SCIO briefing on BRICS opportunities, challenges and prospects

Speakers:
Zhang Yansheng, chief research fellow of the China Center for International Economic Exchanges

Zhang Jianping, deputy director of Academic Steering Committee, Chinese Academy of International Trade and Economic Cooperation, Ministry of Commerce

Chairperson:
Xi Yanchun, vice director-general of the Press Bureau, State Council Information Office

Date:
August 28, 2017

Xi Yanchun:

Ladies and gentlemen, good morning. Welcome to this press conference. As far as I know, you all share great interest in the prospects of BRICS cooperation. To help you gather more information on it, we invited Mr. Zhang Yansheng, the chief research fellow of the China Center for International Economic Exchanges, and Mr. Zhang Jianping, the deputy director of the Academic Steering Committee of the Chinese Academy of International Trade and Economic Cooperation of the Ministry of Commerce, to make an introduction and answer some of your questions.

Now, let's welcome Mr. Zhang Yansheng to give his briefing.

Zhang Yansheng:

Good morning. It's my pleasure to share my opinion with you today. Please allow me to first make a brief introduction of the upcoming BRICS summit in Xiamen.

First of all, the BRICS mechanism has been running for 10 years. In the spirit of openness, inclusiveness, cooperation and mutual benefit, we have made our partnerships closer, more comprehensive, and more solid. Through practical strategic cooperation, we have promoted peace and development in the world. In the pursuit of mutual benefits and win-win results, through open and transparent cooperation mechanisms, we have expanded our scope of cooperation, and shared our gains to the fullest extent.

Over the past 10 years, the proportion of the GDP of BRICS countries in the world total increased from 12 percent to 23 percent; the proportion of foreign trade increased from 11 percent to 16 percent; the proportion of investments made in foreign countries increased from 7 percent to 12 percent. In 2016, the proportion of foreign investments we attracted reached 16 percent, and our contribution to the world economic growth reached 50 percent.

This indicated that the BRICS mechanism has played a significant role not only in the economic and trade development of the five member countries, but also in the development of other emerging markets and developing countries, as well as in the economic development of the world as a whole.

The BRICS Xiamen summit will lead the BRICS mechanism into its second golden decade. Therefore, the summit in Xiamen will have two parts to its theme: the first part will center on deepening the BRICS partnership. It is what we have talked about before, the "BRICS plus," which means how the five BRICS countries can get more friends from all over the world, which will allow more and more emerging markets and developing countries to join together in the BRICS mechanism, and boost and enhance the BRICS causes, spirit and mechanisms.

The second part is inaugurating a brighter future. In fact the economic environment in our current world has two prospects: one is a bright one, which will push forward the world to be more open, safer and full of cooperative spirit. The BRICS mechanism and countries participating in the mechanism can benefit from this prospect. However, the world economy has another prospect, which has recently been frequently discussed by economists. It is the uncertainty of the world economy.

As a matter of fact, now there is an anti-globalization trend, accompanied by protectionism, populism, isolationism and unilateralism in trade, investment and finance. In 2017, the global economy has shown signs of improvement, but at the same time, there still exist uncertainties that may change the international environment and economic situation. Therefore we arrive at the theme of "deepening the BRICS partnership, inaugurating a brighter future."

In this case, we are very much looking forward to this year's BRICS summit in Xiamen to make joint efforts in deepening cooperation and injecting new energy towards achieving a new solution for improved global governance and making new contributions to world economic growth. Therefore, we believe that the Xiamen summit will focus on the following four aspects.

First is deepening cooperation among the BRICS member states and promoting common development. International cooperation will be pushed forward through a strengthened BRICS economic partnership.

Second, it will focus on strengthening global governance and jointly responding to challenges. BRICS member states are devoted to maintaining international peace and stability, improving the international financial and monetary system, and strengthening coordination and cooperation in regard to the multilateral mechanisms.

Third, it will focus on carrying out people-to-people exchanges and laying a solid foundation of public support. BRICS member states should carry out cultural exchanges and mutual learning, strengthen educational cooperation and promote development of various sports.

Fourth, it will focus on promoting the building of mechanisms and creating a broader partnership. We are looking forward to achieving a BRICS mechanism able to play a greater role in promoting international development and cooperation in the future. Thank you.

Xi Yanchun:

Thanks to Mr. Zhang Yansheng for that briefing. Now, we move on to the question session. As always, please identify your media outlet before raising questions. In addition, we have arranged a full range of simultaneous English interpretation for today's press conference. Now, please proceed with your questions.

