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China and BRICS: Upgrading Global Agenda

By Alexander SALITZKI (Russia)

China and BRICS: Upgrading Global Agenda

A few weeks have passed since the Chinese fifth generation leaders came to power. The first impression is really strong. Newly elect Chairman Xi Jinping has visited Moscow and has taken part in the Durbin top level BRICS event; he has received US Secretary of Treasure and Henry Kissinger in Beijing. The issues in focus, the country’s core problems, top events and leading figures have been defined… Xi Jinping stopped in Tanzania on the way to Durbin. Back in history, when China was rather far from being a leading global nation, it built a railroad there, giving Zambia an access to the sea. Beijing makes the world remember its contribution into its progress and the fact China is ready to increase it.

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China appears to become the largest world economy in the coming dozen of years. The economic slowdown is a pure fiction. Let me set a simple example. The GDP grew by 7.8% (the lowest growth this century) or by $700 billion (at currency exchange rate, which is the lowest estimation). For comparison in 2005 the GDP grew by 11.3% adding «only» $270 billion.

The economic growth is dynamic, stable and lasting, a thing of the past for the majority of states in the contemporary world. Naturally it introduces changes in public psychology. The economic landscape is rapidly changing. It gives new impetus to business activities and prosperity of the people and the state, there is a feeling of improvement and mass optimism. The entrepreneurs are prone to make investments, the basic assets get renewed, the middle class is on the rise, a consumer revolution is on the way, and the need for environment protection is coming to the fore. The financial situation is absolutely stable, the Chinese banks face growing number of foreign clients or those who wish to join.

The picture is quite contrary in Europe. There is no growth in sight; the financial situation is all doom and gloom. It all is aggravated by «the parade of egoisms». Nothing could be worse in the times of slump. It’s important the European pessimism would not encompass Russia, which is mentally close to the old continent. Lagging behind Europe, tackling the historic task of integrating the huge country, or reviving the movement to the East interrupted by the end of last century – all these challenges make economic growth an imperative.

Siberia and the Far East are closer to Moscow than Europe and the International Monetary Fund that spoiled the things for Russia in Cyprus. The huge territory of Russia and China’s economic prosperity are a unique opportunity to grasp while implementing the Russia’s XXI pivot to the East. Cyprus is an annoying development that was doomed to take place.

The Russia’s turn to the East has already been transformed in kind of a far eastern off-shore zone making appear new pipelines, ports, roads and bridges. The new infrastructure in the Russia’s part beyond the Ural Mountains is much better than the concrete fortifications and armor formations at the Chinese border in the 1970s or mass voyages to China to buy cheap everyday life goods and clothes in the 1990s.

It’s only natural that a lot of Russia’s contemporary projects are intertwined with China. China’s prosperity is favorable for Russia. The reality justifies further comprehensive bilateral interaction. The process was slowed down in the 1990s and now it’s not that easy to find one’s way to make effective the cooperation with one of world economic leaders while the transnational corporations found this way a long time ago.

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China’s President Xi Jinping (L) and his Russian counterpart Vladimir Putin (R) after talks in Moscow, March 23, 2013.

China’s President Xi Jinping (L) and his Russian counterpart Vladimir Putin (R) after talks in Moscow, March 23, 2013.

Good relations with China may benefit Russia even more than its neighbor, though there may be arguments to the contrary. Off and on the issue of the need «to contain» China surfaces on the agenda. I doubt the idea is productive: it comes from the times of Cold War. The USA adopted this approach in the middle of 2010, but the US foreign policy team sends cleat signals of reconciliation: the interaction between two world heavyweights is too important. The Japanese have been told to cool down over the disputed Senkaku islands. No way will Delhi or Seoul join the «containment» policy.

Even reproduction, not talking about modernization, could be hardly conceived nowadays without the nuts and bolts produced in China. Insourcing (getting production back to the countries it was started in) is nothing else but political rhetoric; to large extent it contradicts the market laws. Making orders in China takes less time and easier to do – this is the reality of modern economic scene. The US economy moderate growth this year immediately spurred the imports from China.

