BRIC by BRIC
The four leading emerging economies – Brazil, Russia, India and China – increasingly think of themselves as a trade interest bloc, but much divides them as well. - By Peter A. Buxbaum, AJOTGeneral Motors recently announced that it is boosting its stake in a venture with the China-based Shanghai Automotive Industry Corporation and Wuling Group to 44 percent. The Detroit automaker, which recently emerged from bankruptcy and sold a $10.6 billion initial public offering on Wall Street after receiving a massive government bailout, is seeking to boost profits in the world’s biggest automotive market.
The prospectus for GM’s IPO indicated that its sales in China fall under a unit known as GM International Operations, which includes Brazil, Russia, India, and China but excludes North America and Europe. The unit’s earnings totaled $2.48 billion in the first nine months of 2010.
It is interesting that GM should segregate operations in the BRIC (Brazil, Russia, India, China) countries in a separate unit. True, BRIC has become a catchword in international trade and finance. The four countries themselves are beginning to view themselves as a kind of bloc, as witnessed by the two annual BRIC summits that have taken place since 2009.
But, the four BRIC countries, although they are among the fastest growing economies in the world, are also quite different from one another. One case in point: Russia was hit hard by the global economic downturn while Brazil suffered less so while China and India emerged relatively unscathed. These facts do not reflect mere economic happenstance but highlight the differences in the economies and trade patterns of the BRICs.
“The BRIC economies are the biggest driver of global trade flows,” said Roy Lenders, vice president for supply chain management at the Paris-based Capgemini Consulting, “with each country having grown stronger than predicted” in 2010. Brazil’s trade performance in 2009 was way ahead of original projections, Lenders added.
Increasingly, companies based in the BRICs are emerging as leaders in global business. In 2010, 231, or 11.5 percent of the total, of companies listed in the Forbes Global 2000 originated in the BRICs, up from 83 companies, or 4 percent in 2005.
According to WTO data for 2009, China has overtaken Germany as the world’s leading merchandise exporter, accounting for almost 10 percent of world exports. China is second to the United States on the import side. The U.S. share of world merchandise imports stands at 13 percent as compared to China’s 8 percent.
Data from a new United Nations study show that between 1992 and 2007, the average annual economic growth in China amounted to 9.5 percent; in India, 6.5 percent, in Russia, 2.6 percent, and in Brazil, 2.7 percent. This compares to the average annual growth rates of real GDP of developing, transitional, and developed economies during the same period of 5.0, 2.7 and 2.5 percent, respectively. In other words, the Chinese and Indian economies grew at much faster pace than developed economies during the decade and a half in question.
During the recessionary 2008 and 2009 time frame, world GDP growth amounted to 1.6 percent while the United States, the European Union and Japan performing below average with flat or contracting economies. By contrast China and India enjoyed growth rates of 8.5 percent and 5.4 percent, respectively, down from 2007, but only slightly.
These figures foreshadow what a report from the Federal Reserve Bank of Dallas calls a two-speed global recovery. “GDP growth is expected to linger below 3 percent through 2011 for the advanced economies,” said the report. “In contrast, GDP growth is expected to remain strong for the emerging economies.”
GDP growth is expected to average over 7 percent for the BRICs, according to the Dallas Fed. “Growth is expected to slow in 2011 due to a withdrawal of fiscal stimulus and tightening of monetary policy,” the report added, “but it is still expected to outpace growth in the advanced economies.”
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