Aurelia Butler

The government’s “Intergenerational Report 2023″ will forecast the total spend on the five categories could rise by about A$140 billion ($90 billion,) or 5.6% of current GDP, over the next 40 years, according to excerpts of the report seen by Reuters.Ahead of the report’s formal release on Thursday, Treasurer Jim Chalmers said though he felt optimistic about the future, the country must adapt and understand the major challenges for the economy ahead.”Our population will grow more slowly, our people will live longer and healthier lives and our care economy will become an even more central focus in the decades ahead,” Chalmers said during a media briefing on Monday.Australia’s total spending on health was expected to increase the most as a share of GDP over the next 40 years, with the care economy increasing from around 8% of GDP currently to around 15% in 2062-63, according to the report.”Ageing and a growing population are driving strong growth in health and aged care spending,” it will say.Australia’s population growth is projected to slow to an average of 1.1% over the next 40 years versus 1.4% over the past 40. The total population is projected to reach 40.5 million in 2062-63, broadly similar to the last report in 2021, from about 26 million now.The report will warn the cost of servicing government debt will have an enduring impact on government coffers as massive stimulus unleashed during the COVID-19 crisis will require bigger repayments due to inflation and higher interest rates.Australia recorded the first budget surplus in 15 years in 2022/23, but that is expected to slip back into deficits from this year as the economy slows and interest rates rise. ($1 = 1.5613 Australian dollars) More

Good morning. Ethan here; Rob returns tomorrow. We may or may not learn anything new from Friday’s Jackson Hole monetary policy confab. But we will almost certainly learn something from Nvidia’s earnings on Wednesday. Grist for the AI-hype mill or much-needed reality check? Let me know what you expect: [email protected]: not Japan“The village elder once told me that if your pig, even after laxatives and an enema, just can’t defecate, you should check if it’s because you forgot to feed it.”This crude joke, making the rounds on Chinese social media, sums up the bizarre situation the Chinese economy is in.Faced with sagging demand and a teetering property sector, Chinese authorities have tried nearly everything. They have cut lending rates, mortgage rates, business taxes, stock-trading fees and even admission costs at tourist sites; extended EV subsidies; relaxed regulations; intervened in forex markets; and extended stock trading hours. The one thing they haven’t tried: feeding the pig some fiscal stimulus.That reflects a two-part calculation, argues Adam Wolfe, emerging markets economist at Absolute Strategy Research. First, the immediate problem the Chinese economy faces is one of precautionary savings sapping aggregate demand. Second, authorities fear the most obvious fix to weak demand, a dose of stimulus, might not accomplish much, partly because of an elevated savings rate. Wolfe’s is a story about insufficient confidence, pushing back against the increasingly popular narrative of a Japan-style balance sheet recession in China. (For the case that China is indeed facing a balance sheet recession, read Robin Wigglesworth or Martin Sandbu.)Start with precautionary savings. China’s soft consumption numbers evoke Keynes’ paradox of thrift, in which precautionary high savings in a downturn hurt demand further, encouraging still more savings. Wolfe thinks “zero-Covid PTSD”, including the lethally abrupt reopening process, has pushed up the savings rate, hurting demand, especially for durable goods. Even in the healthier services sector, spending has not kept pace with income growth (light green line below):

Next, authorities aren’t confident that “big bang” fiscal spending can solve the problem. Longstanding fears around high indebtedness apply. Remember that the crisis unfolding in China’s property sector was first prompted by the effort to constrain developers’ dangerous leverage levels. That limits how much borrowing can be used to solve the confidence shortfall, for fear of creating worse problems later on. Households’ cautiousness may be hard to dislodge. Wolfe says the worry is that higher spending, such as direct transfers to households, could just end up getting saved — resulting in a low fiscal multiplier that blunts the efficacy of stimulus.Christopher Beddor and Thomas Gatley of Gavekal Dragonomics take a similar line in a recent note. They point out that consumer, but not business, confidence is worse than what economic fundamentals would predict, probably reflecting lingering pandemic effects. Their chart below shows that while sentiment in central bank survey data usually tracks real activity, the two have come apart lately:

