Pankaj Mishra writes: Rarely has an acronym led such a charmed life as BRICS. Casually invented by former Goldman Sachs Group Inc. economist and Bloomberg View columnist Jim O’Neill to label emerging markets of promise, it actually brought together leaders from the disparate countries of Brazil, Russia, India, China and South Africa. Last week in Brazil, they took a decisive step toward building institutions that could plausibly challenge the long geopolitical and economic ascendancy of the West.

The New Development Bank, headquartered in Shanghai, would finance infrastructure and development projects. This would be the biggest rival yet to the World Bank and the International Monetary Fund, as well as the economic architecture designed by the U.S. in Bretton Woods in 1944.

There are good reasons why China is working hard to establish it. The BRICS countries contain more than 40 percent of the world’s population and account for a quarter of the world’s economy. China itself may shortly bypass the U.S. to become the world’s biggest economy (based on domestic purchasing power). Yet leadership of the World Bank and the IMF remains the exclusive preserve of the U.S. and western European countries.

The promised reforms to these institutions have not materialized; China now clearly wants to build its own global system with the help of the BRICS. A new “special relationship” with its closest economic partner in the West — Germany — and the recent establishment of Frankfurt as a clearinghouse for the renminbi is part of the same Chinese attempt to break the hegemony of the dollar as a payments and reserve currency. [Continue reading…]