The BRICS Summit hosted by Russia on Tuesday appeared to be on the right track for boosting cooperation among the world’s largest emerging economies.
Each of the leaders of the five countries – Brazil, Russia, India, China and South Africa – seemed to express a strong desire to work together on tackling such fields as the economy, the Covid-19 pandemic, terrorism and other issues of mutual concern, as reflected in the Moscow Declaration, the official document listing the leaders’ pledges.
All five leaders, for example, vowed to collaborate on developing and producing a Covid vaccine.
This is a far cry from the antagonism that India and Brazil have showered on China. Brazilian President Jair Bolsonaro came to power on an anti-China platform, vowing to decouple from the Asian country. He openly worshipped Donald Trump, following the outgoing US president in banning Huawei and other Chinese-made equipment from his country’s 5G (fifth-generation telecom) rollout.
Indian Prime Minister Narendra Modi has been even more hostile toward China, escalating the two countries’ border disputes, banning Chinese apps and products, joining the US-led quadrilateral security arrangement to counter Beijing, and other anti-China stances.
So what should the world take out of the apparent rapprochement between China on the one hand and India and Brazil on the other at the BRICS Summit? The world should rejoice, because such a meeting of minds would be good not only for the BRICS states themselves but for the world at large, economically and geopolitically.
Increased inter-BRICS trade and investment would spur international trade, reversing the pandemic-induced world recession. Cooperation between India and China would strengthen global security in the Asia-Pacific region and beyond.
One could suggest that BRICS is a “marriage made in heaven,” as its members could help one another realize their economic and geopolitical potential.
The economies of China and of the other four members are highly complementary. Brazil’s, Russia’s, South Africa’s and to some extent India’s resources fueled China’s manufacturing prowess. In turn, Chinese technology and funding jumpstarted economic development in Russia, Brazil and South Africa. Chinese investment in India’s technology upstarts and low-priced exports played no small role in enhancing the latter’s economic growth.
Indeed, it was China’s buying of and investing in the resource and other industrial sectors that made BRICS what it is today, surpassing the Group of Seven countries in economic size. According to the International Monetary Fund, the combined gross domestic product of the BRICS states in 2018 was US$46.1 trillion, whereas that of G7 was $41.1 trillion in purchasing power parity (PPP) terms.
Since the G7 economies are already developed, there is little room for expansion. The five BRICS countries, including China, on the other hand, still have considerable room for economic growth.
China’s private consumption as a percentage of GDP was only 40% in 2018 as compared with the G7’s 70%. Designating consumption as the engine of growth in China’s 14th Five-Year Plan should result in high growth rates over the period because of the country’s 1.4 billion population, between 400 million and 500 million of whom are classified as middle class.
In addition, the government plans to spend hundreds of billions of dollars on infrastructure and housing construction, connecting new and existing cities.
Massive domestic demand in China could offer the other BRICS states huge export opportunities, particularly after China’s relations with Western resource-based economies such as Australia and Canada soured. Russia, Brazil and South Africa could replace those two Western countries as China’s major suppliers of oil, natural gas, iron ore and other commodities over the next five years and beyond.
Indeed, resetting their relationship with China would be in the best interest of India and Brazil because it will be the only economy that is expected to enjoy positive growth in 2020 and relatively high annual rates of around 5% over the next five years, thanks to the government’s quick and effective measures in preventing the spread of the pandemic. That has allowed Beijing to reopen the economy sooner than any other major economy.
The pandemic in the European Union, the UK and the US, in fact, is surging, forcing more lockdowns and exacerbating economic woes. President Trump refusing to concede this month’s election and politicizing the pandemic in the US could spike infection cases, stifling or at least slowing economic recovery.
As a result, China seems to be only major economy that could help its four partners reverse their pandemic-induced recessions. In addition to being able to buy huge quantities of resources, China has deep pockets, and is able and willing to invest trillions of dollars in Russia, India, Brazil and South Africa through the Belt and Road Initiative.
The timing of Chinese rapprochement with New Delhi and Brasilia could not be any better, because India and Brazil are encountering difficulties curbing the spread of Covid-19. With China being one of the countries having three vaccines ready for use over the next few months, it would be in a great position to help India and Brazil.
Being buddies with China again is the right choice for India and Brazil.
Ken Moak taught economic theory, public policy and globalization at university level for 33 years. He co-authored a book titled China’s Economic Rise and Its Global Impact in 2015. His second book, Developed Nations and the Economic Impact of Globalization, was published by Palgrave McMillan Springer.