BRICS Summit 2024 took place in Kazan, Russia, from October 22 to 24, under the rotating chairmanship of Russia. This summit marks the first meeting after the expansion of the BRICS cooperation mechanism last year, with the presence of leaders from Saudi Arabia, Egypt, the UAE, Iran, and Ethiopia, who officially became members on January 1st of this year.
Experts believe that Xi Jinping aims to reform the international financial system through the BRICS alliance, although this opportunity seems highly uncertain. Elite corruption depleting national assets makes it difficult for Beijing to continue playing the role of a big brother who hands out money. Despite the expansion of BRICS membership, each country within the group has its own calculations, and internal conflicts are rife.
Due to Russia’s involvement in the Ukraine conflict, President Putin, who has been marginalized by Western countries and even potentially labeled a war criminal by the International Criminal Court, welcomed 36 leaders to Kazan for the BRICS Summit on October 22 as the host.
Since the outbreak of the Russia-Ukraine war, Chinese President Xi Jinping, on his second visit to Russia, stated at the BRICS Summit on October 23 that the urgency of reforming the international financial framework is paramount to better reflect the changing world economic landscape.
An article from Le Monde on Tuesday (22nd) pointed out that China’s push for the expansion of BRICS demonstrates the legitimacy of its proposed vision of a new world order. Through BRICS and other international organizations led by China, the country is strengthening its ties with southern countries and providing alternative solutions to the US-dominated world order.
According to reports from Agence France-Presse on the BRICS Summit, Beijing hopes to show that the majority of the world’s population agrees it is necessary to end the US-centric world order. China is looking to diminish the strength of the powerful dollar, the US’s military alliance network, and values like political and speech freedoms.
Regarding whether China can truly drive the international financial system and control BRICS countries, Wang Guochen, a researcher at the Mainland Economic Institute of the Taiwan Institute for Economic Research, expressed to Dajiyuan that such an opportunity appears extremely slim.
“Even though the Renminbi’s share of international payments in the Swift system has surpassed the Yen, continuously rising to around 4%, the foreign exchange reserves of IMF countries have been decreasing for 3 to 4 consecutive quarters in China.”
Wang Guochen pointed out that while the Renminbi has accelerated in circulation, the places where it is stored are decreasing, which is disadvantageous for the internationalization of the Renminbi or changing the global financial system.
Statistics from the People’s Bank of China show that in 2023, the China International Payment System (CIPS) processed an average of 30,000 transactions per day, involving 482.6 billion yuan. Wang Guochen noted that compared to Swift’s average daily processing volume of 42 million transactions amounting to $5 trillion, how can China’s CIPS system replace Swift with such a huge disparity?
“If it cannot join Swift, it will be like being shut out of global financial exchanges. Therefore, in summary, China’s ability to change the global financial system is basically slim.”
Taiwan’s senior political and economic commentator Wu Jialong told Dajiyuan that countries like Russia, Iran, and even North Korea, part of the so-called evil axis, are willing to use the Renminbi for trade settlement due to US sanctions. “China can indeed make some progress in trade and investment cooperation among BRICS countries. However, these countries are in a downward trend in the global economic system, and their economic momentum is gradually fading. Even if they stick together for warmth, their global economic influence will decrease, and serious economic crises may arise internally.”
According to recent reports from the Voice of America, Thailand and Indonesia are planning to follow in the footsteps of the US by imposing additional punitive tariffs of 100% to 200% on cheap Chinese goods. Wang Guochen mentioned China’s desire to maintain stability in the Renminbi exchange rate. Without stability, people are less likely to use it. However, China is printing money recklessly, causing currency devaluation. In this situation, it has to keep exporting to support the Renminbi. This excessive trade dumping is causing a backlash in the global southern markets. How can the Renminbi be internationalized under such conditions?
As reported by Radio Free Asia in 2023, China provided 140 billion yuan in aid to Argentina and promised to invest $400 billion in Iran over 25 years, as well as providing multiple aids to Egypt and Ethiopia.
Sun Yun, Director of International Programs at the Stimson Center, believes that Xi Jinping’s generous aid to developing countries is seen as financial and cooperation agreements. However, considering the current state of the Chinese economy, it lacks the capability to implement a large-scale money strategy.
Wu Jialong further commented that China’s international influence is based on its vast financial resources. However, the country’s dollar assets have been siphoned off by domestic elites, who convert Renminbi into dollars and transfer them overseas. Hence, although China appears to be wealthy on the surface, its wealth has been drained by elites. This, coupled with the extreme measures taken during the COVID-19 pandemic, such as conducting mass nucleic acid tests, has squandered a significant amount of wealth and foreign exchange assets.
“Now, China is strapped for cash and faces difficulties in acting as a big player internationally or asserting dominance.”
Wu Jialong believes that the core countries in BRICS, China, Russia, and Iran, will face continued economic pressure. Given the global political landscape with the US-China confrontation, where America’s basic strategy is undermining China’s economic momentum to eventually make it disappear, China may find itself grappling with economic problems and power struggles, even the possibility of civil conflict.
The BRICS group has expanded its membership from 5 to 10 countries. According to Voice of America reports, BRICS is at a crossroads. The world is closely watching whether BRICS can become a force for a fairer international order or continue to be a forum riddled with internal contradictions.
Wang Guochen mentioned that Russia would not consider using the Renminbi if it were not for financial sanctions from Europe and the US. Putin also hopes to bolster the Ruble, aiming for its internationalization. In other words, both China and Russia are looking to exert influence over the BRICS countries.
Jim O’Neill, the former Goldman Sachs economist who coined the term BRICS, previously told BBC, “Xi Jinping is trying to turn the BRICS bloc into his own ‘Group of Seven’, but I don’t think the Indians will agree!”
O’Neill mentioned that the biggest challenge for BRICS countries is the lack of close relations between China and India, rarely reaching agreements on anything.
Wang Guochen also pointed out that some countries joining the BRICS alliance are anti-American but not necessarily looking to confront Europe or the US. They also do not necessarily trust Xi Jinping and have their own considerations. In other words, they might form a common trade circle or a joint market where goods and services flow freely, echoing Xi Jinping’s idea of external circulation.
“However, these countries are facing political and economic challenges, including Russia, Iran, and even China. Their consumption capabilities are in question. Each country wishes to export rather than import. But who could match the US, possessing the largest and final consumer market globally? It seems none of these countries possess such a market.”
This rewritten and translated article touches upon the recent BRICS Summit 2024, discussing the various economic and financial intricacies within the alliance and the challenges faced by its member countries in shaping a new international order.