This, in turn, is denting property sales and consumption. But Beddor and Gatley argue that sentiment should improve as the real economy does:The most likely reason [for poor sentiment] is simply that China’s economy continues to be volatile; if it records several months of consistent improvement, confidence will further normalise and households will revert to earlier consumption and savings rates, as well as deploy those savings in a less risk-averse manner. The improvement in household sentiment indicators may have been weaker than the improving fundamentals in Q2, but they are still up substantially from before the reopening, and will probably improve further with more consistent economic and job-market outcomes over time.This is not to deny China’s structural issues. But rather than a balance sheet recession, China appears to be suffering two related but distinct problems: a near-term, fixable confidence deficit and the longer-term, harder-to-fix breakdown of its property investment-led growth model.Consider the features of a balance sheet recession. One crucial dynamic is falling asset prices forcing deleveraging. But in China, that has only happened in one sector, whereas in the 1990s a broad swath of corporate Japan, including appliance makers and auto exporters, faced unsustainable debt burdens. Outside of Chinese property, “no one is being forced to delever”, says Wolfe.Even in China’s real estate sector, the drop in prices has been modest compared to the plunge in sales. Official data show an existing home price decline of 6 per cent from the peak. Chinese government statistics are notoriously unreliable, but alternative private data show city-level home price declines of 10-20 per cent. In 1990s Japan, the decline from the peak was more like 40-60 per cent, depending on the measure. To repeat, the property problems are serious. Goldman estimates, conservatively, that the property slowdown will knock 6 per cent off MSCI China companies’ earnings this year. Wolfe thinks the state will have to directly finance property construction to prevent a wider credit crunch. He says the ultimate goal is to manage decline, shrinking the property sector to something in line with fundamental demand.That process has been under way for several years, though, part of a larger (and so far lacking) transition away from property investment as China’s economic engine. Fiscal stimulus can’t solve that problem. But it can offset the confidence deficit. Until the zero-Covid reopening is fully in the rear-view, it’s too early to start declaring China the new Japan.One good readTop-10 Goldman shareholder likens Goldman employees to Maoist guerrillas. More

The writer is president of Queens’ College, Cambridge, and an adviser to Allianz and GramercyWhile many interesting papers are discussed every year at the central bank conference in Jackson Hole, it is the Friday morning address by the Federal Reserve chair that has captured the lion’s share of media attention over the years. Recognising the level of interest, Fed chair Jay Powell and his predecessors have adopted one of three main approaches depending on the circumstances: signalling imminent monetary policy steps, delving into long-term monetary policy issues or limiting themselves to a narrow economic question with no immediate policy implications.Powell has a particularly target-rich environment for whatever strategy he chooses this year. It is a moment of great economic fluidity with fascinating policy challenges and trade-offs, both tactical and strategic. Indeed, I would not be surprised if it is not the availability of topics that will determine what he opts to say on August 25 but a personal calculus driven largely by risk assessments.A year ago, Powell chose the first strategy, delivering a shockingly short (under nine-minute) speech centred on the notion that “While higher interest rates, slower growth and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses.” He went on to say: “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”This framing did more than jolt markets and trigger a large sell-off in stocks and bonds. It propagated a “pain narrative” that many media outlets employed as a benchmark. But with robust US economic growth and unemployment hovering merely a hair away from its historic low, what actually transpired was akin to a “waiting for Godot” scenario — a pain expectation repeatedly alluded to but not realised at the aggregate level.This first approach is tempting given the many questions swirling on the near-term monetary policy outlook. They include whether the Fed is ready to declare an end to the most concentrated rate-increasing cycle in decades; the timing of subsequent rate cuts; and, should inflation misbehave, the patience the central bank is willing to show to minimise the risk of an economic recession in the “last mile” of combating unanticipated high inflation.Yet, tempting as it is, Powell may consider another approach after his initial, costly mischaracterisation of inflation as “transitory”, the belated policy response and what has transpired since his last Jackson Hole speech. It may appear better for him to sidestep the short term and take a longer-term perspective of monetary policy.The Fed is operating with a “new monetary framework” introduced three years ago that is better suited for the previous decade than this one. A debate is brewing over the appropriateness of the 2 per cent inflation target in the light of the recent experience in the US and elsewhere with the lower zero bound. The necessity to accommodate substantial secular supply shifts is also a big concern.There are also questions about whether, in the context of heightened use of industrial policy, there is a need to revisit the conventional wisdom over a fiscal-monetary compact. Last, there is a case for the Fed to follow the welcomed decision by the Bank of England to institute an external evaluation of its forecasting errors — an important step to counteract the erosion of both central bank credibility and the efficacy of its forward policy guidance, as well as mitigate the potential harm to political independence.The third strategy entails shelving both immediate and long-term policy issues, focusing instead on a specific economic query with few immediate implications. While it is not an obvious approach for a Fed chair who is not an economist by training, it may be the most cautious course for someone who has had communications challenges.It also aligns with the extensive array of issues captivating researchers within and beyond the economic profession. After all, both the domestic and global economies remain remarkably fluid and subject to profound transformations; the green transition, the reconfiguration of cross-border supply chains, overwhelmed institutional frameworks, structurally tight labour markets and so on all play a part.Such an abundance of topics ripe for discussion under all three approaches bodes well for Powell as he prepares his eagerly anticipated address. What is less clear, however, is what he will opt for. If I were advising him, I would suggest the third strategy at this economic, political and institutional juncture.  More

