Report on; The BRICS China s Socioeconomic Development By Kwabena Konadu 11115515 Spring Semester 2012
Table of Contents 1. Introduction 2 1.1 Brazil.4 1.2 Russia 6 1.3India 6 1.4China..7 1.5South Africa...9 2. The future of BRICS.10 3. Economic Indicators 14 4. Conclusion.14 5. References.16
1. BRICS INTRODUCTION From the last decade, countries known under the emerging markets acronym of BRICS, have seriously define their common interests and values. Brazil, Russia, China, and South Africa have held three summits so far in Russia, Brazil, and China. The fourth summit was on March 29 th which was held in New Delhi, to address the global economic condition, reforming the financial and regulatory institutions and improving cooperation with each other on a host of international issues from starting a BRICS development bank to interchanging high tech skills. While these issues directly impact them, they can also affect much of the developing world. The impacts of emerging markets and in addition to the high population as a group are massive; they account for 45% of the world population, 25% of the world s GDP. The BRICS nations have a potential to create a future model for others. In 2011, South Africa joined as a full member, after having been invited as a guest to the 2010 summit. The founding members and South Africa are deemed to be at a similar stage of emerging market due to its economic development. The agenda of BRICS meetings has considerably widened over the years to encompass topical global issues such as political developments of relevance like situation in Middle East and North Africa region, Afghanistan,
Iran and Syria, global governance such as UN, IMF, World Bank Group, international terrorism, climate change, food and energy security, Millennium Development Goals (MDGs), international economic and financial situation. 1.1 BRAZIL The possible benefits of the emerging countries with the each other are very clear especially with the case of Brazil. Brazil s Zero Hunger strategy for instance has been successful at reducing poverty, inequality, and hunger by developing profitable small farms and delivering cash to poor families through innovative payment systems. As the debate goes in India and South Africa about how to reduce poverty, curb growing inequality, and boost agricultural production, Brazil s experience can help. The potential benefits of cooperation are especially clear for Brazil. India and Brazil have declared inclusive development an imperative and have engineered creative solutions to meet their developmental challenges. On the other hand, both face many obstacles to equitable development-some of which can be overcome through mutual learning and targeted bilateral investment. Brazil s social schemes are among the world s best targeted and they re transparent. They have demonstrated how to streamline the delivery of
services across all levels of government. By collaborating with Brazil, the other countries can improve the reach and efficiency of their own. Regarding the economy, the administration by Luiz Inacio Lula da Silva kept the main economic policies in place: fiscal austerity, inflation targets and a fluctuating exchange rate. As a result, the risks of investing in Brazil decreased significantly, economic growth rates went up, inflation rates retreated to levels similar to other countries around the world, and Foreign Direct Investment flows are only second to those of China. The country's international reserves now exceed $350bn, which serve as a cushion to protect the country's economy against economic crisis abroad, such as in 2008 and now. Foreign trade has multiplied by a factor of four, reaching half a trillion dollar in 2011, with China becoming Brazil's main economic partner, ahead of the United States Brazil is the country that has probably benefited the most since the BRICs acronym came to life. Its inclusion alongside China, India, and Russia projected the country to a position that in normal conditions it would have taken years to achieve.
