China’s new president, Xi Jinping, arrives in Durban, South Africa today for a summit of the BRICS: Brazil, Russia, India, China, and South Africa. A geo-economic acronym invented in 2001 by a Goldman Sachs analyst to forecast a convergence among fast-growing emerging economies has spawned a geopolitical association. The leaders who gather, and commentators on this event, will search for what these nations have in common. The larger question, however, is whether this acronym has become an anachronism. Assessing the performance of the BRICS over the past five years and prospects for the next, does lumping these nations under a single label confuse more than it clarifies?
When Jim O’Neill of Goldman Sachs coined the term 12 years ago, many expected that economic growth rates in India and Brazil would soon rival China’s. That remains O’Neill’s bet, his most recent blast foreseeing that “India definitely has the biggest potential for growth among BRIC countries this decade.” But the brute fact is that China has continued growing more than twice as fast as other members of this club. Indeed, in every year since 2001, the gap between China’s GDP and that of each of the others has widened. In the decade ahead, the gap is likely to become even more pronounced. Given this divergence, it is more appropriate to consider China separately from Russia, India, Brazil and South Africa, which, if an acronym is called for, can be called: “RIBS.”
In 2001, China’s GDP was equal to the GDP of all the RIBS combined. In the five years since the global financial crisis, just the increment of growth in China’s economy is larger than the entire economies of Russia and India combined. Indeed, in the half decade since the financial crisis, 40 percent of all growth in the global economy has occurred in China.
Last year, the economy of China expanded by $1 trillion; Russia and India grew by $100 billion; Brazil and South Africa shrank. In 2001, China ranked sixth among the world’s economies. Today it stands at number two, on track to overtake the U.S. and become the world’s largest economy in the next decade.
In trade, China accounts for 11 percent of global merchandise exports, roughly double that of the RIBS combined. Moreover, the markets to whom China and the RIBS export and from whom they buy are the U.S., the EU, and Japan. Merchandise trade among China and the RIBS barely registers in world trade statistics.
In foreign reserves, China held twice as much as the RIBS combined in 2001 (with $220 billion), and now holds three times as much as the others (with $3.3 trillion). In greenhouse gas emissions, China accounts for 30 percent of the global total, more than twice the amount of the RIBS combined.
Goldman Sachs continues trumpeting the rise of the BRICS (though it refuses to include South Africa, which was pulled into group by China in 2010). Its latest “BRIC Fund” prospectus forecasts that by 2030, the BRIC nations will have a combined economy larger than that of the G7. If this happens, the most important part of the story will be that China added $17 trillion to the global economy, effectively creating another United States in less than 20 years.
Concepts that jumble together elements with more differences than similarities sow confusion. While it may have played a useful purpose at the beginning of the century to highlight faster-growing emerging economics, BRICS has become an analytic liability. Like generalizations about per-capita growth in countries where wealth disparities are widening (as the rich get richer while the income of the poor declines), submerging China in this acronym misses more than it captures. If a banner is required for a meeting of these five nations, or for a forecast about their economic and political weight in the world ahead, RIBS is much closer to the reality. Even if governments, investment banks, and newspapers keep using BRICS, thoughtful readers will think China and the rest.