Two key events that occurred within a week of each other last month could have historic significance. BRICS, which groups Brazil, Russia, India China and South Africa, announced on Aug 25 six new member countries have joined the grouping, bringing its total membership to 11. And, on Aug 29, Chinese mainland tech giant Huawei launched its new Mate 60 Pro smartphone, which comes with the company’s self-developed chipset, with 5G connectivity, as well as satellite call support.
Both developments – one geopolitical and the other about consumer products and technology – may seem unrelated but, I think, when viewed as one, they mark a turning point in the evolution of a new world order.
The enlarged BRICS grouping now represents more than 40 percent of the world’s population, 25 percent of the global gross domestic product, as well as one-third of the planet’s economic growth. It has the world’s largest manufacturing powerhouse (China), along with major oil and gas producing nations (Saudi Arabia, Russia, Iran and the United Arab Emirates). Brazil, Argentina and India are also key agricultural producers, and many of the member nations have extensive mineral reserves, including iron ore, precious metals and rare earth elements.
Technologically, Huawei’s new smartphone signifies several milestones have been reached. The conglomerate’s 7nm chips mark a breakthrough in self-sufficiency despite United States sanctions on China’s chip industry.
What would be the implications these events have on the world? They’ve built on earlier pivotal points, with BRICS having already overtaken the G7 economies in purchasing power parity in 2020, while trade under the China-led Belt and Road Initiative trade had exceeded that with the US, the European Union and Japan last year. These trends point to a rebalancing of power, with the West remaining integral, and the Global South becoming increasingly influential.
The new world order will bring more diversity and multi-dimensionality. While there will still be forces trying to create “small yards and high fences”, there will also other forces that will unite peoples and nations.
Countries, especially those in the Global South, are increasingly capable of upgrading their overall competitiveness. For many nations that may rely primarily on their natural resources for exports, they could become manufacturing and exports-oriented. Morocco, for instance, is an emerging manufacturing hub for electric vehicles to be exported primarily to Europe.
Nations with deep pockets, like Saudi Arabia and the UAE, are aiming to be tech capable themselves by utilizing innovations from both the West and China. Chinese technology and state-owned and private enterprises are playing increasingly vital roles in the Middle East’s rejuvenation and strategic realignment.
With Egypt, Ethiopia and Iran joining BRICS, with Brazil and Argentina on board, linkages are deepening between the bloc and vital regions of the Middle East, Africa and Latin America. This will bring the Global South closer, benefiting from the huge markets within BRICS.
While differences will continue to exist, commonalities will surface due to common views on opportunities through linchpins such as the BRI, BRICS and the Shanghai Cooperation Organization, as well as new challenges
The Chinese mainland’s chip breakthrough will redraw the global semiconductor manufacturing landscape and, for that matter, how globalization will evolve. Not only will we see the shifting of the global semiconductor value chain to China (and, as a result, the changing destinies of companies), China’s position as the manufacturing hub for a large range of tech products, such as smart phones, Internet of Things products, smart consumer electronics, and intelligent and connected vehicles, will further strengthen, as with their associated supply chains.
As the world diversifies, China’s manufacturing prowess will spread to other Global South nations. Countries like Vietnam, Thailand and Mexico, with industries ranging from electric-vehicle manufacturing to consumer goods, have benefitted from this diversification.
With the rise of the middle class in emerging economies, demand will grow for both consumer products and food. Many of these countries, like Brazil, Argentina and Russia, are also major producers of agricultural products. We could expect more trade in agricultural and consumer products among the Global South nations.
There’s also talk of a new BRICS currency. While I’m not sure how probable this may be, the use of domestic currencies for international settlements will certainly accelerate, and the dollar’s privileged status faces recalibration. The Chinese yuan will be playing an increasingly prominent role. However, I don’t believe in total “dedollarization” as the greenback will remain important, at least in the near future. But, beyond a certain tipping point, the US dollar’s privilege will be marginalized and a dramatically different global landscape will surface. That will be a very different world.
While some “decoupling” may occur and “national security” concerns become more prevalent, open investment flows and collaboration are likely to expand, especially in the Global South, bound by initiatives like BRICS and the Belt and Road Initiative. Additionally, artificial intelligence governance and ethics, as well as climate change, will require greater cooperation and coordination among countries.
For chief executive officers of global businesses, they must ask themselves: What does this new world mean to their companies? Are you ready for such a new world? And what steps do you need to take to prepare for it, while keeping your businesses going? They should also ponder over today’s geopolitics and rhetoric, and the realities in business, innovation and competition. How can they chart the right course without being hijacked by the rhetoric (and collective myopia at home) and being able to capture the opportunities, many often not fully manifested yet, but knowing where the risks are.
The new world may look more complicated for some, but it’ll also makes much more sense to many others. Businesses should reflect more deeply on what it means. On an even macro level, the new world would mean a shift of the center of gravity back to Eurasia, a role it had enjoyed for millennia before the Age of Discovery. However, after many generations of evolutions and disruptions, the new Eurasia will be very different from that of the past. While differences will continue to exist, commonalities will surface due to common views on opportunities through linchpins such as the BRI, BRICS and the Shanghai Cooperation Organization, as well as new challenges.
Edward Tse is founder & chairman, Gao Feng Advisory Company, a strategy consulting and financial advisory firm with roots in China.
HONG KONG NEWS