China Power

China and the BRICS: Unavoidable Hegemony?

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China Power

China and the BRICS: Unavoidable Hegemony?

The BRICS failure to reach agreement on a multilateral development bank reflects a larger unresolved issue.

As China’s relative economic growth has continued apace, its dominance within BRICS has become increasingly entrenched. Almost regardless of its intentions, China’s size and national power make it the unavoidable hegemon of BRICS. Yet the other member states distrust of Beijing’s economic and strategic plans makes them unwilling to accord China the degree of influence within the grouping that its national power capabilities would suggest. Resolving this is as necessary as it is difficult.  

China’s growing dominance within BRICS can be demonstrated in any number of ways. Most succinctly, China’s GDP is over 1.5 trillion dollars larger than the combined economic output of the other four BRICS members. Furthermore, the current trend is for the disparity to grow even wider. As Oxford Analytica, a global analysis and advisory firm, points out, China accounted for around 70 percent of the growth in the BRICS’ share of global economic output between 2000 and 2011.

China’s importance to the individual BRICS members is further demonstrative of this reality. To begin with, China is the largest single nation trading partner of Russia, Brazil, and South Africa, and, as of 2011, was India's largest import market and second largest trading partner. As China's consumption grows, so will its importance as a market for its BRICS counterparts.

By contrast, none of the other four BRICS is particular important to China’s trade in terms of value. According to the latest EU data, which is for 2011, the value of China’s trade with Malaysia was greater than its trade with any single member of BRICS, and Sino-South Korean trade was only slightly less than China’s entire intra-BRICS trade.

To be sure, not everything that is traded is of equal importance to the countries doing the trading. Crucially, China’s imports from Russia, Brazil, and South Africa are highly weighted towards energy and natural resources, which Beijing will be increasingly reliant on foreign sources for in the decades ahead.

Still, at least when it comes to energy, this will not give the other BRICS as much leverage over China as one might have thought only a half-decade or so ago. Because of the North American energy revolution and Iraq’s growing oil production, energy markets are likely to increasingly become buyer’s markets. This is especially the case for China, which—along with India to a much lesser degree— will be the one country looking to buy the quantity of energy that a country like Russia needs to sell. By contrast, at least in peacetime, China will, in principle, have a host of different options when it comes to energy suppliers. As a result Russia will need to continue selling its energy to China at least as much as China needs to continue buying it.

China’s dominance is equally pronounced in terms of outbound investment, the subject that concerned BRICS this week. Notably, whereas BRICS aimed to pool together their investment funds to create a rival to the Western-dominated World Bank, the truth of the matter is that China Development Bank (CDB) and other state institutions are by themselves rivals to the World Bank. In fact, between 2008 and 2010, China’s overseas loans outstripped World Bank lending by US$10 billion.

Beijing’s enormous capital outflows have a real tangible impact inside the other BRICS members. To cite just one example, a 2011 report by the China-Brazil Business Council (CBBC) found that China invested US$12.690 billion in Brazil in 2010, 99 percent of which came from state-owned enterprises and all but US$1.522 billion of which went to foreign companies (read: Chinese companies) operating inside Brazil. From this the CBBC concluded that China’s investment in Brazil marked “the consolidation of the Chinese presence in Brazil through foreign direct investment.”

It is therefore not surprising that the BRICS sought to constrain China’s ability to contribute to the joint effort to construct alternatives to the Western-dominated World Bank and International Monetary Fund. Still, this underscores the uncomfortable reality that even as remaking the current international economic order is the glue holding BRICS together, non-Chinese BRICS members are at pains to avoid replacing the current order with a Chinese-dominated one. Given the power disparity between them and China, this task is difficult to say the least.