The Economic Health of BRICS – Part 1/7

January 11, 2012

In 2001, Jim O’Neill, the chief economist for Goldman Sachs, coined the BRIC acronym to represent the combined economies of Brazil, Russia, India and China. He was also so bold as to predict that by 2032, or sooner, the BRIC would overtake the six largest western economies (which includes America) in terms of economic might.

Then in 2010, South Africa joined the BRIC turning that acronym into the BRICS.

In fact, the International Monetary Fund (IMF) has predicted that China, a member of BRICS, will beat the United States as the world’s largest economy by 2016 with a GDP of $19 trillion compared to $18.8 trillion for the US.

There are about seven billion people on the planet and almost half live in Brazil, Russia, India, China, and South Africa. The US, by comparison [I prefer factual comparisons over opinions], holds less than 5% of the world’s population. However, I thought I’d throw in this comparison as a footnote. The King’s College of London reported that in 2009, “More than 9.8 million people are held in penal institutions throughout the world… About 2.3 million were in the US,” which means 23% of the total global prison population was in America.


About prison slavery in the United States.

Did you pay attention?  A country [the US] with less than 5% of the global population has 23% of the  global prison population.

By comparison, the five BRICS countries [without the freedom American citizens seem to enjoy] has almost half of the world’s population but only 35% of the global prison population.

What does that tell us—that the more freedom and wealth a country has, the more crooks it grows and attracts?

Anyway, the world’s combined GDP, according to The World Bank was more than $63 trillion (US) in 2010. The GDP of the US was $14.6 trillion, while the BRICS’ combined GDP equaled about $11.6 trillion (US).

Recent drops of property values in China, sometimes reaching 50%, caused dire predictions in the Western media that China’s economy would soon crash and take the BRICS down with it causing their economies to suffer as well.

However, it is best to understand China’s economy and banking system to see if this wishful thinking on the part of China’s Western critics is valid.

Continued on January 12, 2012 in The Economic Health of BRICS – Part 2

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Lloyd Lofthouse is the award-winning author of The Concubine Saga. When you love a Chinese woman, you marry her family and culture too. This is the love story Sir Robert Hart did not want the world to discover.

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Playing With Numbers

June 1, 2011

For centuries, China was the world’s largest economy (from tenth to fifteenth century) and if experts at the International Monetary Fund and others are correct, China will soon regain the title as the world’s largest (healthy) economy.

However, it is confusing. If we listen to The Economist in The X Factor, we are told that India’s economic growth may soon outpace China’s.

The Economist says, MORGAN STANLEY thinks it could happen in 2013; the World Bank thinks it might happen next year. Many pundits have speculated about when India’s growth might outpace China’s.

However, the International Monetary Fund’s (IMF) World Economic Outlook says that has already happened since China grew by 10.3% in 2010 and India by 10.4%.

Then from Yahoo Finance we learn the IMF says, “According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016.”

After reading the previous paragraphs, it sounds as if India will grow its economy past China and China will outgrow the United States leaving the US in third place.

In fact, India is far from growing a larger economy than China or the US.

In 2010, India’s economy ranked 10th globally or fourth depending how you stack the numbers.

India’s nominal GDP was placed tenth at $1.53 trillion, while another way of looking at the numbers says India ranked fourth at $4.06 trillion, but its public debt was $758 billion or 55.9% of GDP with $201 billion in exports and $327 billion in imports and a credit rating of $1.164 trillion.

This means India, like the US, is spending more than it earns.

China, on the other hand, had a nominal GDP of $5.88 trillion but a GDP (based on PPP) of $10.08 trillion placing it 2nd globally.  China’s public debt was 17.5% of GDP, which is a long way from India’s 55.9%.  Everything else about China leaves India far behind China’s economy.

India’s exports were more than seven times lower than China’s $1.506 trillion while its imports were almost four times lower than China’s $1.307 trillion and China has a credit rating of $8.156 trillion—much higher than India.