With the appeal of protectionism and government intervention on the rise, Swedish author Johan Norberg provides a stirring exposition of how free markets have underpinned human prosperity — and how they can continue to do so. The Capitalist Manifesto: Why the Global Free Market Will Save the World (Atlantic Books £20) begins with a summation of how the global spread of capitalism after the fall of the Berlin Wall helped to reduce poverty by promoting the free flow of trade, capital, people and ideas across borders. “Even if China is removed from the 1990-2019 data set, global poverty has been reduced by almost two-thirds,” he explains.

Central to capitalism, according to Norberg, is its “Socratic wisdom” — or the notion that markets do not presume to know what is best, compared to say an all-powerful government choosing what to produce. In this way, the freedom of buyers to choose products across a competitive marketplace allocates resources more effectively, while profit motivates continual innovation. But Norberg is not solely focused on growth, he articulates how free markets can be a powerful force for justice and anti-discrimination too. Many of the ills of capitalism, he argues, are due to market distortions introduced by regulation, like immigration restrictions, subsidies and tariffs. Sure, capitalism is certainly not flawless, but as rhetoric over introducing trade barriers, reshoring, and technology restrictions grows ever louder, Norberg’s latest book is a timely reminder of the benefits of free and open trade.Now on to those flaws. The Big Four index funds of Vanguard, State Street, Fidelity and BlackRock control more than 20 per cent of the votes of S&P 500 companies. That alarming fact is at the core of John Coates’ book The Problem of Twelve: When a Few Financial Institutions Control Everything (Columbia Global Reports $17). Said problem arises when a small number of actors obtain considerable influence over the politics and economy of a nation.

Coates, a law professor at Harvard University, provides an expertly balanced explanation of how corporate concentration can arise when the forces of economies of scale in finance clash with a commitment to fragmented and limited political power. He illustrates this through the rise of index and private equity funds in the late 20th century, which have amassed and sustained enormous influence over the business strategies of corporate America. The challenge is what to do about it. Coates acknowledges that the concentration of wealth and power is a threat to democracy, yet the political response to it can threaten the very financial institutions that also create vast economic benefits. A fascinating insight into a paradox at the heart of liberal democracies.Financial markets are prone to bubbles when they get captured by mania, blind belief, and, sometimes, deception. Little exemplifies this better than the rise and fall of cryptocurrency. Easy Money: Cryptocurrency, Casino Capitalism, And The Golden Age of Fraud (Abrams Press $28/£19.99) by actor Ben McKenzie, with journalist Jacob Silverman, is the perfect guide to the recent bitcoin hysteria.

