The BRICS Expansion: China's Stepping Stone to Global Power
Anticipate a BRICS Expansion: New Faces Expected at This Year's Summit, Aug 22-24!
Key Judgements
Saudi Arabia is almost guaranteed to join BRICS officially at the summit this year, giving access to China’s New Development Bank. Argentina will likely join as well.
Technological collaborations within BRICS, especially with China's advancements in areas like 5G and AI, have the potential to reshape the global tech landscape.
The increasing relevance of the global south drives the expansion of BRICS. With China and Russia's vast resources, many nations see the benefits of joining the alliance.
New Members Coming 2023
The BRICS alliance, traditionally consisting of Brazil, Russia, India, China, and South Africa, is poised to see a potential expansion in its membership. Countries that have shown keen interest in joining the bloc in 2023 encompass Argentina, Iran, Saudi Arabia, the United Arab Emirates, Cuba, the Democratic Republic of Congo, Comoros, Gabon, and Kazakhstan.
However, the prospect of new members has stirred apprehensions within the existing framework. India, in particular, has expressed reservations. Given the bloc's increasing influence and the potential introduction of a new global currency, India's concerns are rooted in the strategic implications of such decisions. There's a growing sentiment among some Indian policymakers and analysts that if China's intentions within BRICS lean towards establishing a dominant global position, especially with introducing a new gold-backed currency, India might be better off reconsidering its membership. The dynamics of BRICS are undoubtedly evolving, and the decisions made in 2023 could reshape the geopolitical landscape.
Economic Diversification Away from the West
From 2001 to 2010, FDI outflows from the BRICS grew from 1% of global flows to over 10%. By 2020, the share of BRICS outflows had reached 20% of global flows. The absolute value of BRICS outflows reached a historic high, in 2021, at almost $250 billion.
China's active participation in BRICS has been a strategic move to diversify its economic partnerships. Historically, China's economic growth was closely tied to Western markets, especially the U.S. However, the evolving geopolitical landscape and trade tensions have made it imperative for China to seek alternative avenues for growth.
BRICS, representing 18% of global exports, offers a significant opportunity. The growth rate of intra-BRICS exports has consistently exceeded the global average, indicating a thriving trade environment within the bloc. For China, this means access to emerging markets, reduced dependency on the West, and a chance to establish new trade norms and standards that align with its interests.
Alternative Financial Institutions
BRICS outward FDI stock mushroomed from $1.1 trillion in 2011 to $3.7 trillion in 2021, an increase of 235%. However, the BRICS as a group accounted for less than 1% of the world’s total outward FDI stock in 2021
The establishment of the New Development Bank (NDB) by BRICS nations clearly indicates the bloc's intent to move away from Western-dominated financial institutions. The NDB, focusing on infrastructure and sustainable development projects, offers China a platform to finance projects that align with its Belt and Road Initiative (BRI) and other global ambitions.
China's dominant role in intra-BRICS investment is evident from the figures. With the total inward FDI stock between BRICS countries increasing from $27 billion in 2010 to $167 billion in 2020, China's contribution stood at a staggering $151.439 billion in 2020. This financial clout allows China to influence the bank's lending policies, ensuring that projects align with its strategic and economic objectives.
Geopolitical Leverage
In global geopolitics, alliances, and blocs play a crucial role. As a collective, BRICS offers China a platform to voice its concerns, champion its causes, and present alternative viewpoints to Western perspectives. Given China's economic dominance within the bloc (accounting for over 70% of BRICS GDP in 2021), its voice carries significant weight.
Furthermore, BRICS nations often share common interests and concerns, especially regarding trade imbalances, technology transfer, and sustainable development. China can effectively counterbalance Western influence in international forums and negotiations by leveraging the collective stance of BRICS.
Strengthening the Belt and Road Initiative (BRI)
China's BRI is one of the most ambitious infrastructure projects of the 21st century. It aims to create a vast network of railways, roads, pipelines, and utility grids linking China to various parts of Asia, Europe, and Africa. The support and collaboration of BRICS nations, especially Russia and India, are crucial for the success of this initiative.
