The world has changed significantly in a very short time. The two glaring events were the Pandemic, which began in early 2020, and the Ukraine War, which started in early 2022. In sum, these events have created a geopolitical upheaval that has splintered our world into two parts, best defined as developed and developing countries.
It’s crucial to recognize that our personal well-being and financial futures are critically dependent upon the cooperation between the G7 (representing the collective West) and BRICS (representing the rest of the world). If the United States can secure a seat at the BRICS table for global trade cooperation, it could strengthen its international alliances and foster a more balanced global economic landscape.
The outlook appears bleak, indicating that geopolitics may lead to substantial financial volatility. However, it’s important to note that this is not a time for despair but for careful analysis and strategic planning.
Coincident with this division are rival organizations. The G7, the seven largest economies in the world, represents developed countries. Various organizations represent developing countries, but the most important is BRICS, which includes ten countries.
These countries include the main bloc:
- Brazil
- Russia
- India
- China
- South Africa
New Partners: Saudi Arabia, UAE, Iran, Egypt, and Ethiopia.
Moreover, many new members will be announced at the next meeting in late October. More than 40 countries have expressed interest in joining. Also, about 140 countries are part of the Belt and Road Initiative (BRI). The G7, by contrast, is likely to be eclipsed by a massive global shift to a new world order.
A comparison between the G7 and BRICS underscores the potential for fruitful cooperation, even without adding 40 potential new members. Currently, BRICS represents approximately 45% of the world’s population and about 32% of the world’s GDP (PPP), compared to the G7’s 29%. Furthermore, the growth rate in BRICS is significantly higher than in the G7. With much lower per capita income, the BRICS growth rate will likely surpass that of the G7 in the foreseeable future, further solidifying their economic prowess.
The economic rise of BRICS has posed a significant challenge to the United States, prompting the use of financial sanctions to curb their influence. However, these sanctions have largely failed to achieve their intended impact. Historically, the U.S. has been able to exert control by restricting countries and companies from using the dollar in trade. This approach no longer holds the same weight, as other nations have forged strong trade partnerships, conducting transactions in their currencies rather than the U.S. dollar.
The Ukrainian war led to an unprecedented number of sanctions against Russia with the expectation of crippling its economy. However, Russia adapted by trading in currencies other than the dollar, leveraging its position as one of the largest producers of vital natural resources like oil and gas. Despite an initial slowdown, Russia rapidly recovered through increased oil sales and expanded manufacturing, particularly in military equipment. As a result, Russia has emerged as one of the top-performing economies globally, achieving over 3% growth and maintaining moderate inflation. The situation in Ukraine is leaning towards surrender, and the extent of territory Russia aims to take remains uncertain. Much of Russia’s success can be attributed to its robust manufacturing capacity, allowing it to outproduce the entire West in various sectors, with ratios exceeding 2:1.
The ineffectiveness of the sanctions imposed on Russia has become apparent, highlighting the need for a more strategic approach. Conversely, the sanctions targeting Chinese industries and companies have shown more immediate success, mainly due to their targeted nature, which has made it more challenging for China to mitigate their impact effectively.
The U.S. has strategically employed sanctions to hinder Chinese progress in key technology sectors such as AI, smartphones, and supercomputers. By imposing restrictions on companies like Huawei, the U.S. has significantly limited their access to advanced tech products from domestic and foreign sources. Notably, the imposition of sanctions on products with 25% or more U.S. involvement in their production demonstrates the broad reach of these measures, potentially affecting a wide range of products across various locations.
Taiwan Semiconductor (NYSE: TSM) is pivotal in the tech industry by producing 70% of the most advanced chips. A potential unification of Taiwan and mainland China would grant China control over access to these chips. However, recent pro-U.S. Taiwanese governments have led Chinese companies to develop alternatives to sanctioned technologies. This shift has yielded some success, as seen with Huawei’s recent introduction of a smartphone made entirely from Chinese-originated technologies, which competes with the iPhone in many aspects.
TSM is encountering obstacles in establishing its factories in the United States, including recruiting skilled labor. The delayed construction timelines for these facilities, particularly for the most advanced technology, cause concern for the U.S. and the Western nations.
