[Insight & Opinion] The World Shaped by "BRICs"

The BRICs summit held in South Africa concluded on the 24th (local time). The five BRICs countries not only account for 42% of the world's population and 26% of the land area but also represent 27% of the global Gross Domestic Product (GDP), making their economic scale larger than that of the European Union (EU). BRICs is considered an intergovernmental consultative group with an anti-American and anti-Western character, contrasting with the Group of Seven (G7). However, the term "BRICs" was first used in 2001 by Jim O'Neill of Goldman Sachs as a category of countries for investment purposes.

As a result of the summit, six countries?Saudi Arabia, the United Arab Emirates (UAE), Iran, Egypt, Ethiopia, and Argentina?joined, expanding BRICs to 11 countries. There were differing views on the expansion of membership. China supported the expansion to increase its influence, South Africa advocated for greater participation of African countries, but Brazil opposed it, fearing a reduction in its own standing. The decision to admit six new members demonstrates China's decisive influence and suggests a shift in Brazil's position, recognizing the need to control China's influence through membership expansion. As China's share of the total GDP of BRICs countries increased from 47% in 2001 to 70% in 2022, the economic power gap between China and other countries is significant; thus, the participation of countries like Saudi Arabia can partially curb the concentration of influence on China.

One of the main agendas of the BRICs summit was the expansion of local currency transactions and settlements among member countries. There was a principled agreement to reduce the proportion of the dollar in trade and investment at least among BRICs countries by using member countries' currencies such as the yuan, ruble, real, rand, and rupee, aiming to avoid economic shocks like sudden exchange rate fluctuations caused by U.S. monetary policy. Given the increased burden of foreign debt repayment and the sharp depreciation of their currencies due to the rapid U.S. interest rate hikes to control inflation in the second half of 2022, these countries had no reason to avoid expanding local currency use. BRICs has been gradually promoting the use of local currencies among member countries through measures such as the Contingent Reserve Arrangement (CRA) in 2014 and the establishment of the New Development Bank (NDB) in 2015. At this summit, with specific target deadlines and proportions of local currency use presented, this movement is expected to accelerate.

The likelihood of this movement developing into an anti-Western political alliance or a de-dollarized economic bloc appears low. Unlike China and Russia, which actively position themselves as anti-American forces, India, Brazil, and South Africa still require more Western investment. There is also significant public resistance within BRICs countries to a China-led decision-making system, so conflicts surrounding this issue may intensify in the future. However, the expansion of BRICs clearly shows that there is a growing number of forces seeking an alternative to the U.S.-centered order. Whether the resentment toward the U.S. and the West will become the driving force for creating a new order is uncertain, but challenges to U.S. hegemony will continue for the time being. In the new trends following deglobalization, it is a critical moment for us to seriously consider what kind of future we should envision and pursue.

Choi Jun-young, Senior Advisor, Yulchon LLC

This content was produced with the assistance of AI translation services.