China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

BRICS II – another BRICK in China’s global strategy

August 31, 2023

We recently noticed the BRICS summit in South Africa. Expectations in our part of the world were not hopeful before the summit in a sense that decisions from Johannesburg would mean an encouraging injection for the global economy. However, it was recognizable that China managed to launch another brick in its global political economic strategy by establishing its de facto leadership for the new and enlarged BRICS II organization.

Democracy clearly underrepresented …

I have been watching BRIC(S) from its start in the early days of this century – i.e. before South Africa was invited to join – as quite an unnecessary organization. BRIC(S) was initially launched as a smart financial marketing idea of an American investment bank without any other logical unifying argument than putting together Brazil, Russia, India and China as the four largest emerging markets with – then – potentially good economic prospects.

Then, two of these four founding countries were not democratic (China -and at least partly – Russia), and two others could be described as democratic (India and Brazil, plus joining South Africa some years later).

Now, when BRICS II will come into force in a few months time, this previously quite balanced democratic participation in BRICS will not be maintained when the six invited new members will become part of BRICS II as well.

These six new BRICS countries are:

Iran, Saudi Arabia, United Arab Emirates (UAE), Egypt, Ethiopia and Argentina.

It is indeed very obvious that none of these invited six countries can offer democratic standards and/or economic strength. There is all reason to believe that democracy in the new BRICS II will become clearly underrepresented.

… and weak economies totally overrepresented

Another angle may be a pure economic one. Also in this context there is nothing encouraging to find – apart from currently more or less healthy macroeconomic stability in India, Brazil and the oil producers of Saudi Arabia and UAE.

So what can the 11-nation BRICS II finally offer themselves and the rest of the world? In my view not very much. There are too many internal imbalances.  May be some increase of intra-trade (mainly for oil and other commodities) could show up. An obvious disadvantage is the missing positive homogeneity between the countries.

However, one more aspect still remains to be considered in the BRICS II context: China’s global political and trade economic strategy with BRICS II as perfect tool.

Application of the old and new Chinese diversification efforts

As I have written before in this blog, China has been starting to work more ambitiously on its intensified and revised geopolitical strategy. I have followed China’s internationalization and globalization for many years and have to admit that China since the start of the opening-up reform policy by the prominent reformer Deng Xiaoping had a logical strategy in their search for enlarged international partnership through all the years.

The international reform steps in the opening-up context were during the years about FDI and more foreign investment in China, the move of Western labor force (experts) to China, increasing exchange of students with abroad both from and to China, mutual cooperation in research –> altogether different steps to improve skills, technology, products and productivity with ideas from outside China. So far about the traditional diversification objectives.

Gradually after China’s important WTO entry, Chinese political leaders also announced objectives for developing China into a technological superpower and for increasing its global political power, more lately very much by focusing on (emerging) countries that appreciate incoming Chinese investments and (expensive) financial support (https://blogg.lnu.se/china-research/?paged=3, from February 17, 2023). Thus, we also have some examples of China’s modern diversification strategy, happening to a high extent geographically.

When summing up some international/global organizations below with obvious strategic interest, you can find some obvious examples where China already is or will become the dominant player, such as:

BRICS II – certainly an organization ready for increasing Chinese influence

Belt & Road Initiative (BRI) – infrastructure projects, fully led by China

RCEP (The Regional Comprehensive Economic Partnership RCEP) includes 14/15 East Asian and Pacific nations working for free trade among each others in a longer perspective (without having the U.S. in the organization). It is quite easy to imagine that China at some point will become more active within RCEP as well.

Looking at these examples clarifies well that China wants to expand its global influence. This will happen via bilateral action or via international organizations. Strengthened global platforms will become even more important to President Xi Jinping and the CP, since China nowadays domestically performs insufficiently after many years of boom.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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International Women’s Day – relevant to both advanced and emerging countries

March 7, 2023

 

On March 8, it is time again to celebrate the international Women’s Day. Sure, better female equality has been achieved in the past few decades. But not enough!

During a lot of meetings during the years with students, researchers, male and female entrepreneurs or corporate officers, politicians and other professionals, I have got the clear impression that the female role in supervisory boards and boards of directors until now has been regarded as – by far – the most relevant gender equality issue. However, this view is definitely too narrow though very necessary.

Instead, there is another group of corporate and non-commercial organizations with insufficient female equality: competent women in middle management and below. These women still seem to be without strong and influential lobby – indeed a shame!

Lagging statistics

One major problem in this context is the statistical uncertainty about the total relative share of women being organized under the leading positions. Better statistical estimates are desirable. Some kind of idea, however, can be found in a publication by the World Bank by the name of https://data.worldbank.org/indicator/SL.EMP.SMGT.FE.ZS (also for emerging countries). Here, the participation share of women in middle management is in most advanced countries around 30-40 percent, in the case of Sweden somewhat higher. The average seems to be located at around one third on country levels – not really satisfactory.

Altogether, the potential for improvement is still high. Analysts should be provided with much more statistics on gender equality on both broadening and deepening levels – and researchers should deal more with female encouragement and promotion on lower organization levels.

