China will contribute $41 billion to a $100 billion pool of currency reserves the BRICS countries are forming to guard against financial shocks, the nations’ leaders said.
Russia, India and Brazil will each add $18 billion to the pool, while South Africa will provide $5 billion, according to a statement following an informal meeting today of the countries at the Group of 20 summit in St. Petersburg, Russia.
Leaders from some of the largest emerging market economies are combining resources as they seek to shield against “unintended negative spillovers” from unconventional monetary policies in developed economies, according to the statement. They also agreed to seed a new development bank with $50 billion of capital.
“We see the temporary difficulties of some BRICS countries mainly as difficulties in terms of international balance of payments,” Chinese Vice Finance Minister Zhu Guangyao told reporters in translated remarks. “The policy options in response to such typical balance-of-payments difficulties include increasing interest rates or devaluing currencies.”
Instituting capital controls, as has been done in the past, is “out of the question” now, Zhu said.
South Africa’s rand has depreciated 16.9 percent against the dollar this year, the most among 24 emerging-market currencies tracked by Bloomberg. India’s rupee was second worst, depreciating 16.8 percent, while the Chinese currency has strengthened 1.8 percent.