Explore the Potential of the BRIC Economies

[Astronuc]

marcus made the following comment about BRICs nations, and I just happened to stumble across an interesting overview of them.

A lot of economic growth and investment opportunity is centered in the BRIC nations Brazil, Russia, India, China. But Russian and Chinese are difficult languages to learn. with Chinese there is the strange system of writing. Russian alphabet is comparatively easy but the language is highly inflected, you conjugate verbs, decline nouns, quite a bit worse than German, for example. Also many educated Russians know English so you can talk with them. Many in India also speak English. So I see a definite payoff to Portuguese.

I recommend watch the interview with Jim O'Neill, Head of Global Economic Research, Goldman Sachs
http://www2.goldmansachs.com/ideas/brics/index.html

Looking at the 2050 potential may seem a bit far out, but the BRIC economies are now 15% of the world GDP, which is about half that of the US. China may soon surpass Germany and become the third largest economy in the world. China could become the biggest economy in 20 or so years - if it only grew at 5%/yr. Current growth rate is about 10%/yr. India could challenge the US becoming the second largest economy by 2040 if it sustains a growth rate of 6%. Current growth rate is between 8 and 9%.

The growth of China and India mean the US has to compete more for the same resources.

 

[CRGreathouse]

China may soon surpass Germany and become the third largest economy in the world.

In exchange rates, fine. PPP already has China as the second-largest economy in the world (not that G-S would care).

China could become the biggest economy in 20 or so years - if it only grew at 5%/yr. Current growth rate is about 10%/yr. India could challenge the US becoming the second largest economy by 2040 if it sustains a growth rate of 6%. Current growth rate is between 8 and 9%.

I think it would be easier for India to sustain 6% per year for the next 20 years than for China to sustain 5% per year (even though I'm almost bearish on India for the next few). China will need to transform its economy dramatically as it maxes out its current niches.

The growth of China and India mean the US has to compete more for the same resources.

I actually disagree here. I see this as mainly wealth creation rather than reshuffling. (I mean, who really believes in mercantilism anymore?)

 

[fuzzyfelt]

The emerging markets aren't looking too special today.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHtpiuKBhYSM

 

[quadraphonics]

Also, comparing the total size of the economies of countries with vastly different populations can be misleading. Even once China's economy is the same total size as America's, they'll still have 4 times as many mouths to feed. The upshot is that a much bigger chunk of their economy will be spent on prosaic things like food and clothing, leaving that much less for things like, say, defence or space exploration or R&D or investment or any of the other things that determine the relative influence of a given country.

It is true that a rising global per-capita GDP is going to continue to make things like oil and raw resources more expensive, but it need not raise the price of many of the things that we buy, such as manufactured goods, services, etc. Indeed, the development of China and India have proceeded exactly by *lowering* the global prices of such goods and services.

Even assuming that China's economy continues to grow at 9% per year, and America's at only 3.4%, it will still take almost 40 years for China's per-capita GDP to catch America's. Of course, it is extremely unlikely that China can sustain such high growth rates that long into the future. Their current growth strategies are predicated on the presence of external markets that dwarf their own, which will be less and less the case as they grow. Moreover, current Chinese development can be achieved simply by importing wholesale the more-productive technologies and practices that were developed elsewhere; no new innovation is required, nor has any significant innovation been evident. They simply ship subsistence farmers in from the countryside and put them to work in assembly-line plants that were developed and refined in the West over the past 150 years. Note that the majority of China's trade surplus is actually generated by foreign-owned companies, many of them American. Achieving per-capita GDP growth in the United States, on the other hand, requires the invention of new ways to improve productivity, either new technology or improved business practices. As China's per-capita GDP gets to be the same order of magnitude as that of the United States, they will have to shift to the latter type of innovation-led growth which, if they can even make the transition, will entail lower growth rates.

And that's without considering the radical demographic shifts that will occur in China in the next few decades, due to the one-child policy.

In short, projecting current trends decades into the future and getting worried about them is a foolish pursuit.

 

[byohannan]

Part of the blame for making the BRIC contries achieve a huge economic grows rests with the US and EU. bad policies and greed caused american and european jobs to be outsourced to BRIC nations and factories shut down . Now the US has to put with substandard BRIC products and services

 

[Astronuc]

Emerging Powers Prepare to Meet in Russia
http://www.nytimes.com/2009/06/16/world/europe/16bric.html

MOSCOW — Leaders of some of the world’s most powerful economies are gathering on Tuesday to plot how they can exert more control over the global financial system as it takes its first wobbly steps toward recovery.

Yet not an American or Western European will be in the bunch.

The first summit meeting of the so-called BRIC group — Brazil, Russia, India and China — is intended to underscore the rising economic clout of these four major developing countries and their demand for a greater voice in the world. And Russia, the group’s host and ideological provocateur, is especially interested in using the summit to fire a shot across Washington’s bow.

All four countries have expressed varying degrees of discomfort with Washington’s financial stewardship, and are particularly concerned about the value of the dollar at a time of rapidly mounting indebtedness in the United States. At the same time, most economists say the BRIC countries can do little to change the current architecture of the global financial system, and that the outcome of this meeting will be largely symbolic.

The BRIC countries comprise about 15 percent of the world economy and, perhaps more important, have about 40 percent of global currency reserves. Brazil, India and China have also weathered the financial crisis better than the world as a whole.

. . . .

and related

Russia, China, others urge diverse monetary system
http://news.yahoo.com/s/ap/20090616/ap_on_re_eu/eu_russia_summit_talks

That comment rattled the markets.

In the US, some of my contacts indicated that they could not get specialty steels because the Chinese were buying out the market. That may have changed, but the cost of specialty steels has increased significantly making the economics of large capital projects, e.g., new nuclear power plants, look questionable.