The use of sanctions, enabled by the dollar’s status as a reserve currency, has spurred many non-Western countries to pursue de-dollarization. As mentioned, a primary objective of BRICS is establishing an alternative to the dollar. Recent reports indicate that a new currency is undergoing testing, although specific details have not been disclosed. The descriptions provided suggest that it will closely resemble the concept outlined in “China’s Rise and the New Age of Gold,” a publication from four years ago. This concept entails a user-friendly blockchain of multiple currencies primarily backed by gold and possibly other commodities.
If Saudi Arabia, a member of BRICS and the world’s largest oil exporter, were to begin pricing its oil in the new BRICS currency rather than the dollar, it could have catastrophic implications for the United States. About 50% of the world’s reserves are held in dollars, primarily U.S. Treasury securities. However, this percentage has declined as central banks have been increasing their holdings of gold. If a viable alternative to the dollar were to present itself, it could significantly reduce the rate of dollar reserves, resulting in a surplus of dollars sold. If such an event were to occur, the only buyer of dollars would be the U.S., triggering hyperinflation in the U.S. economy.
The dynamics between countries like the U.S. and China can have far-reaching effects, and it’s crucial to analyze the potential outcomes and motivations behind various actions. It’s essential to consider the possible implications of geopolitical and economic decisions on a global scale.
The dynamics between the United States, China, and Taiwan have far-reaching effects on global trade and technology. The decisions made by these countries can profoundly impact the balance of power in the tech universe. It will be interesting to see how these relationships evolve and how they will shape the future of international cooperation and competition. Considering the potential implications of such significant geopolitical and economic developments is essential.
President Xi Jinping of China recently met with former Taiwan president Ma Ying-Jeou (2008–2016), a member of the party that advocates a closer relationship with China. Despite the upcoming inauguration of a new president from a rival party, the new legislature (similar to our congress) is controlled by Ma’s party, indicating that Ma still holds considerable sway in the country. This situation leads us to anticipate a meeting between Xi and the new president, likely this summer. This meeting could be crucial in fostering a positive relationship between China and Taiwan.
What could China’s President Xi Jinping say that would entice Lai, the new President of Taiwan, to change sides?
In the context of hypersonic missiles potentially developed by China, the recent display of Chinese military technology superiority has been evident in the Ukraine conflict. This technology was showcased when Iran demonstrated its capability by launching 5 to 12 missiles with precision, penetrating Israel’s heavily fortified air force base without causing any casualties. These events underscore the significant advancements in military capabilities and their impact on global dynamics.
The prospect of a merger between Taiwan and mainland China could create an exceptional administrative region, potentially ranking as the third most influential after Hong Kong and Macau. The economic strength of a unified Hong Kong and Macau would be incredibly formidable, potentially rivaling major economic powers in both the East and the West. Macau’s impressive life expectancy and high income per capita are worth noting. The city-state’s reputation as one of the most open economies globally reflects its exceptional economic policies and standing.
Wikipedia states, “About two dozen newspapers from Hong Kong, mainland China, Taiwan, and the Philippines are shipped to Macau every morning,” claiming the world’s highest’ media density’.
Regarding education in Macau, all children receive free public education until the age of 15, which was an initiative of one of the Chief Executives of the province. While Chief Executives are approved and report to Beijing, they have all been relatively free to guide the economy as they see fit.
As for Hong Kong, despite all the negative commentary related to riots earlier this decade, when it comes to the complex assessment of overall well-being, Hong Kong is doing exceptionally well. The ‘Human Development Index’ (HDI) is published yearly by the United Nations to measure overall well-being. The UN grades over 190 states and countries on a composite of three factors:
- Health (measured by life expectancy)
- Financial (measured by income per capita)
- Education (measured by years of schooling for adults and expected years of schooling by children)
The top 69 countries are considered to be high on the HDI. Hong Kong ranks #4 behind Switzerland, Norway, and Iceland. Moreover, among these 4, Hong Kong’s annual gains in HDI over the past 12 years are well above the first three, suggesting it could rank #1 in the imminent future.
Stay tuned for my next article, which will follow up on the information presented in this article! Also, check out a FREE preview of my latest book, “China’s Rise and the New Age of Gold,” available on Amazon, Kindle, and Audible!
