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Foreign Policy

The BRICS Wall of China

Nov 10 , 2016

Adding concrete content to a catchy acronym has become a pressing challenge for BRICS, which brings Brazil, Russia, India, China and South Africa together. BRICS presents itself meretriciously as a powerful grouping. After all, its member-states together represent more than a quarter of the earth’s landmass, 42% of the global population, almost 25% of the world’s gross domestic product, and nearly half of the global foreign exchange and gold reserves.

However, as the recent BRICS summit in the Indian beach resort of Goa highlighted, there is little in common among its member-states. Although these five emerging economies pride themselves on forming the first important non-Western global initiative with the aim to end the era of Atlantic dominance, the grouping is still searching to define a common identity and build institutionalized cooperation.
Six years after it expanded from a four-member BRIC to the five-nation BRICS by adding South Africa, it has yet to unveil a forward-looking approach, or frame a common action plan, to help bring about fundamental changes in the architecture of global finance and governance.
While cynics have dismissed BRICS as an acronymic ingenuity without substance, the grouping’s future hinges on its ability to evolve into a coherent coalition with defined goals and an institutional structure, including a permanent secretariat. BRICS cannot remain just a discussion forum bringing its leaders together for an annual summit.
The Group of Seven (G-7) also began as a discussion platform but, by defining its members’ common interests, it advanced within years to joint coordination on key international issues; however, BRICS lacks the shared political and economic values that bind together the G-7 members who are also tied by security arrangements with the United States. In BRICS, differences outweigh commonalities.
For Brazil, India, Russia and South Africa, BRICS offers largely symbolic benefits, including underscoring their growing international role and their desire to pluralize the global order. By contrast, China, which needs no recognition of its rise as a world power, is milking BRICS for tangible benefits.
Just as China dominates the new institutions of which it is a founding member — from the Shanghai Cooperation Organization, a security grouping, to the Asian Infrastructure Investment Bank, headquartered in Beijing — it is using BRICS to assertively advance its economic and political interests.
China seeks to be the first among equals in BRICS. It dominates the two instruments BRICS has fashioned — the New Development Bank and the $100-billion Contingent Reserve Arrangement designed as a shield against global liquidity pressures. It outmaneuvered India to host the common development bank at Shanghai, then offering New Delhi a consolation prize — an Indian as the bank’s first president.
Today, China is in the happy situation of overseeing the BRICS bank and the Asian Infrastructure Investment Bank, which is intended to be the “World Bank” of Asia. The U.S. unsuccessfully lobbied some of its allies not to join the China-created Asian Infrastructure Investment Bank that rivals the Japan-led Asian Development Bank.
Leading two new banks fits well with Beijing’s strategy to create an “economic hub-and-spoke system” via energy pipelines, strategic highways and ports, and railroad networks. In this scheme, China, as the hub, is meant to draw in raw materials and other natural resources from the spokes, while exporting industrial and consumer goods to them.
China’s objective clearly is to expand its clout at the expense of the other BRICS members, and more importantly, the U.S., which maintains a military hub-and-spoke system.
Against this background, the other BRICS members are discovering that, on international institutional reforms, China is not on the same page as them. It is a revisionist power with respect to the global financial architecture. As illustrated by the New Development Bank and the Asian Infrastructure Investment Bank, it is seeking to dominate the new institutions aimed at challenging the Bretton Woods system.
But China is a status quo power in regard to the United Nations system and thus an obstacle to restructuring and democratizing the Security Council.
In other words, China supports international institutional reforms that give it a greater say but not measures that dilute its status by increasing the voice of others. For example, China wishes to remain Asia’s sole country with a permanent seat in the Security Council, which means keeping fellow BRICS member India (and Japan) out. China’s strategy, by extension, also seeks to shut out India from other political institutions, including the Nuclear Suppliers Group, where it has almost singlehandedly blocked a U.S.-led push for India’s entry.
How a domineering China is using BRICS to advance its own agenda is exemplified by its push to expand the international role of its currency, the renminbi (also known as the yuan). Beijing is offering renminbi loans to other BRICS members as part of its quest to build the renminbi as a global currency that could one day rival the dollar or euro. Lending and trading in renminbi helps China to boost its exports and influence.
Meanwhile, China’s hidden export subsidies have been systematically undermining manufacturing in the other BRICS states, even as its adept use of tariff and non-tariff barriers shuts out goods and services from its own market in which they have a comparative advantage.
For example, China’s trade surplus with India — thanks to heavy dumping and the use of non-tariff barriers against Indian information-technology, pharmaceutical, and entertainment industries — has doubled since 2014 alone threatening India’s domestic manufacturing base. An article last month in China’s state-run Global Times mockingly said: “Let the Indian authorities bark about the growing trade deficit with China. The fact of the matter is they cannot do anything about it.”
At the BRICS summit in Goa, with Russian President Vladimir Putin and other leaders looking on, Chinese President Xi Jinping flexed his muscles to shield his country’s close ally, Pakistan, from accusations that its intelligence agency was behind grisly terrorist attacks in Afghanistan, Bangladesh, and India in recent months. Consequently, the Goa Declaration mentioned the Islamic State, al-Qaeda, and al-Nusra, but not any of the U.N.-designated terrorist groups based in Pakistan. Xi also succeeded in keeping the South China Sea issue out of the declaration.
In Goa, Xi called for “political solutions” to “regional hotspots” even as his government adds fuel to regional fires through a relentless territorial creep in the South China Sea and by embarking on a $46-billion corridor to the Indian Ocean through Pakistan-held Kashmir, an internationally recognized disputed region. How can BRICS create rules-based cooperation among its members if international norms of conduct are flouted?
The Goa summit indeed was a reminder of China’s lengthening shadow over BRICS. As China uses the grouping to advance its interests, BRICS has been left carrying the can. The risk is real that the grouping could collapse under the weight of the BRICS wall of China that is being erected.
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