The influence of G7 countries as sources of investment in Brics countries is diminished by the recent proposal to expand the emerging market economic bloc from five to eleven members.

Leaders of the Brics — Brazil, Russia, India, China and South Africa — invited another six countries to join their club during a summit held in Johannesburg last month. The so-called Brics+ club will include the current five Brics members along with Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE.

The G7 — which consists of Canada, France, Germany, Italy, Japan, the UK, US and EU — was the source of about 54% of greenfield FDI in the Brics in 2022, according to fDi Markets figures. By comparison, less than 42% of FDI into the 11-nation Brics+ bloc originated from G7 countries last year.

The largest expansion of the Brics bloc of emerging markets in more than a decade has been driven by China, which hopes to create a full-blown rival to the G7. The inclusion of the UAE and Saudi Arabia, which are both home to large sovereign wealth funds and  active multinational investors, has increased the potential FDI firepower and economic influence of the enlarged Brics bloc.

In 2022, about a third of all FDI announced in Brics+ was sourced from other countries within the bloc, compared with a mere 1% from within the Brics, according to fDi Markets. 

China dramatically increased investments into Brics+ countries in the lead up to last month’s summit. More than $28bn-worth of FDI has been announced by Chinese companies across the 10 other Brics+ countries so far this year, according to preliminary fDi Markets data up to July. This was an all-time high for the first seven months of the year and up from $3.6bn-worth of FDI in the whole of 2022.

More data trends you might have missed: 

• The 1H2023 investment matrix
• Global competition for climate investment heats up
• China's national security concerns cap record FDI lows

The spike of China’s capital expenditure plans abroad was driven by several megaprojects in strategic sectors. In June, Chinese electric vehicle maker Human Horizons signed a $5.6bn deal with Saudi Arabia to build an automotive research, development and manufacturing facility. 

State-owned China Energy also plans to establish a $5.1bn green hydrogen plant in Egypt, while West China Cement has set up a joint venture with East African Holding to invest $2.2bn to construct a megacomplex in Ethiopia. 

Despite this recent spike in Chinese investment, the US still dwarfs its geopolitical rival over a longer time period. Since 2003, US-based multinationals have announced investment in the Brics+ 11-nation group worth about $851bn, almost four times the level of FDI originating from China.

A similar imbalance is seen even when excluding China from the emerging markets bloc. About $515bn-worth of FDI has been invested by US companies into Brics+ countries excluding China, compared to $215bn by their Chinese counterparts.

FDI from the US and China into the original Brics members excluding China — Brazil, Russia, India and South Africa — is also different in its composition. More than half of Chinese FDI was into manufacturing in every year apart from 2004 and 2015. The second largest business activity for Chinese FDI by capital expenditure since 2003 was construction, followed by electricity and logistics.

US investment into the Brics excluding China has been more focused on services. Manufacturing made up more than half of US FDI into the four-nation Brics group in just two years (2010 and 2015) over the past two decades. The second largest business activity for American FDI by capital expenditure was research and development (R&D), followed by ICT and internet infrastructure and business services, according to fDi Markets data.