Prospects for China’s economy in the aftermath of the BRICS Summit in South Africa

Chinese President Xi Jinping

Chinese President Xi Jinping

Published Sep 26, 2023


Jaya Josie, Adviser, China Africa Center, Zhejiang University International Business School (ZIBS) and Adjunct Professor University of Venda

Following recent International Monetary Fund (IMF) and World Bank (WB) reports on post-Covid 19 pandemic recovery in China’s economy, the second quarter of 2023 saw leadership debates and discussions on the economy in the country. The debates within the Communist Party of China (CPC) reflect an awareness in China of the fragility of the post-Covid pandemic economic recovery.

The economic fragility has been further exacerbated by certain trade restrictions being imposed on China by the USA and countries in the European Union (EU). Some of the most recent restrictions imposed by the EU in September 2023 raised serious questions about the EU’s obligations under its World Trade Organization’s (WTO) obligations. Notwithstanding the recent US and EU trade restriction, the debates in China is raised by an awareness around the ease of doing business, the role of state owned enterprises (SOE) and the role of the private sector in the economy. In particular, SOEs account for the largest share of the economy’s market capitalisation and that, in 2019, accounted for about 40% of the GDP. In this regard they were seen as the foundation of the economy and safeguard against external shocks.

In the recent attack on China’s export of electric vehicles, the EU specifically argued against the flooding of cheap Chinese subsidised electric vehicles into the EU. Although the SOEs played an important role against the shock of the Covid-19 pandemic, there seems to be a recognition in the CPC that there are problems of inflexibility and efficient management in the SOEs. The debates and discussions focus on institutional reforms of SOEs to deal with slow growth and, in 2019, high levels of debt.

The debates and discussions on the inefficiencies in the economy in China is about moving towards modernisation in a socialist economy. A leading figure in the CPC debate is Liu Shijin, a State Councillor, who called for theoretical discussions on the distinctions between the SOEs and private firms. These views were supported by Jiang Xiaojuan, member of the Standing Committee of the National People's Congress (NPC) and Professor at the University of the Chinese Academy of Social Sciences (CASS). Both interventions were responses to an article published in July 2023 and titled Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting the Development and Growth of the Private Economy.

Despite the post pandemic and geopolitical challenges at home and abroad, China's economic recovery is making headway with confidence-boosting support measures for recovery and development. The National Development and Reform Commission (NDRC) pledged policy support for counter-cyclical regulation targeting consumption, the private sector and the property, capital and foreign exchange markets to drive economic growth. While China experienced many challenges in 2023, there were also some positive signs for its external relationships within the BRICS, the Belt and Road Initiative (BRI) and Africa, in particular. This optimism was reflected in the recent BRICS Summit in South Africa in August 2023.

The 2023 BRICS Summit hosted by South Africa ended optimistically, with many expectations and promises for economic cooperation and collaboration among member states. The Summit also enlarged the membership of the BRICS group from the original five members of Brazil, Russia, India, China, and South Africa to include six more members, including Argentina, Saudi Arabia, Iran, Egypt, Ethiopia, and the UAE. The BRICS will become known now as the BRICS +.

Recent (2023) International Monetary Fund (IMF) and World Bank reports indicate that the original BRICS group is expected to reflect a joint GDP of $27.6 trillion in 2023. With the six new members the BRICS + GDP is expected to grow to US$30.8 trillion. This amount represents 29.3% of global GDP. Of this amount, China’s share is expected to represent 18.4%, Brazil’s share 2.0%, Russia’s 2.0%, India’s 3.6% and South Africa’s share 0.4%. It is evident from these numbers that China’s share of global GDP is expected to represent the largest expected GDP growth in 2023. Based on World Trade Organization (WTO) 2022 data, BRICS expansion will increase the group’s share of global exports to 25.1% from 20.2% and currently, China is the largest exporter globally.

In an economic update on China, the World Bank (June 2023) projected China’s GDP to grow by 5.6% in 2023, led by increased consumer demand. However, capital spending on infrastructure and manufacturing is expected to be consistent while export demand will be weaker as external demand is still recovering from the after effects of the Covid-19 pandemic and current global geopolitical tensions.

While China’s economy has shown signs of post-Covid recovery in 2023, recent signs, however, indicate that the country’s economy is still very fragile and requires policy support. According to the World Bank Report, China’s growth prospects show slow income growth and uncertainty in the labour market, with reluctance for consumer spending and difficulties in the property sector. These factors are exacerbated by weaker global growth prospects and increasing geopolitical tensions. In view of these indications China has embarked on an extensive drive to consolidate its external relationships.

Before the BRICS Summit and during President Xi Jinping’s state visit to South Africa, he committed to increase China’s economic cooperation and development programs in South Africa and Africa following the post-Covid-19 economic slowdown. Between June 2022 and June 2023, it was reported that exports from China to South Africa increased by 1.08%, while imports decreased by (-28%), resulting in a negative trade balance. Clearly, the challenges and difficulties for the BRICS group as a whole and BRI remain ever present.

During the Summit, Russia and India also made commitments to increase cooperation with South Africa and Africa in general. The war in Ukraine has affected Brazil, India, China, and South Africa, as these four members of BRICS have steered a neutral course in the Russia-Ukraine conflict, much to the chagrin of the supporters of Ukraine. Besides Russia, of all the BRICS countries, China has come under scrutiny from the USA and Europe, apparently for its continued alliance with Russia.

In China, observers believe that China is being singled out because it is fast becoming the second largest world economy and, through its Belt and Road Initiative (BRI), is extending its reach into South east Asia, Eastern Europe, Africa, the Middle East, and Latin America. China and its economy are facing many domestic and international headwinds that may temper its growth and development path over the next few years. Given that two additional members from Africa are joining South Africa in BRICS, President Xi Jinping underlined a continued commitment to the African continent in general. As part of the BRI, South Africa and Africa can play an effective, mutually beneficial role in ensuring consumer and infrastructure investment demand and safeguard essential value chains that will promote industrialisation, sustainable development and protect and grow the economies in China, South Africa, and Africa, in general.