McKenzie, famous for his role in the drama The O.C., provides a gripping write-up of his personal journey to unveil what he considers to be the con underpinning the crypto world. From meetings with the CIA to an engrossing interview with Sam Bankman-Fried, McKenzie shows he is equally comfortable with economics and investigative journalism, as he is with Hollywood.The global free market as we see it today has been shaped by economic crises since the 19th century. In Seven Crashes: The Economic Crises That Shaped Globalization (Yale University Press £20) Harold James, a history professor at Princeton University, provides a deep and insightful economic history of how major crashes and downturns — from the Great Depression to the Covid-19 crisis — have moulded the politics and academic thinking around globalisation.

James categorises “good” crises from “bad” ones. The former lead to greater expansion of free trade and capital, while the latter results in a less open world. He provides a neat analysis of how different types of shock drive different responses. Crashes driven by a supply shock, like the 1970s oil price hikes, tend to lead to greater globalisation, as businesses and nations react to raise supply, writes James. In contrast, demand-driven crashes such as the 2008 financial crisis result in a contraction of global markets. An important historic account to help us better understand the trajectory of the world economy.Tej Parikh is the FT’s economics leader writer More

For a telling insight into the seismic changes reshaping the global order, it is worth a glance at the official schedule of Kenya’s diplomats. There was a time when they were called upon to host delegations from global powers relatively rarely. No longer. Now there is barely a slot free in their calendar.In the early summer Nairobi hosted in quick succession US officials to discuss a free trade deal, Russia’s foreign minister, Sergei Lavrov, to address parliament, and EU officials to sign a trade agreement. Kenya’s military commanders have an impressively full dance card too: in May, for example, an Indian frigate anchored off Mombasa for a joint naval exercise, even as British Royal Marines trained Kenya’s first commando unit.All the while China, which two decades ago identified Kenya as a vital partner in Africa, in its then fledgling courtship of the continent, is investing in infrastructure leading from the Indian Ocean coast to the interior. China’s foreign minister, Wang Yi, popped by in July. Oh yes, and Iran’s president Ebrahim Raisi had a red-carpet reception in Kenya in July at the start of an African tour.Welcome to the à la carte world. As the post-cold war age of America as a sole superpower fades, the old era when countries had to choose from a prix fixe menu of alliances is shifting into a more fluid order. The stand-off between Washington and Beijing, and the west’s effective abandonment of its three-decade dream that the gospel of free markets would lead to a more liberal version of the Chinese Communist party, are presenting an opportunity for much of the world: not just to be wooed but also to play one off against the other — and many are doing this with alacrity and increasing skill. “For Kenya and others it’s not a question of picking sides. It’s a question of picking everyone,” says Michael Power, a Cape-Town based investment analyst, most recently for Ninety One, who has devoted his career to following emerging markets. “We should no longer talk of the non-aligned movement,” he adds, referring to the group of African, Asian and Latin American countries, formed in the cold war, and avowedly neutral in the contest between the west and the Soviet Union. “But of the multi-aligned movement.”It is 15 years since the first round of this phenomenon when the G20 found its voice and role in shoring up the global economy during the financial crisis — as captured by the commentator Fareed Zakaria in his 2008 essay, The Rise of The Rest. Now, however, with the US and China at loggerheads, the G20 is more divided and less effective and a new more opportunistic era is under way.One senior western policymaker, privy to thinking in the west and China, sees it as a “once-in-a-generation shift”. Western diplomats talk of the era of “fence-sitters” and “swing states”. For Ivan Krastev, the political scientist, it is the age of the middle powers. The word “middle”, he stresses, refers to their position — in between the US and China — rather than their weighting.His vision encompasses a range of distinctly un-middling countries including traditional US allies such as Saudi Arabia, Turkey, Israel and even Germany, as well as titans of the global south, such as Indonesia and India, patently a rising great power.

