SCO โSummit Signals Potential for First Multilateral Security Growth Bank, Challenging Dollar Dominance
QINGDAO, CHINA – Theโ Shanghai Cooperation Organisation (SCO) summit this week is spotlighting discussions thatโ could lead to the establishment of the world’s first multilateralโข development bank โฃ(MDB) financed in non-dollar currencies and with a mandateโ to fund security-related initiatives, a move that could reshape global development finance and challenge the longstanding dominance of the U.S. dollar.
Founded in 1996 by China, Russia, Kazakhstan, Kyrgyzstan, and โขtajikistan – initially known as the “Shanghai Five” โค- theโฃ SCO has expanded to include Uzbekistan, India, Pakistan, Iran, Belarus, and โฃrecently welcomed Saudi Arabia, Egypt, Turkey,โฃ Myanmar, Sri Lanka, and Cambodia as dialog partners.โ rootedโ in resolving โpost-Soviet border โdisputes, the association quickly adopted a securityโ focus, enshrined in the 2001 Shanghai Convention on Combating Terrorism, Separatism and Extremism – often referred to โขas โคthe “three evils.”
now, with deep Chinese institutional backing, the potential SCO Development Bank (SDB) is being positioned asโฃ a counterweight to existing institutions like the World Bank, which explicitly prohibits financing forโค military-relatedโ projects. Currently,lending by the New Development Bank (NDB),established by BRICS nations,is less then 25% denominated โขinโข local currencies,highlighting a continued reliance on dollar-based financing.
However,โค China is โactively promoting alternatives. Renewable energy investments in Central Asia are increasingly โขsettled in renminbi,fostering discussion of a “electro-yuan” โฃdriven greenโ electricity trade. โ This builds on the Belt and Road Initiative’s initial call for increased currency circulation, with China now leveraging the green transition to advance the โrenminbi’s โrole. discussions areโ also underway regarding joint bonds and integrated payment networks.
“China is grasping the potential of green transition toโข be a currency transition, too, ironically away from the greenback and toward the renminbi,” โฃnotes Lauren Johnston, director of New South Economics, whoโ holds a PhD in International economics from Peking Universityโข and hasโข previously worked with the Worldโ Bank and World Economic Forum.The SDB’s potential security focus stems directly from the โSCO’s โfounding principles.Recent announcements of four new security centers suggest the bank โcould โoffer financing for initiativesโ aimedโค at countering the organization’s identified “three evils,” a funding stream unprecedented for a multilateral development bank.
while the prospect of a China-led “redback” era raises concerns, Johnston emphasizes the importance of learning from history.”We should all hope that SCO members heed the lessons of WWII, and the era of relatively peaceful prosperity that followed is also embedded in any future SDB,” she writes.
