Golden Bricks Pave Way at Sanya Meet?

The plan of the first summit was to “unseat the dollar.”
Golden Bricks Pave Way at Sanya Meet?
Frank Tian Xie
4/30/2011
Updated:
2/16/2016
The Japanese premiere of 'Inception'at Roppongi Hills last July. (Kiyoshi Ota/Getty Images)
The Japanese premiere of 'Inception'at Roppongi Hills last July. (Kiyoshi Ota/Getty Images)

The third BRICS summit was held in the resort city of Sanya on the island of Hainan, China, on April 14.

The earlier two summits were with the four component countries, Brazil, Russia, India and China. This year with South Africa added, and BRIC has become BRICS.

These countries, as emerging economies, encompass around 30% of the world’s land, 40% of the world’s population, 18% of world’s GDP and 15% of the world’s trade volume. Impressive as it may look, how cohesive is this group?

Jim O'Neill, chairman of Goldman Sachs Asset Management International, who coined the term BRIC in 2001, pointed out that these countries have very little in common. “The wealth per head is very different, the politics is very different, and the philosophy and their natural economic edge are different,” he said according to a Bloomberg report.

The Sanya Declaration and Agreement to promote collaborations among its members in capital markets and other financial services is just a gimmick in investment. Calling it the “golden bricks,” may sound pleasing to the politicians. But will it provide the Asian Economic Forum, as intended?

The plan of the first summit was to “unseat the dollar.”

With the depreciation of the dollar, the deteriorating Japanese economy and the turbulence in Europe, it may not be a bad idea to search for a relatively stable currency as a medium of international trade. Nevertheless, discussing the international monetary situation excluding the United States, Japan and Europe which form the main body of the world economy is simply meaningless. BRICS, led by China and paired by Russia and India, is a heterogeneous group, to begin with.

The four countries had their own agenda at the beginning. The cooperation between China and Brazil didn’t get anywhere until China decided to invest billions of dollars in oil in Brazil. The trade friction between China and India, from apple juice to iron and steel, chemical fiber, tires, toys and mobile phones, has been going on for half a century and sees no end. The old scores between China and Russia did not get settled even after the Chinese communist regime ceded land to Russia. While so far Russia has not allowed the Chinese regime to set up market in its country, it’s hard to imagine that it will comply with a wider range of cooperations.

All five countries have different political agendas and different concepts of democracy. China still doesn’t support India to become a permanent member of the United Nations Security Council. During the Cold War, China was on the side of the United States against Russia, now China is on Russia’s side and against the United States. Although Russian officials are optimistic about BRICS, the Russian media are skeptical. Russian media said the Hainan summit showed it is difficult for the five countries to find a common ground. Moreover, the relationship between Russia and the United States is getting better. BRICS can no longer serve as a tool to challenge the West.

China attempts to take a leading role in BRICS, but the communist regime’s authoritarian ways and its political system will discourage the other four countries, especially democratic India, Brazil and South Africa. The difference in political systems and the dictatorship of the Chinese government will hinder cooperation. Any attempt by China to represent the developing countries is unlikely to be authorized by the other members.

All five countries are suffering from economic pressure due to inflation and uneven trade. Although China has become the largest trading partner for Russia, Brazil and South Africa, and India’s second largest trading partner, none of the four countries figure within the range of China’s 8th largest trading partner.

The four countries, as well as the rest of the world, are all complaining about China’s trade policies, business competition and exchange rate controls. China hasn’t agreed to open its drug market to India, and aircraft market to Brazil as yet. The United States is pretty tolerant with China’s currency manipulation, but it may not go down well with Brazil and India.

Similar economic structures of the five countries induce only intense competition on importing raw materials and exporting marketable products and there isn’t much scope for cooperation.

Brazil is the less ambitious of the five countries. But China, Russia and India have dreams of growing into empires. Geopolitical and ideological factors point to the inevitable failure of BRICS. Exploitation, distrust and conflicting interests among the BRICS members create a scenario as in the Hollywood movie Inception.

The movie reflects on the relationship between the dreamer and the dreams, and questions whether one can control the dreams.

Developing nations dream of global capitalism despite the obvious shortcomings. Will the golden bricks pave the way to realize the dream?

Frank Tian Xie, Ph.D., is a John M. Olin Palmetto professor in business at the University of South Carolina Aiken, and a visiting scholar of the National Taiwan University.
Related Topics