Can China's economic model be followed by others?

It will not be surprising to hear soon that America, Europe, and even India are trying to replicate China's success. Against the backdrop of China's economic slowdown and the ongoing debate over the 'China Plus One' strategy, it's important to consider the implications.

It would not be wise to ignore China's potential dominance in solar and wind energy, electric vehicles, batteries, new materials, and possibly semiconductors in the coming decades.

Countries worldwide are grappling with how to adapt to or counter this potential dominance. We need to assess whether China's current dominance stems from past developments or reflects its existing position in industrial production. Are countries pondering their stance on China demonstrating necessary foresight, or have Western nations simply lulled themselves into complacency?

There are multiple perspectives on these questions. 

The industrial transformation China has undergone over the past 15 to 20 years, especially in toys and textiles, is prompting policymakers elsewhere to consider similar strategies. In hindsight, it's clear the world has woken up to this reality somewhat late. 

While America once celebrated Silicon Valley's tech entrepreneurs and their generation of millionaires, China quietly became their supply base. During this period, China also began to discreetly take control of key emerging industries. Today, China is the world's leading manufacturer of electric vehicles, solar panels, wind turbines, and related components. While it may currently be hindered from fully capitalising on the market, reducing reliance on Chinese products won't be easy—a process that will take years.

Meanwhile, Beijing is likely to gain the ability to leverage trade sanctions. China recently disrupted the chipmaking industry by imposing controls on the supply of gallium and germanium. The West seems to have no one but itself to blame for such a situation.

In the late 20th and early 21st centuries, Germany encouraged China to install solar panels to meet growing demand, with other European countries following suit. China capitalised on this opportunity, keeping construction costs low (even after state subsidies) and nearly surpassing its Western rivals.

China now dominates the entire solar panel manufacturing process, from polysilicon production to final assembly. Additionally, China controls 60% of the global wind turbine market and dominates the active pharmaceutical ingredient (API) market, which is crucial as the Indian pharmaceutical industry relies heavily on APIs.

Chinese carmakers have also seized the expanding electric vehicle market, outpacing traditional manufacturers of internal combustion engines. Technological breakthroughs in battery development have significantly reduced the cost of electric vehicle batteries. As Chinese automakers began producing affordable electric cars, sales soared. Tesla was eventually encouraged to invest in a Gigafactory in Shanghai—a factory specialising in energy and carbon-reduction equipment. This kind of strategic foresight, rarely seen elsewhere, is especially evident in the trade of industrial raw materials.

China has long combined cobalt from the Congo with lithium from Bolivia. When Indonesia banned raw nickel exports, Chinese refiners quickly moved in. China also buys factories in Australia, America, and Europe when there's a significant technological advantage, or when key components are manufactured in these regions.

The question of what to call such an economic system can be perplexing. The term "BRICS" often comes to mind, coined by economists at Goldman Sachs to represent Brazil, Russia, India, China, and South Africa at the dawn of the 21st century. They predicted that by mid-century, these economies would collectively be known as the "G-6," akin to the 1970s group of advanced industrial economies—America, England, Germany, Japan, and Italy—known as the "Group of Six" or "G-6." 

This concept held for about a decade before faltering. China (the world's sixth-largest economy in 2001) and India (then outside the top 10) began to catch up. Both are now among the world's top five economies, but Brazil and Russia have not met expectations.

Russia sees limited prospects for remaining among the world's ten largest economies, and India still lags behind the other three countries in terms of per capita income. Even at a glance, some commonalities are evident. In 2001, four of the world's six most populous countries were designated as "BRICS," and they are also among the seven largest in terms of land area. From this perspective, grouping them by geography and population makes sense.

However, Pakistan and Nigeria surpass Russia and Brazil in population. The inclusion of South Africa—a country with an economy one-tenth the size of India's—as a fifth member undermines the economic rationale behind the grouping. Yet, such a designation is not easily discarded, leading to regular "BRICS" conferences.

While these meetings were not without interest, they often led to speculation about unrealistic topics. Many subjects were discussed, but in the end, only the "BRICS Bank" was established. After including non-BRICS countries like Venezuela, the BRICS Bank no longer stands out from other financial organisations created for international development.

A project for an undersea "BRICS cable" to protect information from American surveillance was launched almost a decade ago, but implementation has been slow. Meanwhile, China is also adept at controlling information, raising questions about whether the initiative was flawed from the start. The BRICS conference also discussed creating a new currency to rival the US dollar, but India showed little interest.

China's economic progress and its close association with this monetary system did not seem favourable to India. The idea of the dollar slipping from economic control and aligning with the Chinese yuan was unsettling. Meanwhile, the central idea behind forming the BRICS—to create a counterweight to Western dominance in the global system—is losing relevance.

The underlying logic of the BRICS is unravelling. Although some forty developing countries have expressed interest in joining, it has been challenging to create something akin to the G-15, a group of leading developing countries with similar goals. The G-15, which lasted for nearly 25 years, ceased to exist about a decade ago. The BRICS have tried to fill the void left by the G-15, but neither China nor Russia are "developing" countries in the traditional sense. What unites them is their opposition to the West, making the BRICS susceptible to becoming an organisation dominated by Chinese diplomacy.

China's regional allies include North Korea, Cambodia, and possibly Myanmar. Therefore, Beijing has sought to broaden its base of diplomatic support. Unsurprisingly, Beijing pushed for expanding BRICS membership. China aims to end Western hegemony by expanding the BRICS, seeking diplomatic ties with Africa, and more recently, strengthening its influence in the Gulf region by renewing its friendship with Russia. The BRICS have also initiated discussions with another Chinese-dominated group, the Shanghai Cooperation Organisation.

Shahidul Alam Swapan is a columnist and poet

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.