China is likely to resume its role as the world’s largest economy by 2015.

Any way we look at it, how can India beat China unless they are talking about the annual percent of economic growth?

Considering how much smaller India’s economy is, they would have to have a lot more growth to equal China dollar for dollar.  If India’s economy grew by 10.4% and its economy was either $1.53 trillion or $4.06 trillion (depending how one looks at it), that is still a far cry from China’s 10.3% economic growth based on a much larger GDP.

On the other hand, America, the world’s largest economy, looks like a cancer patient with six months to live.

America may have the world’s largest GDP at $14.66 trillion but having $14 trillion in public debt at 93% of GDP just about cancels that out.  Even India is doing better.

Then America’s exports were $1.280 trillion compared to $1.948 trillion for imports telling us more money is pouring out than coming in. How will America pay off its debt if losses outpace earnings?

The Economist seems to want people to think India is beating China but the numbers tell a different story. To beat China, India has to grow a much larger economy and reduce its public debt while erasing an illiteracy and poverty rate that’s embarrassing for a country touted as the world’s largest democracy.

Anyone that studies history knows that a democracy survives if the citizens are literate and understands the issues.

Discover India Falling Short

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

To subscribe to “iLook China”, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.


Is China Shifting Gears?

May 19, 2011

Is China shifting gears to avoid the Japanese Syndrome, which is what happened to Japan in the 1990s and was known as the Lost Decade? American economist Paul Krugman has described Japan’s Lost Decade as a liquidity trap, in which consumers and firms saved too much overall, causing the economy to slow too much.

In addition, on November 13, 2009, The Economist said, in The Dragon still roars, “Some analysts claim that China today looks ominously like Japan in the late 1980s… Banks’ non-performing loans will surely rise in 2010, and unless the government tightens monetary policy it will store up future problems which could harm economic growth.”

However, on April 10, 2011, Lianting Tu reported for CNBC that China is “Taking a cue from the larger economy, which is looking to make the transition from quantity to quality, China’s four biggest banks have decided to slow down growth and focus instead on better profit margins.”

What Lianting means is China’s banks are not loaning as much money, are making better loans and charging higher interest rates, which boosts profits.

She also writes, “Non-Performing Loans are a Non-Issue” in China.  She says, “For the four major Chinese banks, the average non-performing loan, or NPL, ratio dropped to around 1.1 percent in 2010 from 2 percent in 2009 and is expected to decline further this year, compared with 20 percent in 1990 and around 5 percent only 3 years ago.”

Compared to the United States, China is in good shape. According to the Federal Reserve Bank of St. Louis, total non-performing loans in the US flew from less than 2% in 2007 to almost 6% in 2010—the opposite of China, which has been reducing non-performing loans.

A Chinese friend said most loans get paid off because in China when a loan is made, entire working families cosign, which may be another benefit of a collective culture instead of one based on individualism. In China, mostly everyone in an extended family has to lose jobs and income to default on a loan.

In fact, in the US, bankruptcy cases filed in federal court for the 12-month period ending September 30, 2010 totaled 1,596,355, up 13.9 percent over the same period in 2009.  In 2007, before the 64 trillion dollar global financial crises caused by greed from Goldman Sachs, Wall Street and much of the US banking system, the bankruptcies were about 50% less. Source: Bankruptcy Action.com

Discover Deng Xiaoping’s 20/20 Vision

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

To subscribe to iLook China, look for the “Subscribe” button at the top of the screen in the menu bar, click on it then follow directions.


Bald Eagle Capitalism

April 24, 2011


The Economist’s
cover for the March 12, 2011 issue of what the British call a newspaper disguised as a magazine had a cover with Bamboo Capitalism splashed in big print over a picture of a bamboo forest with people riding red butterflies.

The Economist says, “China’s success owes more to its entrepreneurs than its bureaucrats.”

 True, but The Economist also says China’s economic success has often been vaguely attributed to “capitalism with Chinese characteristics”… taken to mean, “Bureaucrats with heavy, visible hands have worked much of the magic.”