Even though China is moving away from the BRI plan as we know it and into other smaller, less capital-intensive plans that focus on similar strategic goals, there is still a large part for BRICS to play in their plans. As the CCP is trying to prepare for its upcoming debt crisis, it cannot deploy capital how it initially thought when the BRI was first envisioned. But it served as a means to an end to get the global influence that was sought after initially.
The increasing intra-BRICS exports and investments can significantly bolster the BRI. For instance, infrastructure projects funded by the NDB in BRICS nations can complement the BRI's objectives, ensuring smoother trade routes and enhanced connectivity. Moreover, the shared interests of BRICS nations in regional stability, economic growth, and sustainable development align well with the goals of the BRI, making the initiative a win-win for all involved.
In the last five years, several BRICS countries, especially Brazil, China, and India, adopted policies to expand market access to foreign investors further. Brazil introduced measures to expand market access to foreign investors in airport operations and electricity industries.
Cultural and Educational Exchanges
Beyond the tangible benefits of trade and investment, soft power dynamics play a pivotal role in international relations. BRICS nations have been proactive in initiating various cultural and educational exchange programs, and China has been at the forefront of these initiatives.
The CCP uses these cultural and educational exchanges to help further its narratives and build networks of elites sympathetic to the CCP's causes through bribery, corruption, or old-fashioned elite capture. What seems like a language or cultural exchange program shortly turns into senior officials being wined and dined in Beijing and welcomed back at any time. For members of educational organizations which do not normally wield large amounts of power in their home countries, this makes them dependent on the CCP for great family vacations and extra money for their research programs of educational expansions.
Such programs allow China to showcase its rich cultural heritage, from its ancient philosophies to modern art, science, and technology achievements. China fosters a deeper understanding of its societal values and aspirations by hosting students, academics, and professionals from fellow BRICS nations. Conversely, Chinese students and professionals benefit from exposure to diverse cultures and ideas, enriching the nation's intellectual capital.
In the long run, these exchanges can lead to collaborative ventures in academia, research, and innovation, further solidifying China's position as a global thought leader.
Technological Collaboration
In the age of the Fourth Industrial Revolution, technological prowess is synonymous with global influence. China is poised to be a global tech leader with its stolen tech-transfer innovations in 5G, artificial intelligence, and green technologies. Collaborations within the BRICS framework can amplify this position.
Joint technological ventures can lead to breakthrough innovations, benefiting not just BRICS nations but the world. For instance, collaborations in renewable energy can lead to more efficient green technologies, addressing global concerns about climate change. Similarly, partnerships in digital infrastructure can pave the way for a more interconnected and digitally inclusive BRICS community.
With its vast technological infrastructure and expertise, China can play a mentorship role, helping other BRICS nations leapfrog technological challenges and achieve rapid digital transformation.
Resource Access and Security
China's meteoric economic growth comes with an insatiable appetite for resources, from energy to raw materials. The rich in natural resources, BRICS nations offer a solution to this challenge. Russia's vast energy reserves, Brazil's agricultural output, and South Africa's mineral wealth are just a few examples.
By fostering closer ties with BRICS nations, China can ensure a stable and secure supply chain for its industries. This supports China's industrial growth and reduces its dependency on volatile global markets. Moreover, collaborative ventures in resource exploration and extraction can lead to more sustainable and efficient practices, benefiting both the environment and the economy.
A Counterbalance to Western Alliances
Alliances and blocs mark the geopolitical landscape of the 21st century. While Western alliances like NATO have historically dominated global politics, the rise of BRICS offers a counter-narrative. As the bloc's economic and political weight grows (evidenced by its increasing share in global GDP), it presents a formidable counterbalance to Western dominance.
As the most influential member of BRICS, China can leverage this collective strength to champion causes that align with its global vision. Whether advocating for a more equitable global trade system or pushing for reforms in international institutions, China, backed by its BRICS allies, can effectively challenge the status quo, paving the way for a more multipolar world order.