Bric country leaders meet in 2009, including Luiz Inácio Lula da Silva of Brazil, Dmitry Medvedev of Russia, Hu Jintao of China and Manmohan Singh of India © Dmitry Kostyukov/AFP/Getty Images

“This geostrategic entrepreneurialism reflects the evolution of the global order into an archipelago over the past decade,” says Nader Mousavizadeh, an adviser to Kofi Annan, when he was UN secretary-general, and who is the chief executive of Macro Advisory Partners, a strategic advisory firm. “The shift has to be seen as structural, secular and not cyclical.” “The fact that the relationship between Washington and Beijing has become adversarial rather than competitive has opened up space for other actors to develop more effective bilateral relationships with each of the big powers but also to develop deeper strategic relationships with each other.”Beyond the BricsThis new less regimented landscape most obviously benefits the global south, the loose term broadly synonymous with the developing economies of Latin America, Africa and Asia. Their heightened ambitions will be on display in South Africa in mid-August at the summit of the Brics nations, Brazil, Russia, India, China and South Africa.The Brics was formalised in the aftermath of the financial crisis drawing on a classic jazzy bankers’ acronym — it was coined by Goldman Sachs economists — when their interests were more aligned than now. The founding four later invited South Africa, a relative economic minnow, to join; its inclusion brought Africa into the group.Now after some years treading water, the Brics is gathering momentum. Symbolically at least the summit has the potential for being seen as the 21st-century equivalent of the Bandung conference of 1955, which launched the non-aligned movement.

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Top of the agenda is the application of 22 countries to join, and which if any to accept. The eclectic roll call of suitors includes global south ideological stalwarts such as Venezuela and Vietnam, but also Middle East actors such as Saudi Arabia, the UAE and Iran, and powerhouses from other regions, including Indonesia, Nigeria and Mexico.Add all of them, and the block would represent 45 per cent of the global economy. Even a more limited expansion would create a behemoth accounting for almost half the world’s population and 35 per cent of its economy, says Anil Sooklal, South Africa’s ambassador to the Brics who is co-ordinating the summit. He anticipates “a more ambitious agenda and more forceful position, including a strong push for reform of the global political, economic and financial architecture”.The anticipated arguments behind the scenes over who should join underline that it may be easier to articulate the Brics’ ambitions than realise them. They and potential new members have very different and in some cases rivalrous interests. China, for example, has no desire to see India or Brazil join them on the top table at the UN Security Council — nor is it in favour of a multipolar world, whatever it may say in public. But however the Brics develops, the summit does underline the broader phenomenon. To understand the new room for manoeuvre, Krastev argues that talk of the rise of a new cold war between America and China is misleading.“Don’t focus on US-China competition, as they are not going to be able to discipline fragmentation as Russia and America did in the cold war,” he says. “The middle powers may not be big enough or strong enough to shape the international order, but their ambition is to increase their relevance.

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“Their overactivity is going to make them unpredictable,” he adds. “Their activism is contagious. When I think of them, I am reminded of a line from a nonsense novel I read as a child: ‘Lord Ronald flung himself from the room, flung himself upon his horse, and rode madly off in all directions.’” In its stance over Russia’s invasion of Ukraine, Turkey is a case study of a country choosing sometimes to align itself with the west and sometimes to stand against it. Its unpredictability was to the fore this summer at the Nato summit when it did a U-turn in allowing Sweden to join the alliance. Western officials see Saudi Arabia and the UAE very much in this category of states behaving more assertively on the global stage and more independently of their traditional ally, America. Policymakers in Brussels have noted their intensified engagement in the politics of the Horn of Africa, for example, and also of course Saudi Arabia’s hosting of a Ukrainian peace talks, and concluded that the EU needs to rethink its foreign policy priorities and focus. “We need to be engaging more with such countries,” says a senior EU official. “A large part of our foreign policy structures are 20 years out of date.”The spirit of activism will certainly be to the fore in Johannesburg. Much of the pre-summit argument focused on whether Vladimir Putin would attend. This posed a dilemma for South Africa over its international obligations to arrest him given that the Russian leader has been indicted by the International Criminal Court.Putin’s decision to stay at home was a boon for Cyril Ramaphosa, the president of South Africa, whose refusal to criticise Moscow has exasperated some in the Biden administration. It also suited many other countries attending which faced awkward encounters with Putin. While loath to join with the west in denouncing Moscow, many African states are upset by Russia’s ending of the deal on safe transport for Ukrainian grain supplies. Instead it will be the other autocracy among the Brics founders, China, which will overshadow the summit, via the looming argument over expansion.China’s desire to be the de facto head of the developing world is undisputed. Sir Danny Alexander, a former British government minister who is in Beijing as vice-president for policy and strategy at the Asian Infrastructure Investment Bank, says China clearly sees itself as the natural leader of the global south.

