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China And The BRIC Dream

Posted in China Business

Just watched a ten minute or so movie on Goldman Sach’s website, entitled, “The BRICS Dream” [link no longer exists] (h/t to the Cal Poly MBA Trip Blog).  BRIC is an acronym for Brazil, Russia, India, and China and the movie, “led” by Jim O’Neill, Goldman Sach’s Head of Global Economic Research, notes it was Mr. O’Neill who created the BRIC acronym way back in 2001.

The thesis of this fascinating movie is that over the next 50 years, Brazil, Russia, India and China — the BRIC economies — are likely to become a much larger force in the world economy.  The movie maps out GDP growth, income per capita and currency movements in the BRICs economies until 2050:

The results are startling. At the projected pace, in less than 40 years, the BRICs economies together could be larger than the G6 in US dollar terms. By 2025, they could account for more than half the size of the G6. Of the current G6, only the US and Japan may be among the six largest economies in US dollar terms in 2050. The list of the world’s ten largest economies may look quite different in 2050. The largest economies in the world (by GDP) may no longer be the richest (by income per capita), making strategic choices for firms more complex.

The movie predicts a huge increase in the middle class of these four countries and, interestingly, sees Russia having the highest per capita income among the four, based in large part on its diminishing population.  O’Neill believes this rising middle class of the four BRIC countries will lead to massive car buying, and he forecasts China becoming the largest purchaser of cars by 2050.  The growth of the BRICs will lead to energy consumption worldwide increasing by 2.5% per year, in contrast to the 1.5% increases in the past.  O’Neill sees the stock markets of these four countries doing well even if they institute few structural changes, but becoming “fantastic” if they evolve in terms of their transparency.  O’Neill sees the currency of all four nations rising considerably between now and 2050, with China’s Yuan rising the most, at 289% between now and 2050.

All of these predictions are prefaced by many “ifs” and, as excited as I am about the economies of all four of these countries, (as well as many of the countries Goldman Sach’s calls the “next eleven,” particularly Turkey, Vietnam, Indonesia, Korea, and the Philippines), I recognize that so much can happen between now and 2050 that it is virtually impossible to make economic and investment predictions for 2050 with any real degree of accuracy.  This is even more true of the BRIC countries whose political stability is not rock solid — yes, I know Brazil, India, and, nominally Russia, are democracies.

Does make for great viewing though.