China News Service (CNS):

Just now, you mentioned that China has been promoting the "BRICS Plus" initiative, hoping to widen our circle of friends, so as to turn BRICS into the most-influential platform for South-South cooperation. What sort of impact can we expect from such an initiative in terms of BRICS cooperation, as well as the global economy? Could you please elaborate on this?

Zhang Yansheng:

We often say that the BRICS mechanism is designed to establish the most extensive cooperation partnership. BRICS countries differ greatly in culture, religious beliefs, development level and national conditions. As the Chinese saying goes, gentlemen seek harmony but not uniformity, which means that we can cooperate with people who are totally different with us. Our aim is to promote world peace, development and cooperation. In this respect, we believe in openness and look forward to working with those countries and regions willing to join in a "BRICS Plus" system. Thank you.

Zhang Jianping:

I'd like to say something more about this issue. The "BRICS plus" initiative is being promoted on behalf of developing countries and those transitional economies with their GDP per capita lagging far behind the developed world. Among the five BRICS countries for instance, the richest member like Russia has a GDP per capita of over US$20,000, while China barely reaches above US$8,000. Even though Brazil once hit a high of US$12,000, the figure has fallen to US$10,000 now. South Africa is lower, and India, the poorest, has a GDP per capita of around US$1,760.

Many developing countries have faced such economic conditions. Therefore, while developing economies, they face various imperative missions, such as shaking off poverty, promoting industrialization, improving infrastructure, and cooperating and participating in global value chains, based on which, they will be able to blaze a trail for their own advancement.

In view of that, the BRICS countries are expected to shape a system together while facing the critical challenge of development. However, the five member countries alone barely have enough power to achieve the desired goals. Exemplifying the model of the G20, the system, on one hand, consists of seven member countries from the developed world, and, on the other hand, comprises 10 more developing economies.

In such a perception, the "BRICS plus" initiative is open to all developing countries. However, at the same time, we consider the G20 a very important mechanism as well as a potential partner with its member countries being welcomed to "BRICS plus."

Going forward, BRICS countries and all the other developing countries will carry out "South-South cooperation." China knows very well the needs of other developing countries, including the need to improve infrastructure as well as the means to achieve it. China has a lot of advantages in infrastructure, industrialization as well as investment. We are willing to unite with other BRICS countries to form a global supply and value chain, so that all the developing countries will have more opportunities to develop themselves, improve their infrastructure and link their industrial chains. That way, we are bound for a better future.

Developing countries of the ''BRICS Plus" group will also talk (about our common development) along the way. Mr. Zhang said earlier that global governance today faces the challenges of anti-globalization, thus we have to figure out how BRICS members and other developing countries can be united to better safeguard and promote globalization and economic cooperation, as well as to find the momentum of development and economic and industrial cooperation so as to benefit each other.

Associated Press:

BRICS refers to five of the fast-growing emerging economies. However, now the situation is changing. Brazil, Russia and South Africa are facing some economic issues, while something is wrong with the relationship between China and India. My question focuses on these problems. Is the present concept of BRICS still workable? Can it still bring some achievements? Thanks.

Zhang Yansheng:

Just now, I mentioned the BRICS mechanism has been operating for 10 years. What does that mean? We can make comparisons between various mechanisms such as the G7, G8 and the Non-Aligned Movement. We know that these mechanisms have a history of several decades, or even a hundred years. So, for the BRICS mechanism, 10 years means it's still at an early stage of development. And at different stages, it needs to address different problems. Indeed, Russia, Brazil and South Africa are now faced with structural contradictions during their economic development. There is an important mechanism within BRICS that we need to explore so as to find a way for cooperative development for emerging economies and developing countries. The economies of Russia, Brazil and South Africa greatly depend on staple commodities and energy resources. Hence, BRICS cooperation aims to solve structural contradictions in economic development and achieve the diversity of economic structures. That's what we call "the Dutch disease" in economics -- focus on development of, say, natural gas actually causes a country's economic decline. We need to address this important issue and cure "the Dutch disease."

Besides, China and India are two major developing countries of a diversified economic structure. They need to rise from being a low-income country to a middle-income one, and then move further to become a high-income nation. There are traps everywhere. China and India need to overcome the low-income and middle-income traps. That's the second important issue the BRICS cooperation mechanism needs to address.

The third one is that, in addition to economic development, China and India are facing some problems and contradictions along their border. The BRICS mechanism needs to work out the way to maintain world peace while promoting economic development and cooperation. We should reach a consensus and establish an action plan within the BRICS mechanism to make clear what principles and measures we should take to deal with the various contradictions, conflicts and problems that emerge.

