a new framework, moving away from Western structures like the IMF and World Bank. Amidst the Russia-Ukraine war and the dollar-based power of the United States, China wants to create a market in Central Asia where Chinese companies dominate and face no challenges.
SCO has intensified discussions on the development bank
China announced aid of $1.4 billion
Russia: Joint bonds and a new payment system to be created
Focus: Green energy, connectivity, and the digital economy
India: Opportunity and caution
It is clear that the SCO is now trying to establish its identity not only as a security platform but also as an emerging development and financial power.