Leaders of BRICS countries—Brazil, Russia, India, China and South Africa—held an attention-grabbing three-day summit in Johannesburg from August 22nd to 24th. The focus of the summit included discussion about membership expansion and strategies to reduce dependence on the U.S. dollar. Chinese President Xi Jinping also arrived at South Africa and attended the meeting. His remarks would attract great attention amid the intensifying confrontation between China and the U.S. However, one cannot help but wonder why the UK newspaper Financial Times reported that Xi Jinping would push the BRICS to become a full-scale rival to the G7.
The G7 has witnessed fifty years of global political and economic changes since its establishment led by the U.S. Its agenda have gradually expanded from economic problems to encompass non-economic issues such as international political situation, global climate change and even crackdown on cross-border crimes. The population of G7 countries accounted for about 15% of the global total when the group held its first summit in 1975. The share has declined to less than 10% now, however. Its GDP also slipped from covering 61.88% of the global GDP to 44.68% in 2021. The share is forecasted to fall under 40% in 2025. Above figures obviously show that the G7 has lost some of its previous power and global influence. The BRICS was established in 2009, accounting for 26% of the world's territory, 42% of the world’s population and 23% of the global GDP. The G7’s near 0.8 billion people (10% of the world’s population) are far less the 3.2 billion inhabitants of BRICS countries (40% of the world’s population). On a purchasing power parity (PPP) basis, BRICS countries’ GDP accounts for 31.5% of the global economy, overtaking the G7’s share of 30.7%. With potential membership expansion in the future, BRICS countries will further increase their contribution to the global GDP and acquire more discourse power. Goldman Sachs thinks that the BRICS will be among the world’s top economies in 2050. The strength of the bloc cannot be underestimated.
Western media often report that the Chinese economy is collapsing or that China intends to replace the U.S. and become the most powerful country in the world. Even though China has fallen to become the third largest trading partner of the U.S. (next to Canada and Mexico), it has increased trade with other BRICS countries. According to the latest data released by the National Bureau of Statistics of China, China’s imports and exports to other BRICS countries reached 2.38 trillion yuan, a year-on-year increase of 19.1%, in the first seven months of 2023. The increase greatly surpassed the 0.4% growth rate of China’s foreign trade in the same period of time. The volume of imports and exports to other BRICS countries accounted for 10.1% of China’s total foreign trade value. China is the most powerful country in the BRICS. Apart from actively establishing trade relations with other member countries, China can also take the opportunity to promote RMB internationalization and increase its standing and discourse power in the bloc.
Hence, does the BRICS led by China have enough strength to rival the G7? The author thinks that it may become possible with enough time: (1) BRICS countries’ anti-U.S. inclination has become increasingly noticeable, and the bloc is expanding its membership. Anil Sooklal, South Africa’s Ambassador at Large: Asia and BRICS, told media in Johannesburg that “twenty-two nations have formally applied to become members of the BRICS economic bloc, and an equal number have also informally sought to join the organization.” The reason behind this is discontent with the U.S. For example, the International Monetary Fund (IMF) and the World Bank were established with the support of the U.S. However, the two organizations have not maintained global financial stability or solved economic development problems; (2) The U.S., with the dollar’s dominance, either prints money and creates inflation or takes strong actions to hike interest rate. The U.S. causes volatility in the global financial market and competitive depreciation of Asian currencies with its beggar-thy-neighbor policy. In particular, concerns about dollar-denominated debts grow amid ever-rising interest rates and in the wake of the U.S. debt-ceiling crisis. As a result, BRICS countries intend to create a new BRICS common currency. This further brings momentum to the trend of dedollarization. The Brazilian President Luiz Inácio Lula da Silva proposed the adoption of a common currency on the first day of the BRICS summit. It is difficult for his proposal to gain traction in the short term. But at least Lula made a strong political gesture. The next step will be how to proceed.
Xi Jinping urged countries to accelerate talks on a Free Trade Area of the Asia-Pacific (FTAAP) at the APEC summit in 2014. China’s intention was to counter the Trans-Pacific Partnership (TPP) led by the U.S. at that time. Indeed, the FTAAP, with close to 60% of the global GDP, 46% of the world’s trade volume and about 40% of the global population, looked very promising. However, the U.S. withdrew from the TPP. China applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2021. The FTAAP failed to become a reality. Of course, a few problems need to be solved before the BRICS led by China starts to rival the G7: (1) BRICS members have their own calculations. The level of trust among them is not high. Some countries are not interested in membership expansion. Moreover, different levels of and huge gaps in economic development make cooperation difficult; (2) Similar to the current situation in the U.S., China is also plagued by sluggish economic recovery, default of debts of large developers and other problems. It will not be easy for China to gain the full trust of the BRICS in the foreseeable future.
(Wo-chiang Lee, Professor of the Department of Banking and Finance at Tamkang University)
(Translated to English by Cindy Li)
