Economic rebalancing and geoeconomic challenges for China: the case of intra-BRICS and foreign direct investments

Abstract

This article investigates a challenge that China will face in the coming years: the geoeconomic consequences of rebalancing its growth regime. On the demand side, Chinese investment and exports give room for consumption, reducing imports of capital goods and increasing imports of consumption goods. On
the production side, manufacturing loses ground to services. Yet, each regime implies different streams of commercial and investment flows, and patterns of influence, cooperation, and partnership. Thus, the spatial distribution of international trade and FDI must change, modifying economic linkages between China and its partners, like BRICS, and their bargaining power in the world economy. This study evaluates the trajectory of Chinese imports of goods and FDIs from other BRICS countries. In terms of trade, we assess the competitiveness of each country’s exports in relation to Chinese output. Regarding FDI flows, we consider the sectoral distribution of investments carried out by the largest Multinational Corporations (MNCs) from BRICS to assess likely changes. Our research suggests that the impacts of rebalancing on each BRICS
country are mostly negative and asymmetrical, depending on the position of the latter in the international division of labor, shaped by the very geoeconomic influence of China.