By Bian Yongzu, Yu Wenwen Source: cnmatters.com Published: 2017-8-30
The 9th BRICS leadership summit will be held in Xiamen, China from September 3-5. In recent years, the BRICS nations have become synonymous with high-speed economic development due to their rapid growth. However, several BRICS economies suffered seriously over the past two years due to either the sharp fall in world oil and commodities prices, plus economic sanctions by the US and EU, or by its own structural difficulties. In these circumstances, some media have begun to talk of “fading BRICS” or even “broken BRICS”. Is there any truth in this talk?
Advancing under Pressure
Since the outbreak of the international financial crisis followed by the European debt crisis, the former world economic structure led by developed countries is undergoing significant change, and the BRICS nations find themselves in a challenging international environment that still waits for reform. The specific manifestations of the problem are the slow growth of international trade, the sluggish increase in international direct investment, a steady escalation in protectionism, a trend towards inward-looking economic policies in some developed countries, and the slow progress of reform of the global economic governance system.
According to a press release issued by the WTO in April this year on world trade statistics and the international economic outlook, growth in world trade in 2016 was no more than 1.3%, which is 0.6 of the actual growth rate of world GDP. According to data from the United Nations Conference on Trade and Development (UNCTAD), the growth rate of foreign direct investment (FDI) has been only 0.8% annual average in the 8 years since the outbreak of the international financial crisis. FDI growth in BRICS has been faltering since 2016, and dropped by 2.5% compared with the previous year.
Confronted by these sluggish conditions, major world economic powers have imposed a series of measures to protect their domestic industry. Issues such as Brexit, Donald Trump’s victory in the US presidential election, and the Italian Constitutional Referendum all mirror an intensified inward-looking trend in the policies of developed countries.
Even though emerging economies are determined to promote the reform of existing global governance mechanisms like the IMF, the World Bank, and the WTO, they are restricted by the dominance over present mechanisms exerted by powers such as the US, who tie them in international legal knots while demanding that the BRICS shoulder more international responsibilities.
The established powers that call the shots in the present economic system are eager to cut themselves a bigger slice of the pie, when what is left is already less than enough for others. Their profit-driven actions have undoubtedly exposed the world economy to greater uncertainty.
So how can we propel growth in international trade and direct investment and create a bigger pie? How can we change the rules on sharing the pie – how can we promote reform of the global economic governance system so as to make the international economic order fairer and more reasonable?
This will require the combined effort of every nation. As an association of the world’s biggest emerging countries, BRICS can certainly make its contribution to the realization of these goals.
Learning from Each Other to Pursue Common Development
BRICS has achieved a number of successes in global governance in recent years, such as promoting voting reform in the IMF in 2010. Since this reform was implemented the volume of funds in the IMF has doubled, with the SDR rising from 238.5 billion to 477 billion. Developing countries have a greater voice in the IMF – among them China, which has seen its voting right leap from 6th place to 3rd.
When there is no opportunity, create one yourself. BRICS brings not only great opportunities to its members, it also carries the hopes of the rest of the world – especially other developing countries. It has already claimed itself an influential international organization. Nowadays, everyone wants to hitch a ride with BRICS, which is progressing at a steady pace.
The scope for development and cooperation among the BRICS members remains promising. Even though the economic growth rates of the BRICS nations are experiencing a temporary ebb, their general physical resources are sound. The BRICS nations possess nearly 40% of world gold reserves, and their work force, land and resources are abundant too. BRICS members are scattered across the continents, which gives them particular strategic geographical strengths, and their complementary industrial structures make the prospects of long-term cooperation encouraging.
In terms of infrastructure China can cooperate with South Africa to set up an electricity grid and a transport network in the south of Africa. It can work with India and Russia to rebuild the ancient silk road, and can work with Brazil to develop agricultural equipment…
In terms of finance, BRICS has established the New Development Bank and Contingency Agreement Fund. Thus it can offer liquidity support to its members to tackle any financial crisis when it occurs; it can also help them to assess and address potential threats.
In terms of trade and investment, BRICS can set up a free-trade zone that includes all its members, to expand the scale of monetary and financial cooperation and trade in goods. The BRICS nations apply different economic development models and are endowed with different resources, which can be complementary to each other. China, which is one of the world’s biggest manufacturing countries, has a strong need for energy and raw materials. Russia, Brazil and South Africa all abound in mineral resources, and can meet China’s needs.
With more measures to encourage intra-trade among BRICS members, the ratio of mutual transactions is climbing steadily every year, and international investment among its members is increasing rapidly at the same time. Russia, Brazil and China have all cultivated a group of large and powerful state-owned multinational corporations.
The BRICS nations still have strong potentials for mid and long-term development, and there is no evidence to support the view that they are on the wane. In an age in which powerful voices are speaking out against globalization, BRICS will continue to work towards mutual political and strategic trust among its members through cooperation and exchange. It will drive transformation in international structures in ways that benefit the vast developing countries, and will help the world economy to become more balanced and sustainable. During Xiamen’s golden autumn, BRICS will welcome its second “golden decade” and can look forward to a bright future.
Bian Yongzu is a researcher of Chongyang Institute for Financial Studies, Renmin University of China; Yu Wenwen is an intern researcher of Chongyang Institute for Financial Studies,Renmin University of China.