Theory and practical application from female gender research

No advanced exercises are necessary to give the “malign neglect” – as described above – an academic touch. Research on human capital formation tells us a lot about the benefits of applying education and improved competence – strongly underlined, for example, by Nobel Prize winners such as Robert Lucas and Paul Romer.

Massively improving female human capital formation also in middle female management and below could appeal to many women’s motivation and productivity – and in the longer run even to macroeconomic GDP growth if successfully spread. Furthermore, countries in particularly Europe could receive some demography-supporting input from the above-mentioned and strived gender-equality improvements.

However, theoretically possible broad proliferation of widened gender equality urges for strong practical support: from students, researchers, employers’ and employees’ organizations, male and female entrepreneurs or corporate strategists, politicians, media and last but not least from voters.

This shouldn’t be impossible in advanced countries, right?

However, also many emerging countries could work more on improved gender equality (also here with human capital mostly in the first place). If we look, for example, at the current convention of the National People’s Congress in Beijing (China’s “parliament”), the female participation rate is only about one fourth. Not really a model for the rest of the world!

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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China’s short- and long-term strategies – increasing challenges for the West

February 17, 2023

In some of my recent blogs, I paid attention to China’s changing style in international relations. Or should I say President Xi Jinping’s style? It becomes more and more obvious that China has strong political and economic ambitions, also globally. This may mean that even more focus will be put on Taiwan which is increasingly developing as an important U.S. issue – both politically and economically. It is therefore necessary that also the EU – and when possible and necessary Sweden itself – accelerate the formulation of a concrete China strategy. The U.S. has already come considerably longer in this respect – with no major difference between Trump and Biden.

The new – or changing – China

Readers of this blog may have observed that I in recent articles several times have described Chinese attitude and strategy changes that started a couple of years ago, from internationally having been a relatively humble and business-minded country to nowadays presenting itself as self-confident, tougher and less compromising.

Today, China wants to export its “superiority regime model” as much as possible to the rest of the world, particularly to Africa, South America and some countries in South East Europa. China has already gained quite some influence in these continents and regions, also by granting – often expensive – new loans for infrastructure etc.

Altogether, China has become much more ideological, authoritarian and nationalist.

This change can be directly explained by the modified leadership of President Xi Jinping who in the past ten years replaced some kind of the previously collective leadership within the Standing Committee by giving substantially more power to himself. In 2013, the first year of Xi in office, the objectives by the Third Plenum with many plans – also for Westerners – toward more market economy looked quite promising. This allowed then for some cautious optimism about future economic progress – cautious optimism that, however, in the meanwhile to a high extent has been shattered.

Thus, economic policy has been landing on the wrong gangway after 2013 – not easy or even impossible to reverse in the forthcoming years or even decades. “Decades” could be the right term when including the Taiwan issue. In my view, Taiwan has to be regarded as the most complicated political and economic issue of the future for both China and the U.S. – with a lot of potential for escalating conflicts between both countries.

Taiwan – a complicated issue for the whole world

Taiwan is very special for both Mainland China and the U.S. Both countries may at some point find a reason to start a war. The official China wants Taiwan back and has not ruled out the use of force to achieve reunification -but without mentioning a certain year. Some analysts see 2049 – the 100th anniversary of the founding of the People’s Republic of China – as a possible year of confrontation, others predict 2035 when China is expecting to achieve “the status of a moderately prosperous country”. Certain China experts are even of the opinion that the price for an invasion including far-reaching Western sanctions would be too large for China – both what concerns Chinese exports and imports.

On the other hand, the belief that the U.S. most probably would not accept a Chinese invasion of Taiwan seems to be widely spread among Western analysts. One can hardly imagine what such a development would mean to the global economy.

Taiwan receives American support not only for democracy reasons but also for its close link to high-tech software. 65 percent of all semiconductors and 90 percent of all advanced chips in the world are produced in Taiwan which currently does not leave much space to Mainland China, the EU and the U.S. Having pointed at this fact, nobody should be surprised that China, the EU and the U.S. now eagerly aim at visibly enlarge their own production of intermediate IT-products at home. Infineon’s planned chip investment in Dresden is such an example.

Political priorities

Before Xi’s entry into the highest political positions, strategic foreign policy was not really an important issue for China’s political leaders. Most issues dealt with trade policy and international business relations. Now, foreign policy is judged as very important since President Xi wants to see China as the most influential country in the world.

The revival of active foreign policy means all the same that China also applies strategic policy objectives at home with new policy tools that have been explained above. New domestic policy tools and objectives are indeed badly needed for Chinese leaders in order to divert the people from the disappointing economic performance – divert by using an ideological, authoritarian and nationalist stance in communication with the Chinese people.

Conclusion:
The analysis of China is about to become increasingly difficult – particularly when including the Taiwan issue. It is quite new in a way that China and President Xi want to become more powerful in a global perspective, not only at home by the authoritarian and nationalist leadership style. Western companies should observe these ongoing changes of Chinese political leadership.

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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