Will the BRIC’s Decade Continue
1. Introduction Jim O’Neill, global economist at Goldman Sachs, coined the term BRIC countries in 2001 and argued that the economic potentials of the emerging markets of Brazil, Russia, India, and China are immense in the decades to come. BRIC countries have performed amazingly well over the last decade. In many cases, they have far outperformed the advanced industrialized countries in terms of economic growth and assessments by ratings agencies. As the first year of new decade has past, economists are wondering if BRIC countries could retain the momentum for their economy surging. Will China experience a hard landing? Will a decline in commodity prices hit Latin America? All these concerns would exert considerable influence on BRICS’ economical development. In this paper, firstly, it presents good performance of BRIC countries in the past decades. Secondly, this paper is focused on analyzing why and how the BRIC countries became the most important emerging economies. I selected 3 driven forces- commodity market, FDI and export into deep studying. Lastly, responding to the topic, I refer to Goldman Sachs’s outlook for BRIC countries. 2. Strong growth performance Between 2000 and 2008, the BRICs contributed almost 30% to global growth in US Dollar terms (see table 1), compared with around 16% in the previous decade. Since the start of the crisis in 2007, the BRICs’ contribution has risen even more. The BRICs have contributed over 50% of global growth (measured in USD terms) from 2007-2010. In recent years, the BRICs have continued their steady climb up the global rankings of economies by size, as measured by US Dollar denominated GDP. 2009-10 proved to be watershed years in this regard. China moved past Japan to become the world’s second largest economy. Brazil passed Spain and Italy to become the seventh-largest economy, and is now fast approaching the UK. India and Russia both jumped over Spain to move into ninth and eleventh positions, respectively. Table 1
3. Why did BRIC countries success? These 4 large countries (Brazil, Russia, India, China ) account for more than 40% of the world’s population and 25% of the world’s land area. In terms of territorial extension and the size of the population, yet it has certain desirable features like: 1) an enormous potential consumer market with larger middle-income group 2) abundant supply of natural resources 3) fast growing economies with the biggest source of labor 4) effective energy and transport sectors and 5) sound legal system and modern infrastructure supporting an efficient distribution of goods and services So with these common features, emerging economies of BRIC have acquired important role in the world economy as producers of goods and services. They export and consume the commodity products. BRIC have also emerged as major destination for Foreign Direct Investment (FDI) inflows. 3.1 Commodity market BRIC are in fact contributing significantly to global demand for a wide range of commodities, since those markets’ demand drives rising need for oil, commercial metals, beans, and other commodities. A very important factor contributing to the growth in BRIC commodity markets is the consumer. As mentioned above, BRIC markets account for about 40% of the world’s population. The potential consume market is very large. The need for commodities not only increases with a quantitatively growing world population, but also qualitatively, because with higher wealth/incomes the consumption gets more commodity-intensive. Demand for soft commodities such as sugar, grains and cocoa have also increased. Moreover, because of the continued industrialization in those countries, particular in China and India, underlying global demand growth for energy and oil could remain very strong. In addition to the consumer, infrastructure development in these countries has also led to continued demand for industrial metal such as copper and aluminum, or precious...
References: Goldman Sachs Global Economics Group: BRICS and Beyond, Chapter 20, BRICs and Global Commodities Markets, May 2006, pp. 259-262. Goldman Sachs Global Economics, Commodities and Strategy Research: BRICs Monthly, The BRICs Remain in the Fast Lane, Issue No: 11/06, June 24, 2011. Goldman Sachs, Global Economics Paper No: 192: The Long-Term Outlook for the BRICs and N-11 Post Crisis. Vinit Ranjan, Dr. Gaurav Agrawal, International Business Research: FDI Inflow Determinants in BRIC countries: A Panel Data Analysis, Vol.4, No. 4, October 2011, pp.255-256. Goldman Sachs, Assets management, Goldman Sachs BRICs portfolio investment engine gaining momentum, pp. 04-05. Kristalina Georgieva, BRIC countries in comparative perspective, word bank 2006.
Author：Chen Fei, 237346, 9AG6/1A Coach: Dr. Johan Van Gompel Internation Social & Economic Analysis
Goldman Sachs, Global Economics Paper No: 166, Building the World: Mapping Infrastructure Demand, Apr-08.
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