Has China’s economy hit a BRIC wall?

11 Mar

brics

Back in 2003 Jim O’Neill from Goldman Sachs made a prediction that would soon project him to worldwide fame as the creator of the term BRICs and thus the predictor of the future economic world order.

In his prediction, O’Neill forecasted that the BRIC countries (Brazil, Russia, India and China) would overtake the US by 2050 to become the top economic powers in the world, with higher GDPs than the US.

Currently, China is in second place globally, whilst the others are somewhat lagging behind. This is obviously, much sooner than predicted, and other economists have suggested that China will overtake the US much sooner than the original 2050 date, Martin Jacques believes that this will happen by 2020, a mere 7 years away!

Since the economic crisis China has become a global creditor and thus an economic powerhouse with the largest foreign exchange reserves in the world (currently $3.3 trillion) and buying up American debt like there’s no tomorrow. It has also been one of the largest contributors to the International Organisations, thus increasing its economic standing with in these global institutions (Woods 2010).

However how much this will be able to hold and whether they will meet the predictions of economists such as Jacques and O’Neill rests with the new leaders who will have to decide which course of action to take to prevent china slipping down. China’s economic growth reached a 13-year low at the end of 2012 at 7.8% (still much higher than the US’ 2% though!)

Furthermore China’s inflation levels in the New Year have skyrocketed past the national target of 3.5% with some food prices increasing to 6% – a new 10-month high. Although Chinese officials have claimed that the Lunar New Year always causes high inflation.

However, this all seems very familiar for many analysts when back in the 80’s many predicted that Japan would overtake the US as the number one economy in the world. However Japan was then plagued by crises. Will china follow the same route?

The similarities between the two countries economically in terms of their relationship with the US are startling, however the media are already reporting an increase in economic growth for China in the first part of 2013 and a recent report has claimed that China is now number one in the world in terms of world trade.

Therefore it appears that the year of the snake may not be as slow as many had predicted but only time will tell whether China will fall, reach or exceed expectations…

Sources:

US role to fade with China calling shots as creditor – economist:

http://rt.com/news/china-dominance-us-subramanian-006/

chinas growth shows signs of pick up form 13 year low:

http://www.bbc.co.uk/news/business-21071546

will china fall flat on its face just like japan?

http://www.bbc.co.uk/news/business-19948730

Global governance after the financial crisis: a new multilateralism or the last gasp of the great powers? (Ngaire Woods 2010)

http://www.globaleconomicgovernance.org/wp-content/uploads/Ngaire-Woods-Global-Governance-after-the-Financial-Crisis.pdf

China overtakes the US in world trade:

http://www.guardian.co.uk/business/2013/feb/11/china-worlds-largest-trading-nation

Chinas inflation hits 10-month high in February:

http://www.bbc.co.uk/news/business-217378

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2 Responses to “Has China’s economy hit a BRIC wall?”

  1. pw9g10 March 12, 2013 at 10:02 am #

    China’s 13 year low in economic growth comes at a time when countries across the world are still dealing with the economic challenges forced upon them when the global economic crisis began in 2008. Considering China’s role as a mass exporter and its heavy reliance upon exports for national income it is clear that the prolonged effects of the financial crisis is restricting the demand for China’s exports. A plausible view would be that when the negative effects associated with the financial crisis subsides then demand for China’s exports will increase ultimately bringing a return in the level of economic growth China has witnessed over the last few years. However, it must be noted that economic growth at 7.8% is far from being considered a problem and represents levels of growth that outweigh the rest of the world’s economic powers.

    China has remained strong while the world’s nations were and are troubled by the crisis but it would be naïve to believe China is entirely resistant to an economic crisis. Predicting the future is obviously a tough task and there are many things that could challenge China’s rise to economic dominance. However, with little reason to suggest otherwise (especially in the foreseeable future) it is entirely believable that China will continue its rise to economic supremacy and hold that position.

  2. jpt1g11 March 13, 2013 at 12:44 am #

    It will be fascinating to see how all of the BRIC nations develop and respond to the financial crisis of 2008.

    The economy in China would appear to be relatively stable given the lack of damage done by the economic crash. Stable industry at both industrial and financial levels puts them at a great advantage in comparison to other leading G8 countries. The goal for China will now be to expand industry and growth into the Western regions to stop the already developed areas becoming over saturated.

    China’s rise as an economic power is at odds with its role in global politics. While undoubtedly a leading economy, second only to the U.S, involvement across the globe is relatively minimal compared to American colossus. The CPC has never attempted to police the world in the same way the U.S has, but its involvement will likely develop and expand given America’s almost inevitable decline.

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