Brics dreams fade as trade spats and border tensions cloud meeting

Johannesburg - Trade ministers of the Brics nations – Brazil, Russia, India, China and South Africa – will meet in Shanghai from today until Tuesday under the shadow of trade spats and increasing border tensions between the group’s Asian members.

The meeting precedes the annual leaders’ summit this month and, according to a Chinese ministry of commerce briefing, will focus on trade liberalisation, commitment to a multilateral system and other issues.

However, prospects for the group to develop into a united powerhouse of emerging economies look distant.

According to Louis Kuijs, the head of Asia economics at Oxford Economics in Hong Kong, the split among emerging market economies may create strains between winners and laggards.

“This tension will most likely get worse rather than better in the coming decade, and will reduce the ability of the Brics group to speak with one voice,” said Kuijs.

The group has found little common ground in recent years as the countries’ growth trajectories diverged and geopolitical ambitions spurred tensions.

China has kept up its rapid, albeit moderated, growth pace and India has vied with it for bragging rights as the world’s fastest growing major economy.

But life has been tougher for the commodity dependant economies of Russia, South Africa and Brazil, the last of which is also plagued by political turmoil.

Just three years ago, Chinese President Xi Jinping laid out his “blueprint” for the Brics nations, calling for closer ties within the bloc and a more “integrated market”.

His Russian counterpart Vladimir Putin also hoped the group would reshape the global economic order, and named Brics cooperation as a national priority.

The $50 billion (R651 billion) New Development Bank, with equal capital contributions from the five economies, was launched in Shanghai in 2015 to provide an alternative funding source to the World Bank.

But instead of increasing integration, the club remains loose and divided.

Trade relations between China and some of the other four nations have soured, with the export powerhouse’s rising shipments of manufactured products fuelling calls for protection.

India recently opened an antidumping probe into Chinese solar equipment makers, the latest in a string of such investigations.

The south Asian nation launched 12 trade cases against Beijing in the first six months of this year, the most in the world, according to China’s ministry of commerce.

Brazil and China have also locked horns.

Latin America’s biggest economy extended a probe on Chinese steel, while China imposed additional tariffs on sugar imports, triggering complaints from Brazil.

Trade relations are heavily tilted in China’s favour – it was the largest trading partner for the other four nations last year.

By contrast, India, Russia and Brazil ranked 13th, 14th and 15th on China’s tally, with South Africa further down the list, according to International Monetary Fund data compiled by Bloomberg.

Geopolitics is also getting in the way.

Chua Hak Bin, a Singapore-based senior economist with Maybank Kim Eng Research, said: “Individual Brics nations are more focused on expanding their economic space and geopolitical influence in their immediate geographical neighbourhoods.”

The ambitious Belt and Road initiative, proposed by Xi to link China with Europe, encroaches on to the other Brics nations’ areas of influence, particularly India’s and Russia’s, he said.

In a move to soothe opposition to its massive trade surplus – not least from US President Donald Trump – China has offered to beef up imports from all over the world.

In a briefing last month, Vice Minister of Commerce Wang Shouwen said China expected to import more than $8 trillion worth of goods in the next five years, and the other Brics members were welcome to further tap into the vast Chinese market.

Official data showed that the Asian nation’s imports from the quarter hit $70.2 billion in the first half of this year – a 34% jump from a year earlier.

Shen Jianguang, chief Asia economist at Mizuho Securities Asia in Hong Kong, said that, while trade within the bloc may continue to strengthen as their economies pick up, China’s most important relationships would still be with the US, Europe and the rest of Asia.

The lion’s share of China’s trade was tied to the global supply chain, and none of the four other Brics nations was a major player in that respect, Shen said.

Chinese imports from other Brics nations are mainly raw materials, which were volatile due to commodity price fluctuations, he said.

All of this means that meaningful progress at the meeting this week seems unlikely.

“To be honest, the Brics grouping has always been a slightly artificial construct,” said Kuijs.

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