Zhang Jianping:

In fact, your question represents a typical view known as "fading of the BRICS" that has been around for a while. However, I would remind you that the acronym of "BRIC" was actually invented by economists from Goldman Sachs Group Inc. in the United States and therefore, as it is an institution based in the United States, you should not be suspicious of the BRICS concept.

People talk about Brazil, South Africa and Russia suffering from the "resource curse." However, as Secretary-general Zhang Yansheng just mentioned, the BRICS countries presently contribute 52 percent of global economic growth. Although developed countries account for a larger proportion of the total amount of the world economy, that is in the form of stocks. On an incremental basis, the contribution of the United States and Japan to current world economic growth is far below that of the BRICS countries. Over the last 10 years, the overall GDP of the five BRICS countries has accounted for 23 percent of the global economy, a ride of 11 percent over that period. If we look at the next 10 to 20 years, this proportion will steadily increase, and as part of a dynamic process, BRICS cooperation will become ever more valuable.

Looking at trade and investment, we just mentioned that the international trade of BRICS countries accounts for 16 percent of the global figure, rising from 11 percent a decade ago. The proportion of BRICS countries' GDP in the world economy has increased to 23 percent from 12 percent. In other words, almost double. You can see that the trade volume didn't keep up with the pace of GDP growth, which points to big demand of mutual trade and mutual investment among the BRICS countries as the next step.

In fact, from China's perspectives, our cooperation on production capacity with Latin American countries, such as Brazil, as well as with South Africa and Russia, is now moving forward rapidly. Even though there are contradictions between India and China, our entrepreneurs have also begun to invest in India. For example, Huawei, Xiaomi and Midea, companies well known internationally, have all invested in India.

As for mechanism cooperation, I will say that the BRICS will continue to press ahead in this regard. Some people have questioned there are the necessary cooperation mechanisms within the BRICS system, and I would say that the annual BRICS Summit itself is the most important mechanism. We also have the Meeting of the BRICS Trade Ministers, which was established in 2011, a mechanism established earlier than the G20 Trade Ministers Meeting, which was only set up last year. Thirdly, under the ministerial mechanism we have created different working groups handling different areas, such as e-commerce and intellectual property rights, playing a good role in promoting pragmatic cooperation in each field. Moreover, we have established the IPR protection mechanism, under which we hold talks and promote cooperation each year.

Next, we will improve the mechanisms in many areas, including e-commerce and service trade. China will host the China International Import Expo in 2018, which will be a very important mechanism for BRICS cooperation. India, Brazil and South Africa have high expectations of a growing share in the Chinese market. Therefore, with the improvement of mechanism, the economic and trade potential of BRICS countries will be continuously tapped and we will make greater contributions to the world economy in the future.

The gold of BRICS will glitter ever brighter, rather than fade over time. Thank you.

ITAR-TASS:

Will there be meetings between state leaders during the Xiamen summit in September? Will President Putin meet President Xi Jinping at the sideline of the event? If so, what issues will they discuss? What kinds of economic cooperation between the two countries will be promoted during the summit?

My second question is about the border dispute between China and India. Has it provided any negative influences on the Xiamen summit? Is there any worry over a possible split it could cause in the bloc? Will President Xi meet with India's top leader at the sideline of the summit? Thank you.

Zhang Yansheng:

Regarding your first question, relevant arrangements will be announced by the competent authorities. I'm sorry that I don't know the plan, but I'm sure you'll find the answer from the Foreign Ministry and other competent departments soon.

Regarding the second question, I'd like to talk about my understandings. As I have said when answering the questions of the Associated Press, the incident has provided a great opportunity for the BRICS countries to find out a way to handle problems concerning bilateral peace, development and cooperation. Possible solutions should be discussed and developed at high levels. I'm glad to see that all state leaders will meet at the summit. This will provide a good chance for them to discuss the disputes and problems between their countries, thus to find out possible solutions. Such talks are unavoidable for the BRICS countries if they want to make the mechanism more mature. Thank you.

Lianhe Zaobao:

Just now you said that the BRICS summit would allow leaders to communicate face to face. Will Indian Prime Minister Narendra Modi attend if the stand-off between the two countries on their border area lasts until September? Presently, there is no indication he won't come because of the stand-off. However, I just want to make sure.

Zhang Yansheng:

We are in the same position as you, namely, we haven't got any information to suggest he won't come. That means neither you nor I have any new information about this situation. Without new information, we cannot make any statements on a hypothetical issue, so, we will go ahead as planned.

