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The Brics expression has captured investors attention over the past decade. But it can also mislead. Chinas relative size to the other Brics is one example. Its $5.9tn economy is larger than the combined economies of Brazil, Russia, and India at $5.3tn.
So is China still a Bric? Or is it the single brick that is propping up the rest of the global economy, including demand in Brazil and Russia?
Both countries have benefited from Chinas voracious demand for oil, iron ore, and other commodities. Not only do Brazil and Russia gain from an increase in the volumes they sell to China, they also gain from an increase in the prices they charge both China and the rest of the world.
But has China benefited as greatly in return? Certainly the share of Chinas exports to the other Bric economies has grown rapidly in the past decade, from 2 per cent to 6 per cent of total exports. Yet, that share is still less than the 8 per cent share China ships to Japan, in spite of the latters sluggish demand.
The second count is the extent to which the Bric economies co-operate on major trade and political issues. I spend part of my time negotiating investment deals between China and other emerging markets. Its interesting work, but to call it challenging is an understatement.
Whether because of cultural differences, bureaucratic obstacles, or policy conflicts, the Bric countries have more reason to disagree than agree. In my experience, I find the idea they might be coordinating on anything but the least controversial issues is wildly misplaced.
This will be especially apparent in the coming years if the global economy fails to create enough jobs.
Take India for instance. The average Indian is just 25 years of age compared to the average Chinese at 34 years. If China doesnt release some of its export manufacturing capacity to younger India, trade protectionism will inevitably rise as India tries to create more jobs at home.
There are similar trade protectionist interests in Brazil. True, the country benefits more from Chinas commodity demand. However, were Chinas economic growth to stall, commodity prices to fall, and export dumping to rise, then the dynamic may shift and Brazil would also focus on local jobs.
The upshot is that global recession, and growing trade protectionism, might weaken the Bric foundations.
Yet not all Brics are equal. And how China responds to the challenges will be far more important to the global economy than the response of the groups three other smaller members.
The BRICs concept was a good starting point. It alerted us to a change in the worlds economic balance. However, the reality is more complex than a single acronym can capture. And what comes next may be harder to model.
Guest post: is China still a Bric? | beyondbrics | News and views on emerging markets from the Financial Times
So is China still a Bric? Or is it the single brick that is propping up the rest of the global economy, including demand in Brazil and Russia?
Both countries have benefited from Chinas voracious demand for oil, iron ore, and other commodities. Not only do Brazil and Russia gain from an increase in the volumes they sell to China, they also gain from an increase in the prices they charge both China and the rest of the world.
But has China benefited as greatly in return? Certainly the share of Chinas exports to the other Bric economies has grown rapidly in the past decade, from 2 per cent to 6 per cent of total exports. Yet, that share is still less than the 8 per cent share China ships to Japan, in spite of the latters sluggish demand.
The second count is the extent to which the Bric economies co-operate on major trade and political issues. I spend part of my time negotiating investment deals between China and other emerging markets. Its interesting work, but to call it challenging is an understatement.
Whether because of cultural differences, bureaucratic obstacles, or policy conflicts, the Bric countries have more reason to disagree than agree. In my experience, I find the idea they might be coordinating on anything but the least controversial issues is wildly misplaced.
This will be especially apparent in the coming years if the global economy fails to create enough jobs.
Take India for instance. The average Indian is just 25 years of age compared to the average Chinese at 34 years. If China doesnt release some of its export manufacturing capacity to younger India, trade protectionism will inevitably rise as India tries to create more jobs at home.
There are similar trade protectionist interests in Brazil. True, the country benefits more from Chinas commodity demand. However, were Chinas economic growth to stall, commodity prices to fall, and export dumping to rise, then the dynamic may shift and Brazil would also focus on local jobs.
The upshot is that global recession, and growing trade protectionism, might weaken the Bric foundations.
Yet not all Brics are equal. And how China responds to the challenges will be far more important to the global economy than the response of the groups three other smaller members.
The BRICs concept was a good starting point. It alerted us to a change in the worlds economic balance. However, the reality is more complex than a single acronym can capture. And what comes next may be harder to model.
Guest post: is China still a Bric? | beyondbrics | News and views on emerging markets from the Financial Times
