The BRIC economies refer to Brazil, Russia,India and China as a combined entity which was form with the intention of recovering the world economy from its current slowdown.
Chinese Economy Performs Well.
While all the leading economies in Europe and USA collapse, there has been a sudden emergence of the East Asian economies such as China. The point to note is that when corporate giants of USA and Europe collapsed, Chinese firms were buying stakes in European and American firms. According to Associate Professor Mark Crosby from the Melbourne Business School: “The rise of China in the new global economic order has made for a more prosperous and stable world” .To back his argument he has come out with many points such as the fact that currently China accounts for the 8% of world’s trade and produces around 11% of global GDP. His arguments becomes more proven when we speculate the future potential of Chinese economy in another 30 years of time as they have made a remarkable change during last 30 years of time. And he argues that even though china account of the 20% of the world population, their economy will grow at a higher rate than global economy and converge to global income levels. These speculations are possible to occur during the next few years as the Chinese economy is backed by the commitment of Chinese population which amounts to 20% of world population and their fiscal and monetary policies are well planned and realistic. Their approach to financial planning and controlling has put the foundation of their tremendous success over last 30 years while other leading economies were failing due to lack of financial planning and control.
While other leading economies show a recessionary situation where GDP level falls China is able to maintain/increase its GDP continually. I.e. in 2008 China has recorded a GPD of US$ 4,401.0bn when compared to a GDP of US $ 3,382.4bn in 2007. This clearly shows that when other developed countries get hit by the financial crisis china has performed well and recorded a GDP which is higher than past few years. Not only the GDP other economic indicators such as current account balance and good and service exports also has grown as a result of exceptional performance by Chinese economy.
Participation of China in Recovery Process
Many scholars talk about stabilizing the collapsing world economy based on East Asian countries as they have been maintaining their economies well and they have the potential to make sure not only their own economy but the world economy also well managed and made stabilized. Peter Drysdale argues that the recovery of the world economic health can be achieved based on East Asian economies in 02 ways:
First way to overcome the crisis is by stabilization of the world economy and world markets, both financial market and real market using significant fiscal and monetary expansion by boosting domestic demand and facilitate recovery, which China has already started planning and implementing on. Second way to stabilization is by taking measures to strengthen and maintain the momentum of reform in financial markets. Peter Drysdale argues that East Asian economies can assume the policy leadership in recovering collapsed financial markets by efficient resource allocation in financial markets which they have been doing well in past few years.
Above 02 articles suggests that there is shift in the world economic order from European and American continent to Asian continent, mainly based on East Asia. Since East Asia, mainly China has been performing exceptionally well in world financial market and showing a better economic performance than developed countries during world economic downturn, the leadership in the world economy is moving from USA and Europe to East Asia. East Asia now has the ability to influence the world economy by their population commitment (which amounts to more than 20% of the world population) and the exceptionally high skills in economic planning. They argue that only recovery process can be facilitated in East Asia which has led to East Asia becoming more powerful than developed economies where they achieve a higher rank in the world economic order. If East Asia makes this situation an opportunity to build stronger rank in the world economic order by facilitating the recovery process of the health of world economy, they will become the world’s most influential and the powerful economy.
Indian Economy Emerges as the South Asian Representative
Another big change in the world economic order can be noted in South Asia due to the emerge of Indian economy and its performance during the financial crisis. The development in India has challenged the long term established economic order which was mainly focused on USA and EU. India is the 2nd highest populated country while China is the highest populated. It can be suggested that the over shining performance of China and India is due to their population size where they can obtain necessary skilled and unskilled labour at lower price in production processes. One main reason for the development in Indian economy can be attributed to the economic decision policy making committee who are very skilled, motivated and effective in decision making. “The 2005 GDP growth rates of China (9.8%), India (8%), and Russia (7%) are the highest in the world.”(Financial Express, 2009) Above statement clearly shows that the GDP rates of developing countries are growing at a higher rate than the developed countries where developing countries account for the highest GDP rate in the world. This clearly shows us that there is a new economic order emerging in the world where the developing countries challenge the existing economic order with a higher standard of living and dominance of the world economy. When it comes to the position of the Indian economy not only they perform well during financial crisis where developed countries fail to do so but also they have promised the world that they will facilitate the recovery process of the world economy from its current slowdown. Prime Minister Manmohan Singh has said that India is ready to play its part in coordinating global efforts to overcome the economic slowdown.” In his opinion the India has the potential to facilitate the recovery process as India is among the newly developing economies which are stable than the developed economies during the financial crisis.
Brazilian Economy too Performs Well
Recent activities of Brazilian economy too suggest that they are also in a position to challenge the established world economic order. The recent decision of Brazil and Argentina to pay off $25 billion in debts to the IMF and the governments of G-7 is a clear manifestation of this” The decisions to pay off the debts was taken to facilitate the independent decision making in the future where they are no longer bund to adhere to policies of G7 and IMF when making economic decisions of their own economy. This independence was obtained to facilitate the new strategies followed by the Latin American countries which are completely different from US policy making. The repayment of debts clearly indicates IMF that bid debtors are no longer ready to adhere to their tough policies and they have the ability to stand on their own with no back up from the IMF. Bolivia government too expects to pay their debts to obtain independence in decision making. This suggests that Latin American countries are also in a position to influence the world economic order.
Many scholar suggest that BRIC has a whole would be able to facilitate the recovery process and it is the only alternative left to recover from the current slow down as developed countries are continuously failing to recover on their own. “”In fact, global economic recovery is closely linked to the success of BRIC economies” says the Indian Prime minister and BRIC countries has taken steps to facilitate the recovery where they have hold many summits on how to overcome the financial crisis and first summit on this topic was held in Russia with the participation of 4 presidents from BRIC countries. The decisions of summit are fruitful where it has facilitated the effective decision making to the recovery of global economic slowdown.