Hmm, I never saw it that way. I don’t think the Party in Beijing sees it that way either or cares what anyone in the West thinks.

Although The Economist goes on to point out that government bureaucrats have less to do with China’s success than most think, it is a fact that government intervention in China’s economy helped China survive the 2008 global financial crises caused by America’s obese, debt ridden, diabetic, cancerous capitalist economy, which I have termed Bald Eagle Capitalism.

Bamboo Capitalism is a good term to identify China’s “capitalism with Chinese characteristics”.  In China, bamboo is considered a symbol of luck. It is flexible. People may eat part of it. It stays green most of the time. It is used in construction, to cook food, make floors, furniture, etc. In ancient times, warriors used bamboo as armor.

The flexible way Chinese entrepreneurs are allowed to do business is the primary reason for China’s economic success, but the central government’s control over property values and banking also deserves credit — an area the US government turned a blind eye to, which led to the 2008 global financial crises and about 64 trillion dollars in global losses along with tens of millions of lost jobs around the world.

The documentary Inside Job revealed the infamous Wall Street architects of the 2008 global financial crises and how they are still in charge at the same jobs where they caused the crash in the first place.

If these same men and women had lived in China, China’s bureaucrats may have quickly executed them so the same crises might not happen again as soon as it may repeat in the West.

In fact, Bald Eagle Capitalism is a fit term to describe the US economic system.

The Bald Eagle is not only the national bird, it is a bird of prey and although it will eat fresh fish, its primary source of food is from carrion, which vultures (a term to describe the people behind the 2008 global financial crises) feed on too.

The Bald Eagle’s diet is opportunistic and varied. The Bald Eagle will also eat the garbage from campsites, picnics and dumps.

Bald Eagles are an endangered species, as is the American economy.

Discover how High-Tech Entrepreneurs Thrive in China

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

If you want to subscribe to iLook China, there is a “Subscribe” button at the top of the screen in the menu bar.


Mostly Free to be Poor

February 15, 2011

Riz Khan hosts a program for Al Jazeera English and in this twenty-two minute segment, he leads a discussion about the possibility that democracy hinders economic growth.

Khan asks, “Is a centralized system, such as China’s one party, better than democracy for growth?”

Both India and China became countries about the same time.  In 2008, India’s GDP was $1.16 trillion and China’s was about three times larger at $4.33 trillion.

There is a debate in India that China’s one party political system has allowed China to modernize and improve lifestyles easier and faster than India’s democracy.

His first guest speaker is Tarun Khanna, a professor of the Harvard School of Business, who does not agree with the argument that India’s democracy is the cause of slow growth.

His opinion is that democracy may be a faulty option but it is the best of the faulty options we have. However, he says it is true that India’s democracy has underperformed.

Then MIT Professor Yasheng Huang says in the last thirty years, the leadership in China has improved its decision-making and made many correct decisions regarding productivity.

A listener to the program sends a message from Facebook.  “All a country needs is purposeful leadership, security, vision, and justice for all. China has demonstrated all this, unlike India.”

Professor Huang disagrees with the Facebook comment.

Kahanna says that China’s strong leadership has been an asset and that even in the Communist Party there is a meritocracy of sorts, which is a system of advancement based on individual ability or achievement—something that India’s political system lacks at this time.

Regarding a dictatorship, Huang says a dictatorship wouldn’t work in India. The culture is too complex.

Kahanna agrees that a dictatorship wouldn’t work in India and says India has to improve its democracy.

Huang feels if China doesn’t change its economic structure and put more emphasis on private companies, India will be the better place to do business in regards to long-term growth.

Kahanna says India’s biggest challenge is to include as many people as possible to share in the economic growth and more than half of its population has been left in poverty.  He says the biggest challenge will be basic health care and education and there has to be more opportunities in India for more people. The caste system in India is also a problem. India’s politicians must stop politicizing the cast system.

