Experts' take on the BRICS Summit

Editor's note: The BRICS countries and emerging market economies have become a driving force for global growth and have been trying to build a truly democratic, fair and just world order. BRICS member states have also called for establishing partnerships to promote cooperation in digitalization, industrialization and innovation. Three experts share their views on the issue with China Daily.

Dollar hegemony prompts BRICS rethink

By Dan Steinbock

At the ongoing BRICS Summit in Johannesburg, a key topic that has attracted wide attention is the further development of new and complementary reserve currencies and settlement mechanisms. This suggests the global economy is slowly moving toward a post-US dollar era.

At the end of March, Alexander Babakov, deputy chairman of the Duma, the lower house of the Russian parliament, said the BRICS countries were working on creating a new trade currency. Babakov expected the BRICS Summit to intensify that process.

Interestingly, this marginal comment was quickly inflated to magnificent disproportions in the West when the fact is that BRICS seeks to foster prosperity through diversified development.

Ever since then, some international observers and media outlets from The Wall Street Journal to the Financial Times have derided the idea of a BRICS currency, calling the attempt as "de-dollarization". A BRICS currency, they warn, could undermine the dominance of the US dollar, which they see as a nightmare of sorts.

In May — oddly, amid the US banking crisis — economist Paul Krugman attributed the de-dollarization "brouhaha" to crypto-cultists and Russian President Vladimir Putin's sympathizers, as if the trend was nothing but a misguided anti-US melee.

The shift from the dollar as a global trade currency has already started. But the countries trying to shift their dependency on the dollar seek to avoid disruptions and do not rely on the kind of top-down network effects, which the US dollar and its precursor the British pound once used, typically through geopolitics and military might.

Instead, BRICS promotes bottom-up network effects. As the grouping has suggested, the first step is the transition to settling trade deals in local currencies, to avoid redundant currency intermediaries and foreign exchange traps. The next is the establishment of a digital currency. The launch of a potential common currency is another possibility, but that's more likely to happen in the long run.

In spring this year, Brazilian President Luiz Inacio Lula da Silva said he asks himself "every night, why all countries have to base their trade on the dollar". It is a valid point, because global currency arrangements shouldn't reflect the interests of only the American people who account for only 4.1 percent of the world population.

Thanks to its organizational flexibility, BRICS makes taking unilateral, bilateral and multilateral measures possible. Such measures range from gradual reforms to more unilateral individual measures, which are being promoted by aspiring BRICS members and coalition partners, too, as they share the grouping's vision.

Reportedly, 23 countries have formally applied to join BRICS, while an equal number of countries has expressed the desire to become BRICS members. Countries looking to join the grouping include Saudi Arabia, Iran, the United Arab Emirates, Argentina, Indonesia, Egypt and Ethiopia. After the 1955 Bandung Conference, non-aligned countries launched a political movement. Today, BRICS is building an economic bloc.

It is the rising number of large and populous emerging economies which has made possible the kind of bottom-up network effects, which will be critical to launching the new infrastructure for the proposed complementary settlement mechanisms. These bottom-up effects are based on the choices of sovereign states. By contrast, the dollar's predominance is imposed on the rest of the world; it has nothing to do with sovereign choices.

Like asset managers who seek to maintain appropriate diversification in their portfolios, BRICS' strategic objective is to recalibrate reserve currencies. In a multipolar world economy, global growth prospects are driven by large emerging economies, not by the West any longer.

Paradoxically, misguided US policies have accelerated the erosion of the dollar-based currency regime following the global financial crisis in 2008 — triggered by the subprime meltdown and asset bubbles in the US — and due to excessive debt-taking, trade protectionism, disputes over technologies, the COVID-19 pandemic-induced economic slowdown, and the US' effort to launch a Cold War against China.

When the dollar is weaponized by US foreign policy in the name of the international community but without the latter's broad support, it puts trade invoicing and settlement, foreign corporations, and central bank reserves at risk. Hence, the recent warning by Fitch Ratings that it may be forced to downgrade dozens of US banks, even the likes of JP Morgan Chase.

The Silicon Valley Bank, the Signature Bank and the First Republic Bank collapsed, and UBS took over Credit Suisse in the spring. And 200 more banks could be vulnerable to the type of risk that caused the SVB's collapse. Across the US, 2,315 banks, almost half of the total, have assets less than their liabilities.

Today, US public debt hovers around $32.6 trillion — $2 trillion more than a year ago. Since 2008, US debt as percentage of GDP has doubled, soaring to over 120 percent. According to the non-partisan Congressional Budget Office, persistently large federal deficits will push federal debt above 181 percent of GDP by 2053.

To defer the reckoning, the Joe Biden administration needs to print money, ceaselessly. Such trajectories are damaging to major foreign holders of US federal debt, many of which are large emerging economies, particularly China.

