BRICS has to take up more challenges

Brazil, Russia, India, China and South Africa (BRICS) together have a population of more than 3 billion - or about 43 percent of the world total. The BRICS economies account for 18 percent of the world's economic aggregate, 15 percent of foreign trade volume, and attract 53 percent of the foreign capital. By 2015, BRICS' total GDP will increase to 23 percent of the world total, and by 2020 to 31 percent.

The five countries' combined population will peak at 44 percent of the world total by 2015 but is expected to fall to 37.1 percent by 2030. Their continuous GDP growth and falling population (after 2015) are bound to increase their per capita income and improve the living standards of their peoples.

The leaders of the five countries will meet at the BRICS summit in Sanya, Hainan province, on April 14 to discuss global developments, financing and cooperation. But apart from the points on the Sanya summit agenda, the leaders have to deal with five domestic problems.

First, they have to take measures to narrow the large income gap in their countries, although they are already implementing social policies to this end.

Second, the BRICS economies have to increase the pace of industrialization. Currently, their industrial structures and most of the products they export are resource-intensive or labor-intensive. But to become countries with high per capita income, they have to transform themselves into skill-intensive and knowledge-intensive economies.

Third, the five economies have to improve their social security systems. They are indeed trying hard to do that, but they have to intensify their efforts.

Fourth, they have to take steps to control inflation. In the past 10 years, Brazil has successfully implemented macroeconomic control. It has basically stabilized inflation - at least it doesn't face hyperinflation. But inflation is a serious problem for China and the other three BRICS economies. For China, rising prices of iron ore and imported oil are increasing prices of goods in the domestic market. So it has to find the best way to control inflation and maintain steady and fast economic development at the same time, which is not an easy task.

Last, the five countries have to stem the flow of hot money into their economies. This again is a difficult task, because their fast development and investment opportunities offer high returns and thus attract overseas investors.

Apart from the massive gains they can make by solving their domestic problems, the BRICS economies have a lot to benefit from their relationship with developed countries, and vice-versa. In fact, their cooperation can result in a truly win-win situation. The BRICS economies import a huge amount of equipment from developed countries to meet their urbanization and industrialization demands. Their combined demand and the developed countries' capital and technological superiority can drive global economic growth, and help the developed economies to emerge from the global economic crisis.

The BRICS economies' relationship with other developing countries is again a mutually beneficial affair. The expansion of BRICS' markets will especially help countries in Africa, Latin America and Southeast Asia, which can increase their exports. In return, BRICS can take advantage of the rapid development of other developing countries' markets to increase their own exports and growth.

Last year, China imported nearly $1.4 trillion worth of goods. Going at the current growth rate, its imports will reach $3 trillion by 2015. Such a big market is open to all countries, and hopefully more developing countries will capitalize on it to boost their economic growth and employment rate.

The BRCIS economies are increasing their overseas investment, especially in developing countries. For example, China is the biggest investor in Brazil. Besides mutual investments, the BRICS economies are also investing in other developing countries, helping increase local employment and economic development.

The BRICS economies have a lot in common, including their fight against trade protectionism, which some countries have resorted to after the global financial crisis. Some developed countries have imposed a technological blockade and refuse to export high-tech products to the developing economies. This is nothing but "excessive trade protectionism", an "anti-globalization" trend, which is a challenge for the BRICS economies.

The global financial crisis was created because some individuals in major developed countries abused their national credit system and issued excessive amounts of currencies, which resulted in the proliferation of financial products. Now, all countries are mulling ways to reform the international financial and monetary system to stabilize the world economy.

The BRICS economies are more or less the victims of the global financial crisis and, therefore, should cooperate to the fullest extent to reform the international financial and monetary system. It is important that the five countries speak in one voice to increase their say and influence in the international financial system reform.

Climate change is another common challenge for the BRCIS economies. Industrialization in the developed countries began a couple of centuries ago, and they have been emitting greenhouse gases since then. So they should take the major responsibility of fighting climate change. Besides, they should also transfer environmentally friendly technologies to the developing nations at low costs, if not for free, to help the latter adapt to and fight against climate change.

But some developed countries are using the transfer of green technologies to make profits. This is tantamount to sabotaging the development of emerging economies, a move that can be thwarted only if BRICS cooperate on the issue.

The summit of BRICS leaders in Sanya is welcome. But the five countries also need multi-level consultations to learn from each other and meet common development goals if they want to have their say in the new world order.

The author is permanent vice-chairman of China Center for International Economic Exchanges, and former deputy director of the Policy Research Office of the Communist Party of China Central Committee.

(China Daily 04/14/2011 page9)