1.2 RUSSIA Soon after Putin s announcement of his presidential ambitions, a response in the Russia & India Report, a supplement of the official Russian government newspaper Rossiyskaya gazeta, claimed that Russia had a diversification plan of its own; the power balance in the Russia-India-China equation may shift, especially in the light of Vladmir Putin s visit to China resulting agreements on the broadening of Russian-Chinese economic cooperation from traditional industries and signing $75 billion deals. China s bilateral trade with Russia far exceeds India s at $ 42.4 billion and saw 25% growth in 2009-10. That makes China Russia s biggest trade partner- and imports a large amount of Russian defense material. At Putin s visit to China in October 2011, the two north Asian neighbors signed varied agreements on energy and hydropower, and also created a mutual investment fund dependent on contributions from private donors. Immediate results came in the form of sixteen economic and trade cooperation deals across a broad swath of sectors including new machinery, electronics, and agriculture. 1.3 INDIA The BRICS countries can also benefit from India s competence in innovation. India has been successful in finding new ways to provide the country s low-income population greater access to products, services, and employment that enhance living standards. India has produced the world s cheapest car,
electronic tablets that cost $50, large, successful retailers that link thousands of rural workers to modern urban markets, and family-sized apartments in cities that sell for $4200. In the affordable housing sector the long term opportunities for partnerships with Indians as entrepreneurs are particularly significant. Brazilian officials predict a deficit of 23 million homes for low-income families for the next 20 years. In healthcare, the benefits are enormous for the BRICS countries especially Brazil and India. Faced with common diseases and limited resources and limited resources, India and Brazil used each other, challenging the international intellectual property regime to combat HIV/AIDS. In 2007, for example, Brazil broke a patent on an antiretroviral drug produced by Merck Pharmaceutical in the wake of rising drug costs. Indian firms were the only producers of the generic version of the drug, and Hyderabad-based Aurobindo ultimately provided Brazil with the active ingredient to produce it. It was estimated that this would save Brazil $237 million through 2012. 1.4 CHINA China the superstar of the group, growth s target is lowered to 7.5% in the year, down from 8% previously, but shockingly lower than the blistering 10% average growth China racked up over the last decade.
China lower growth is a managed target, set expressly by the Beijing leadership to cool the economy from rising inflation, deflate a real estate bubble and most importantly direct growth to China s home country, rather than primarily drive growth through exports. In other words, after three decades of automatic, on-time development as a producer for the world, China is taking a breather because it can afford a slowdown. It s also politically conventional. A political backlash is growing against China in the United States and Europe for taking the West s jobs. Politicians brand China as a jobs vulture. It is a little late to blame China but it pays politically. In response, China is opening out a banner that says Rebalancing of its home economy. That may reduce protectionist calls from the U.S. and take pressure off China to revaluate the yuan. The rebalancing mantra also recognizes that China s largest markets U.S. and Europe may be on the slow growth track for some years ahead. However, China also faces difficulties during its development: the appreciation of the Chinese currency, the renminbi, is too rapid, hurting our exports; the dependence on oil imports is too high, and the population too large. There is the structural problem of finding the right people for the right jobs, and unemployment pressure is acute. High housing prices are compounded by high inflation, and the stock market is volatile. Environmental challenges are
also serious. There are optimisms that China will be able to solve these problems because of its have advantages, such as rich human resources of increasing quality, rare earths and other high-tech natural resources, and a huge internal consumer market. Moreover, China has continued to pursue a foreign policy of mutual benefits, and maintained good economic and political cooperation with other countries, including developed countries, and, particularly, with China's neighbors. China's influence in the world is strengthening, and its role in the BRICS group is getting greater. 1.5 SOUTH AFRICA South Africa officially became a member of BRICS. Compared with the other BRICS, South Africa s size, population, and economy are quite small. Many people have argued that South Africa s entry into the BRICs on December 24, 2010 was a Christmas gift to itself. Even though it has a much smaller population and the economy compared to Nigeria, other factors worked in its favor- its vast natural resources such as gold, diamonds and platinum, its excellent infrastructure, its established corporate footprints, a culture of innovation, easy access to finance for business, a stable macro and micro
