Recovery of Developed countries and its impacts on BRICS countries

1. Recovery of Developed countries and its impacts on BRICS countries Song Hong Institute of World Economics and Politics( IWEP), Chinese Academy of Social Sciences (CASS) New Delhi, Monday, 27February, 2012

2. I. The framework of World Economy

3. Developed countries • The world’s final demand mainly comes from those countries; • USA, EU and Japan are also the hard currency countries, and the world main reserve currency countries; • The sources of world technology(stock and flow), world FDI and other portfolio investments, educations and so on.

4. BRICS and other EEs • All those countries are under the way of industrializing its economy; • The main drivers of development are domestic demand and industrialization process----self-sustainable development stage;

5. The link of BRICS and Developed Countries • The external demand in terms of export; • The external investment in terms of inward FDI and portfolio investments; • The external price of energy and resources, and to a large extent, the exchange rate; • Huge stimulus policy after financial crisis in USA and EU, push local economy too hot.

6. The rest of the developing countries • Still at the early stage of industrialization process, or pre-industrialization stage; • Foreign aid; • Some of the resource abundant countries also got linked to the development of BRICS in terms of export resources and energy; • A lot of efforts still needed to take off.

7. II. The recovery of Developed countries • USA is under weak recovery, the situation is improved gradually, and gently; • Japan, is expected to a strong recovery, since last year earth quake; • The problem is in EU. The European debt crisis is still unstable.

8. GDP growth rate,%

9. Unemployment rate,%, monthly

10. III. The impacts and risks faced for BRICS • This time, only one of the three developed economies is in recession, that is EU, not all of them; • The impacts of it is much more less negative than that of 2008; • For those countries, with high government debt and current account deficit, will face big challenges to survive this crisis.

11. The impact on China’s trade

12. The drop of trade growth rate

13. Russia and Brazil

14. China

15. South Africa and India

16. IV. Individually, not too optimistic • For resource export money, must used cautiously; • Those income based on international price, not stable, so can not be taken for granted; • Once one country is in economic crisis, it will take several years or even decades to recovery.

17. Not too ambitious • During financial crisis, the reasons behind most of the firms went to bankrupt are the break of the flow of cash. • For a BRICS countries as well, not too ambitious to develop your economy during difficult time, otherwise you will face debt crisis, currency crisis and so on; or on the other hand, high inflation, the hot economy, and so on.

18. BRICS as a group • BRICS countries are very complementary each other----Some country is in deficit, some in surplus; • Mutual opening of local markets each other; • Currency swap to mintages the exchange risk, even the debt crisis; • The investment cooperation; • New bank for domestic saving exchange.

19. Thank you!