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“At a meeting of the China International Development Co-operation Agency there was a lot of discussion about the different kinds of collaboration going on. They talked about south south, north south and triangular co-operation. What is clear is there is a multiplicity of discussions on development and investment issues and these conversations no longer all flow through a western lens.”For Beijing, a beefed-up Brics would be a counterweight to the G20, although some of the leading players at the Brics summit — India in particular — have no interest in allowing the Brics to segue into a China “club”. Indian diplomats have made clear that India is not in favour, for example, of developing a Brics currency.As the two Asian giants warily eye each other up, New Delhi has this year made unprecedented strategic overtures to the west, with Prime Minister Narendra Modi making state visits to Washington and Paris. Indian officials talk though of being “aligned with our own interests” and in its stance towards Russia, including buying its oil, New Delhi has resolutely avoided taking the west’s line.President Joe Biden and Narendra Modi during the Indian prime minister’s visit to Washington in June. New Delhi has this year made unprecedented strategic overtures to the west © Andrew Caballero-Reynolds/AFP/Getty ImagesBrazil too is wary of the implications of expanding the Brics, diplomats involved in the preparations for the summit have said, for all the anti-western rhetoric of its leftwing President Luiz Inácio Lula da Silva on a recent visit to Beijing. Such diplomatic dexterity and juggling are on display daily by middle powers around the world, not least by Singapore, which feels the squeeze between China and America acutely.De-dollar diplomacyAnd yet for all the discordance behind the scenes in Johannesburg, most of the participants share a frustration that the global economic order is tilted in the west’s favour, and believe that now finally is the time to change it.Mia Mottley, the prime minister of Barbados, spoke for many developing countries at a summit hosted by President Emmanuel Macron in June when she called for a transformation of the World Bank and IMF. “When these institutions were founded [in 1944] our countries did not exist,” she said.Zoltan Pozsar, head of the macroeconomic advisory firm, Ex Uno Plures, believes that system is at a tipping point. “The global east and south are renegotiating the world order,” he says, highlighting the drive in the global south for de-dollarisation and a rethink of the IMF and World Bank. “The west dreamt of the Brics as a lapdog, that they would accumulate dollars and recycle them into Treasuries, but instead of that they are renegotiating how things are done.”French president Emmanuel Macron greets Mia Mottley, prime minister of Barbados, in Paris. Mottley has called for a shake up of the World Bank and IMF © Ludovic Marin/AFP/Getty ImagesThe US Treasury secretary Janet Yellen has confidently pushed back against this, reflecting the view of many market participants that the ambition to dethrone the dollar as the global reserve currency, is a very long-term bet. “There is a very good reason why the dollar is used widely in trade, and that’s because we have deep, liquid, open capital markets, rule of law and long and deep financial instruments,” she said at the Paris summit.But politically at least the context is more propitious to push for change than ever. In the heyday of the cold war, the non-aligned movement had to rely on moral and emotional rather than economic or political clout. Now the Brics and aspirant members run an ever-larger share of the global economy and control many of the critical minerals the west so badly needs.Moreover, some of the most influential “middle powers” who are wary of China share Beijing’s concerns over America’s weaponisation of financial sanctions. The signal moment for them in the past 18 months, argues the former Kofi Annan aide Mousavizadeh, was not Russia’s full-scale invasion of Ukraine in February 2022 nor Nato’s rediscovery of its purpose, but the freezing of Russian central bank reserves, which dramatically underlined once again the power of the US dollar.“For middle powers, it was the equivalent of someone going in and seizing embassy property. It was a reminder that you can have this sense of opportunity in the archipelago but that the alternatives to a US dollar world do not exist.“Many thought we have to do whatever it takes to avoid being in the position of having reserves of this magnitude frozen in the future. That was Modi’s main response and many other middle power governments including in the Middle East were obsessed about this too.”In Washington and west European capitals, officials are all focused on the rise of the middle powers and the need to reassess their world view. German officials even posit that Germany too can be seen as a middle power. “Our clear idea is that the world is not a G2 world,” said one. “It should be a multipolar world. The task of Germany could be more in the middle.”Biden administration officials talk of the need not to react when old allies adopt positions close to China or Russia, but rather to make their case privately and stress the long-term advantages of America’s values over China’s. All the while Washington is busy working away at new constellations of regional alliances, including the trilateral Aukus defence pact and the Quad grouping of Indo-Pacific powers.At times the rhetoric emanating from Johannesburg will sound like a reheating of the old anti-imperialist language of Bandung. But western officials accept it would be wrong to dismiss it all out of hand as their 20th-century predecessors might have been tempted to do. The age of the western set menu is over. And the new menu, while heavily influenced by two lead chefs, is still being written.Data visualisation by Alan Smith and Keith Fray More