financial climate, an advanced banking system, and functioning regulatory frameworks. South Africa is already the voice of the continent at various international forums. It is poised to serve as a base as well as a gateway for investment from the BRICS countries to the vast market of a billion Africans. China pushed for South Africa to join BRICS because of a number of reasons. China is South Africa s largest trading partner with a surplus in favor of China and the infusion of the Chinese yuan has kept South Africa afloat during the economic recession. South Africa sees China as a very important partner in its economic development, and this evident in the issue where Dalai Lama was refused a visa to South Africa to attend the birthday celebrations of fellow laureate, Desmond Tutu to avoid conflict with the Chinese government. Of the BRIC countries, China is the top investor in South Africa. China has expressed its interest to diversify its investment into sectors such as information technology, bio-technology, human resources, and other industry services. 2. THE FUTURE OF BRICS For the BRICS, their primary concern is to take the opportunity to come together to increase their voting power in the IMF. According to the BRICS countries, they are not happy with the slow pace of quota and governance
reforms in the IMF. The idea of a new development bank that is being discussed will play an important role in addressing this issue. With the BRICS development bank, individual countries will be able to trade with each other without much costs of transaction. Besides the IMF, the leaders have also urged reforms of the United Nations and other international bodies for a larger voice for the developing world. This requires that they speak with one voice on the reforms. The rapid recovery of the BRICS countries from the financial crisis highlighted their role as growth drivers of the global economy. Their cooperation has the capacity to impact positively on the developing world as a voting alliance. The leaders also asked the International Monetary Fund to speed up changes in its governance to better represent the developing world. The IMF and the World Bank influence on the BRICS countries have reduced significantly over the past decade as reported from Bank of China. The previous financial crisis and current financial crisis is evident that these institutions have not played the salvation role in preventing the crisis. The combined economic strength of the BRICS is undeniable. The countries will continue to attract foreign direct investment as corporations hope to gain access to their growing middle class markets. These countries are also increasingly rebalancing their domestic consumption to achieve more
sustainable growth models. Increased economic power gives the BRICS leverage to assert their needs and desires in the international arena. Already the BRICs have exhibited their strength in the Doha Round and in the call for a new leadership structure in the IMF and World Bank. Similar situations will likely to come up in future international agreements and negotiations. The United States and Europe better be ready to compromise.
3. ECONOMIC INDICATORS As it can be inferred from the diagram above it is evident that the BRICS suffered from the financial crisis that emanated from the developed world especially the U.S. China has played a very important role in the recovery of these emerging economies. It is important that the developing world is shield from the crisis that emanates from the richer nations. The new BRICS bank will play an important role in addressing this issue. According to the leaders of BRICS, it will support our priority infrastructure projects as well as trade and investment opportunities with the BRICS partners and also the employment opportunities that will be given to the developing world.
A country s population and demographics, among other factors, directly affect the potential size of its economy and its capacity to function as an engine of global economic growth and development. As early as 2003, Goldman Sachs forecasted that China and India would become the first and third largest economies by 2050, with Brazil and Russia capturing the fifth and sixth spots. The chart below shows a more recent forecast of the world ranking of the biggest economies in the year 2050. 4. CONCLUSION By coming together as one entity, these emerging countries can learn a lot from each other especially in the area agriculture, where India and Brazil have enormous experience. The model of these countries can have a very good impact on the rest of the world especially Africa. By joining forces, Africa s food security can be bolstered.
Despite power struggle and political / territory disputes BRICS are standing at the same point to fight against terrorism, climate change, poverty reduction and development. When BRICS is really up and running, its impacts on the world economy and politics will be considerable as Russian president Putin predicts. Many scholars predict that one day, the Chinese renminbi is endorsed as the new global currency, and it will undermine the US dollar s supremacy in the world financial structure. South African government says that switching from the US dollar to the Chinese renminbi will help African businesses, seeing that a lot of their trade is with BRICS countries. No doubt, that BRICS is a new giant, and this is good news. However, the bad news is that it is a giant with a quite limited capacity to run, as a heavy weight remains chained to its feet. There are a number of challenges it will face in its capacity to achieve its objectives.
5. REFERENCES http://en.wikipedia.org/wiki/brics http://www.bricsindia.in/about.html http://baltic-review.com/2012/03/brics-economic-titans-to-meet-in-new-del hi/ http://www.bbc.co.uk/news/business-15911603