If, in a likely crisis, these economies drastically reduce their US securities purchases or sell a significant share of their dollar holdings, or do both, Washington would need to offset the gap. Otherwise, it will face significantly higher interest rates. Neither Western Europe nor Japan can alleviate the resulting pain, because both are struggling with secular stagnation, as is the US. To avoid such lethal global scenarios, BRICS seeks a diversified world economy and international reserve currencies. That trajectory is more peaceful, stable and secure.

The author is the founder of Difference Group, and has served at India, China and America Institute (US), Shanghai Institutes for International Studies (China), and the EU Centre (Singapore). The views don't necessarily reflect those of China Daily.

Emerging markets to lead global governance reform

By Maya Majueran

The 15th BRICS Summit in Johannesburg, South Africa, from Tuesday to Thursday, is the first offline meeting of BRICS in the post-pandemic era — the last three were held under the chair of Russia, India and China in the virtual format due to the COVID-19 pandemic.

BRICS(Brazil, Russia, India, China and South Africa) was established with the intent of creating more space for emerging economies to play a more significant role in global political and economic governance. BRICS accounts for about 40 percent of the world population, about 20 percent of global trade, and contributes more to global GDP(in purchasing power parity terms) than the G7. Also, the BRICS countries, especially China, have been the main engine of global economic growth over the past few years, with the grouping's deep involvement in global governance being a prominent feature in the fast-changing international landscape.

Economic relationships between the BRICS countries have been formalized by the creation of the BRICS Business Council, the Contingent Reserve Agreement and the New Development Bank. The BRICS Business Council comprises 25 prominent entrepreneurs, five each from Brazil, Russia, India, China and South Africa, representing different industries and sectors. The council meets twice a year and presents the final report to BRICS leaders at the summit every two years.

The council has several business working groups on issues such as financial services, manufacturing, infrastructure, skills development, energy, the green economy, the digital economy, agri-business, aviation and deregulation. It also organizes an annual BRICS Business Forum, offering a platform for member countries to discuss and deliberate on key economic cooperation issues and make recommendations on intra-BRICS trade and industry issues.

The BRICS Contingent Reserve Agreement, a currency swap mechanism intended to provide short-term liquidity support, strengthens the financial stability of member countries, mitigating any balance-of-payment crisis. In its present shape, the Contingent Reserve Agreement should be seen as an alternative, rather than a challenge, to the International Monetary Fund.

As for the New Development Bank, it is a multilateral development bank headquartered in Shanghai. It was established to support infrastructure and sustainable development efforts in BRICS countries and other emerging economies and developing countries, in order to boost their economic development through the use of cutting-edge technologies and innovations. The bank plays a significant role by providing countries with capital and know-how, thus helping them achieve their respective development goals and creating equal opportunities for all countries' development.

BRICS has been holding annual summits since 2009, with member countries taking turns to host the event. The theme of the Johannesburg summit is "BRICS and Africa: Partnership for Mutually Accelerated Growth, Sustainable Development and Inclusive Multilateralism". Given the increasing international prominence of the BRICS countries, the expectations from the Johannesburg summit are high.

In Johannesburg, BRICS countries need to discuss trade and investment facilitation, sustainable development, innovation and global governance reform. And a new gold-backed global reserve currency is what emerging economies need, as they are outraged by the US dollar's dominance in global trade and as an international reserve currency.

The United States and its Western allies have weaponized the dollar to help maintain Washington's global economic and geopolitical supremacy. The US, for example, has imposed economic sanctions on nearly 40 countries, including Cuba, Russia, the Democratic People's Republic of Korea, Iran and Venezuela, affecting nearly half of the world's population and causing untold hardships for ordinary people in those countries and hampering the growth of their economies.

Therefore, many emerging economies have been working to internationalize their currencies and promote their use in global trade and investment, and calling for global trade to be conducted in currencies other than the US dollar to end the dollar's hegemony.

In fact, the de-dollarization trend is gaining momentum. The Russia-Ukraine conflict and subsequent Western sanctions against Russia have prompted the BRICS countries to intensify their efforts to rid global trade of the dollar's hegemony. Over the past year, Russia, China and Brazil have greatly increased the use of non-dollar currencies in cross-border transactions.

Another key discussion at the Johannesburg summit is likely to be on BRICS' expansion by incorporating new members. More than 40 countries have expressed the desire to join BRICS. Aside from the 23 countries that have formally applied to join the grouping, more than 20 countries have informally expressed interest in becoming BRICS members. They include the major countries in the Global South, whose inclusion will add to the economic and geopolitical importance of BRICS.

Many countries want to join BRICS because they believe it would help them boost their economic recovery. In particular, countries of the Global South want to reform the international order, which they believe is unfair and Western-centric — and they are justified in seeking such reform.