Zhang Jianping:

Since everyone is very concerned about the issue of China and India, I would like to say a few words from the perspective of economic and trade cooperation. If we look at the volume of trade between China and India, there is still a lot of room for development. When Indian Prime Minister Modi visited China, his most important task was reducing India's trade deficit with China, which can be attributed in part to the underdeveloped infrastructure in India.

The next step for the development of India is very difficult. Whether it is infrastructure development or industrial development, India and China is complementary and have a lot of room for cooperation. Every time I ask you which country will become the new manufacturing center of the world, a lot of people would choose India. If it comes true, the BRICS cooperation will see an even brighter future, and the two countries will see further progress of trade cooperation.

As a matter of fact, there is a strategic economic dialogue between China and India every year. It is at the ministerial level and is advancing year by year. Therefore, we hope that bilateral and multilateral tracks will continue to promote pragmatic cooperation between China and India, and bring benefits to both sides. Thank you.

Xi Yanchun:

Please note that our guests for today's briefing are experts, not government officials. Your questions concerning the meetings of state leaders and the concrete agenda of the summit still need to be officially confirmed by the authorities. Therefore, we ask for your patience until the authorities announce their plan in due course. Now, let's continue with questions.

Press Trust of India:

What is the focus of this year's BRICS summit and what is the difference between this year's meeting and the previous years'? You mentioned this year marked the tenth anniversary of the BRICS summit, then what consensus is expected to be reached among the five economies and where is the BRICS heading for? Thanks.

Zhang Yansheng:

The theme of this year's summit is "BRICS: Stronger Partnership for a Brighter Future." As Professor Zhang said, documents on ten aspects were approved at a trade minister meeting in early August.

The first aspect was on the establishment of a BRICS Pilot E-port Network. We are now in an era of artificial intelligence, and a key issue is to set up an e-port network to make cross-border trade and exchange more convenient.

Second, the meeting endorsed the Guidelines on the BRICS Trade in Services Cooperation. Service trade, especially those which strengthen the manufacturing industry as well as enrich people's lives, can promote the BRICS countries' economic development.

Third, BRICS cooperation in the e-commerce sector was also endorsed at the meeting. E-commerce has played an important role in China's development in the past thirty years, thus BRICS nations are figuring out how to develop our cooperation more rapidly in this respect. During the G20 Hangzhou summit last year, Jack Ma (founder of Alibaba) came up with the idea of EWTP, an electronic world trade platform which we believe will help better develop e-commerce.

Fourth, the meeting also approved the Guidelines on Cooperation in Intellectual Property Rights. The protection of intellectual property rights is essential for the BRICS to foster an innovation-driven economy.

Fifth, the BRICS countries signed the Outline for BRICS Investment Facilitation to ensure the finance of small-and-micro or small-and-medium-size enterprises (SMEs).

Sixth, the Framework on Strengthening Economic and Technical Cooperation was signed at the meeting. The framework makes clear how the BRICS countries will achieve green, exclusive, sustainable and balanced development through economic and technical cooperation.

Seventh, a consensus was reached to support the multilateral trading system and oppose protectionism in fields of trade, investment and finance.

Eighth, as announced by Chinese President Xi Jinping in his speech at the Belt and Road Forum for International Cooperation on May 14 this year, China will host the China International Import Expo in 2018, and is expected to import goods worth US$8 trillion in the ensuing five years. As long as each BRICS member country takes the lead in exploring its internal demand, expanding consumption and increasing imports, it will provide a driving force for the development of BRICS countries as well as for the world economy as a whole.

These eight aspects mentioned above will be submitted to the summit in September for further implementation. The summit aims to promote economic development through partnerships so that the world will embrace a brighter future. That is critical to emerging markets and developing countries, like China and India, as it will benefit ordinary people, youngsters and small businesses.

Zhang Jianping:

Mr. Zhang, just now, mainly talked about some important fields and priority areas for cooperation in regard to the 2017 BRICS Summit. This time is different from past summits, at which leaders of BRICS nations focus their discussions in a certain field.

The theme of 2017 Summit is to build a stronger partnership for a brighter future, aimed at upholding world peace, promoting common development, improving global governance and deepening economic and trade cooperation so as to make the cooperation between the blocs most comprehensive and on a fuller scale.

As we all know, now the proportion of BRICS nation's investment in another member country is low. We will offer more convenient investment schemes and mechanisms, including intellectual property protection, e-commerce and the single-window service approach, to promote closer economic cooperation and make BRICS countries stronger.