Non-Western is not a synonym to anti-Western. There is a well-known politician in Singapore who thinks the interaction between the West and the East will be more fruitful if not pushed artificially (1).

Commenting on the Xi Jinping’s Moscow visit, José Manuel Durão Barroso, the current President of the European Commission, said the close ties between Russia and China are good for the European Union. This is normal in the polycentric world.

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BRICS-Summit-2013It’s worth to note, The Durbin BRICS summit stressed again the role of states in organizing development and industrialization. No way can one jump this phase over. The introduction of new technologies can alleviate but not substitute the industrial-agrarian stage on the way to progress. The humanity is still expecting the advent of resources saving phase that could be approached by increasing production, but not hand-outs.

Among other things, the industrial leap of China has proven the predictions of limited economic growth made by the Club of Rome to be too gloomy, though timely. The problems faced by China related to resources and ecology are hard to overcome. But the solution is achievable, including cooperation with Russia, the USA and other resources exporting states. Long-term forecasts do not exclude that large-scale liquid gas supplies to China. Perhaps, it could reduce the exporters trade deficit.

The industrial-agrarian phase cannot be stopped, otherwise grave implications will follow. At that, the continuation of it means further increase of demand for resources in the East and the South against the background of growing population, infrastructure, urbanization etc. The transfer of resources to Asia engenders gradual reorientation of world export flows. The Asia East, South and South-East will exert more and more influence of world prices.

It’s evident China lacks pure energy, water and food. Moreover, historically the country has a different vision of natural economy than in Europe or the United States, it has different approach to the correlation between producers and consumers. The China’s concern over resources is natural. The prospects of China’s market should be watched with special attention. Russia can become a reliable supplier of energy and foodstuffs, something hitting bumps on the way of production in Asia due to lack of water and arable land.

Obviously, Russia will have to face competitors, but there are prospects conditioned by difficulties on the way of providing for Asian food security. Due to well understandable reasons, Asian countries strive to diversify the supplies of strategically important materials.

Self-sufficiency could be advantageous, collective and reliable within the frameworks of regional associations based on good neighborly relations. China declares grain sufficiency to be an important political goal, the production has become subsidized (in 2012 the subsidies exceeded 30 billion dollars, or over $50 per ton). Now the country cannot do without soya imports. In 2012 it brought in 60 million tons and saved about 30 million hectares of arable land – only 110 million hectares are used for grain crops. Besides, China faces growing demand for ecologically safe products.

It’s important to sum up the China’s experience of international cooperation in agriculture (one more issue on the Durbin summit’s agenda). Some patterns have already been put to practice by Russia and China; further progress could result in large-scale long-term projects in Siberia and Kazakhstan. The abandoned land has great prospects in the XXI century. Their development could be launched by the Shanghai Cooperation Organization as the way to address the food security issue.

China is not only a successful world workshop. It’s also an important investor, the one who comes with serious intentions for long-term projects. The battleships of state corporations and banks are followed by junks of private business experienced in different areas of economy. These «new colonialists» have to offer more beneficial conditions of cooperation than their predecessors. There is nothing negative about it. Look at Africa. The Chinese expansion in the continent, forgotten by the developed countries by the end of the XX century, had a large role to play spurring economic growth and competition between outside donors.

No need to delude oneself, the Chinese are nor philanthropists, but the fact a new large source of investments appeared on the world map should be welcomed.

The logic of evolution, the growth of possibilities and the sheer size of the country irreversibly leads to the creation of new financial center. Nobody says the Yuan is to take the place of US dollar. But loan and security arrangements, including the ones worked out by BRICS, are timely… It’s a long time since the international financial regulators started to ordinarily come out with the schemes giving rise to holding back development, the export of crises and concerns. A counterweight is a must. It’s not bad its clout is boosted by Chena’s economy.

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(1) Kishore Mahbubani. The Great Convergence: Asia, the West, and the Logic of One World, PublicAffairs Books, February 2013.

Source: Strategic Culture Foundation

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