The US and its Western allies have long influenced the world order with their own values and policies in the name of promoting "democracy" and "defending" human rights, and have launched smear campaigns against countries whose political systems are different from theirs. They even bully emerging markets and developing countries, forcing them to take sides in disputes with countries that don't adhere to the Western-centric ideology and politics.

Fortunately, the Global South is emerging as a key player in international relations, as emerging economies and developing countries are no longer reluctant to demand a change in the Western-centric world order. The US and its Western allies should listen to the Global South's concerns and build a global governance system and international financial architecture which benefit all. If not, the Global South, with the help of BRICS and the Shanghai Cooperation Organization, will lead that change and build a world order that is fair, just and equitable.

The author is director of Belt and Road Initiative Sri Lanka, an independent and pioneering Sri Lanka-led think tank. The views don't necessarily reflect those of China Daily.

BRI helps boost African nations' development

By He Wenping

This year marks the 10th anniversary of not only the Belt and Road Initiative but also the principles governing China's Africa policy which President Xi Jinping has put forward. Based on China's Africa policy of sincerity, real results, amity, good faith, and pursuit of greater good and shared interests, the two sides have deepened cooperation, making the best use of the continent's natural and human resources to promote common development and improve people's living conditions in Africa.

With rich natural resources and 1.3 billion people spread across 54 countries, Africa has huge market potential. But to fully unleash that potential, Africa needs to overcome the ill effects of colonization, stop the regional conflicts, and seek capital and technologies to boost its economic development.

Since gaining independence, African countries have been trying to achieve development and prosperity. Hence, many African countries are trying to learn from China's rapid economic development and its journey to become the world's second-largest economy. That's also one of the reasons why African countries joined the China-proposed Belt and Road Initiative. Their aim is to pursue comprehensive industrialization and economic development.

The complementarity of the Chinese and African economies, the establishment of the Forum on China-Africa Cooperation and the Belt and Road Initiative have opened new avenues for Africa's development. Among the 53 countries that have established diplomatic relations with China, 52, along with the African Union Commission, have signed cooperation agreements with China under the Belt and Road framework.

Even during the three years of the COVID-19 pandemic, Sino-African cooperation progressed smoothly, thanks to policy coordination, unimpeded trade, financial integration, infrastructure connectivity and people-to-people bond.

According to China's Ministry of Commerce, China has been Africa's largest trading partner for 14 consecutive years since 2009. And 2022 saw Sino-African trade in goods reaching $282 billion, up 10.9 percent year-on-year, with China's exports to Africa increasing to $164.49 billion and imports from Africa rising to $117.51 billion.

That infrastructure cooperation has strengthened is evident from the fact that the value of contracted projects by Chinese companies has increased for two consecutive years. Since the establishment of the Forum on China-Africa Cooperation in 2000, Chinese companies have helped build or upgraded more than 10,000 kilometers of railways, nearly 10,000 km of roads, about 1,000 bridges and 100 ports in Africa, creating 4.5 million jobs.

The flagship China-Africa cooperation projects under the Belt and Road framework, such as the Addis Ababa-Djibouti Railway, the Mombasa-Nairobi Standard Gauge Railway and the No 1 National Highway of the Republic of the Congo, have played an important role in not only boosting connectivity and integration in Africa but also strengthening the continent's industry and supply chains.

China and Africa have also jointly built what can be called a community with a shared future in health. In 2020, China and Africa shared experiences and cooperated with each other to fight the COVID-19 pandemic. Until 2022, China had provided 189 million doses of COVID-19 vaccines to 27 African countries and helped localize the production of about 400 million vaccine doses a year with African partner countries.

Also, China has helped the African Union build the headquarters of the Africa Centers for Disease Control and Prevention in Addis Ababa, Ethiopia, which is set to become one of the best-equipped disease control centers in Africa.

China is the world's largest developing country and Africa the continent with the largest concentration of developing countries. Therefore, the mutual help and win-win cooperation between the two sides will help not only Africa alleviate poverty and boost development but also can improve the global governance system and make the international order more open, inclusive, fair and just.

Besides, China also wants other countries to increase investment in and help African countries to boost their development, because Africa's economic development is a long-term task that requires joint efforts of the international community.

China believes Africa is a region for international cooperation, not an arena for major power games. Following this principle, Sino-African cooperation has helped Africa turn its resource advantages into development advantages to achieve independent, diversified and sustainable development, and strengthened African countries' autonomy.

Despite the disagreements between China and African countries, and the Western barbs against China-Africa cooperation, the bond between China and Africa has become stronger, enabling the two sides to prevent any external interference in China-Africa ties and pursue common development.

The author is a research fellow at the National Institute for Global Strategy, the Chinese Academy of Social Sciences, and the China Africa Institute. The views don't necessarily represent those of China Daily.