It is common interest that makes us develop together. As we progress, we will have a bigger influence on the global system. The current institutions, pattern and model of global governance, mostly established in the past by the developed countries, cannot meet the needs of the times under new conditions, like the rapid progress of developing countries and the appearance of the trends towards de-globalization Mr. Zhang mentioned.

For BRICS nations, the crucial step is to deepen cooperation and explore new methods and patterns for global governance. The BRICS Plus initiative is also working toward the same target.

We BRICS nations will devote ourselves to building a global multi-polarization pattern, under which diversified civilizations can respect and reinforce each other, which, in my opinion, is the most significant future direction of global development.

The Beijing News:

Today, we've been talking about the deglobalization trend and trade protectionism starting to re-emerge, so I wonder if the BRICS summit would discuss this and come up with some measures to deal with the situation.

Zhang Yansheng:

As for the related issues of deglobalization, trade protectionism and populism, we have seen a strange phenomenon: the economies leading the deglobalization movement are not emerging markets. The United Kingdom is seeking to withdraw from Europe, known as Brexit, while the United States has conducted Section 301 investigations and holds a different view on trade protectionism. The two are both the leaders who had been pushing the globalization drive in history. Why do these two most developed countries with the soundest market economies and best legal and supervision capabilities allow their voters to elect leaders who have such a different view on globalization? Why?

Personally, I think these voters are not satisfied with the results of the globalization that started from 1990, so they choose to vote in this way. Why are they not satisfied? I think there are three problems. First, people are not satisfied with current income distribution. A very few people, about one percent of the population have been getting more of the benefits, while the vast majority have missed out, especially the middle class. Globalization promotes development, but the results have not been distributed well. Second, since 1990, we have seen the following phenomena: in the major powers of the world, the hi-tech manufacturing industry has slowed down, the application rate of innovations and inventions has decreased, and the proportion of the real economy has also shrunk; at the same time, the finance and real estate industries have prospered along with construction. So, in this way, we can see the major powers of the world have developed hollows in their economies. Therefore, not only political leaders but also business circles are not satisfied, because the real economy's proportion is going down. Third, we have seen an increase without development, that is, some countries see their GDP and GDP per capita increasing but the development of society and the overall structure are unbalanced.

You've just raised this question: How will the BRICS mechanism sum up the problems emerging from globalization since 1990, and resolve the problem of income distribution through cooperation? This is actually an issue of inclusive development, including how to encourage innovation and how to build strong growth dynamics. I think the BRICS mechanism can urge the countries to participate in global governance and improve it so as to build a better world economic system and a more consummate coordination mechanism for international macro policies. The BRICS mechanism can promote world peace, world development, world openness and world cooperation. If we make successful efforts in this aspect, it will be a contribution to world development and also to emerging markets and developing countries. Thank you.

Zhang Jianping:

As a matter of fact, anti-globalization sentiments are more prevalent in developed countries. For BRICS countries, we are very aware that globalization offers us real development opportunities, and that won't stop. President Xi had made that very clear at the World Economic Forum earlier this year, and I'd better not repeat it.

Take the climate change negotiations as an example. Over the past two decades or so, we BRICS nations have upheld the interests of developing countries in the negotiations despite our minor differences. We had talked with developed countries for a long time, which eventually landed us at the Paris Agreement. We believe all BRICS nations will continue to promote its implementation.

Another example is trade. A statement issued after a BRICS ministerial meeting earlier this year included a commitment to continue facilitating trade and investment and abnegation of trade protectionism. I believe we can still reach consensus on this issue this time. Some people say that India and Brazil have launched a slew of anti-dumping and anti-subsidy measures against China, which I think have to do with their attempt to protect their domestic market due to the weakness in their own industrial development and product competitiveness. But this is not the dominant practice in trade; we should look at the prevailing trend (of trade cooperation), which is evidenced by the 70 to 80 billion U.S. dollars of trade between China and India and between China and Brazil.

So, in short, trade friction remains a major conflict between developed and developing countries, because industrial manufacturing is being transported to the developing countries, resulting in an increased deficit for developed countries and an increasing surplus for developing countries.

Among the BRICS countries, we are promoting trade cooperation, economic cooperation, and industrial chain cooperation while resolving conflicts and frictions. With China accelerating investment into other BRICS countries, future trade frictions will gradually be reduced, and the global value chain cooperation will be strengthened. Thank you.

Xi Yanchun:

We'll wind up today's briefing for reasons of time. Thanks for our two experts who have joined us and thanks to you all.