China will push the Brics bloc of emerging markets to become a full-scale rival to the G7 this week, as leaders from across the developing world gather to debate the forum’s biggest expansion in more than a decade.South Africa’s President Cyril Ramaphosa has invited more than 60 heads of state and government to a summit in Johannesburg from Wednesday when several countries could be invited to join the bloc of Brazil, Russia, India, China and South Africa, said several officials familiar with talks.But in the run-up to the summit New Delhi has clashed with Beijing over the expansion. Tensions are mounting over whether the Brics should be a non-aligned club for the economic interests of developing countries, or a political force that openly challenges the west, said people briefed on India and China’s positions. South African officials said 23 countries are interested in joining.“If we expand Brics to account for a similar portion of world GDP as the G7, then our collective voice in the world will grow stronger,” said one Chinese official, who declined to be identified.Naledi Pandor, South Africa’s foreign minister, said this month it was “extremely wrong” to see a potential Brics expansion as an anti-western move. However, western capitals are likely to regard the possible additions of Iran, Belarus and Venezuela as a move to embrace allies of Russia and China.Argentina, Saudi Arabia and Indonesia are vying to be the first new members since South Africa was invited into the original group of Brazil, Russia, India and China in 2010.President Vladimir Putin will not join other Brics leaders in Johannesburg. This will spare Pretoria from having to carry out its legal obligation to arrest the Russian leader after the International Criminal Court indicted him over war in Ukraine.Putin is likely to attend by video link and he spoke to Iran’s President Ebrahim Raisi on August 17 about Tehran’s application to join the Brics, according to the Kremlin.Xi Jinping will travel to Johannesburg on Monday for the summit and other discussions with African leaders, China’s foreign ministry said, marking a rare trip abroad for the Chinese president this year. Xi’s only other international travel so far in 2023 was to Russia in March. Brazil’s President Luiz Inácio Lula da Silva has recently spoken in favour of opening Brics membership to neighbours Argentina and Venezuela, as well as Saudi Arabia and the United Arab Emirates. A senior diplomat in Brasília said it wanted clear conditions established as the basis for any expansion. One could be a requirement for entrants to join the New Development Bank, the Shanghai-based lender founded by the Brics. Saudi Arabia is in talks to become the multilateral bank’s ninth member.

“It’s important that criteria are defined for the entrance of these new members,” the diplomat said. It was unlikely that all 23 countries would join at the same time but “they need to know why the decision was taken [and] so that, if future expansions happen, the candidates know the priority issues”.Officials shepherding pre-summit talks have said criteria for admitting new members will have to be agreed by Brics leaders. They added that a common currency is not on the agenda, despite growing resentment of the US dollar’s dominance among members.Instead of a broader push towards de-dollarisation, the summit could focus on seeking an agreement that Brics members should increasingly settle trade between each other in their local currencies, officials familiar with discussions said. More