Professor Huang then says that democracy is not a solution to solve all of society’s problems. There has to be more than free elections. However, an authoritarian system is also not the answer. He says, take the strengths of both India and China and figure a way to take advantage of them—to make them work.

Learn more at India Falling Short

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.

If you want to subscribe to iLook China, there is a “Subscribe” button at the top of the screen in the menu bar.


The India, China battle to eliminate poverty and illiteracy

November 2, 2010

Chris Devonshire-Ellis wrote a convincing piece at China Briefing that India‘s economic growth would speed past China in the near future. 

He says, “It (India’s) growth rate could overtake China’s by 2013… Some economists think India will grow faster than any other large country over the next 25 years.”

However, there are flaws in that opinion.

Once again, the foundation of this prediction is based on India being a democracy “where entrepreneurs are all furiously doing their own thing” while China is a culture of secrecy and censorship. Chris mentions a few of China’s other flaws too, which China is struggling to overcome.

What Chris doesn’t mention is the difference in poverty and illiteracy between India and China.

India and China both became independent about the same time—China in 1949 and India in 1947.  Due to Chairman Mao’s policies, China suffered horribly from 1949 to 1976 and little progress was made.

For China, most of the progress has taken place in the last three decades. India, on the other hand, has had more than 60 years to solve its problems.

Let’s see what each has accomplished.

The World Bank says, “that China’s record of poverty reduction and growth is enviable. Between 1981 and 2004 the fraction of the population consuming less than a dollar-a-day fell from 65% to 10% and more than half a billion people were lifted out of poverty.”

For India, the World Bank says, “poverty remains a major challenge. According to the revised official poverty line, 37.2% of the population (about 410 million people remains poor, making India home to one-third of the World’s poor people.” UNICEF shows the poverty in India to be 42%.

World Bank studies also established the direct and functional relationship between literacy and productivity on the one hand and literacy and the overall quality of human life on the other.

India’s literacy rate was about 12% when the British left in 1947. Today, literacy is 68%.

In China, literacy is more than 93% with a goal to reach 99% in the next few years.

This means that India has about 800 million literate people competing with 1.2 billion in China.

As for India succeeding, MeriNews.com says, “At a time when we (India) are poised on the threshold of becoming a superpower, the rampant malnutrition and prevalence of anemic children and women to the extent of 48 per cent of the population is a definitive indicator that we have failed as a democracy in ensuring the fundamental requirements of our citizens.”

It appears that China—with its censorship, secrecy and socialist government—has done a much better job of taking care of its citizens.

See the other posts on this topic at India Falling Short and Comparing India and China’s Economic Engines

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too. 

If you want to subscribe to iLook China, there is a “Subscribe” button at the top of the screen in the menu bar.


Democracy’s Economic Roller Coaster

October 22, 2010

In a Brief History of Economic Downturns, Business Intelligence says, “At the amusement park that is the American economy, capitalism is a lot like that roller coaster, a never-ending ride with lots of twists, turns, ups, and downs – or booms and busts…”

Nine major economic crashes were listed.

There was the Panic of 1819, which lasted five years.

The Panic of 1826 went for six years.

In 1857, a single major company went out of business and dragged the entire US economy down.

In 1873, Jay Cooke & Company, the largest US bank at the time failed triggering a recession that lasted six years.

The next serious crash was the panic of 1907, causing massive job losses and many business failures.

In 1918, hyperinflation in Europe and the end of US wartime production caused a brief but severe downturn in the American economy.

The Great Depression imploded in 1929 with the collapse of the stock market and the American banking system and wouldn’t end until the beginning of World War II.

In 1973, the price of gas at the pump soared leading to long lines to fill gas tanks.

Then the Dot–Com Bubble burst in combination with 9/11/2001.

When the sub-prime mortgage bubble exploded in the U.S. in 2008, about 80,000 private owned businesses in China went out of business and 15 to 20 million workers lost jobs – much bigger numbers than the U.S. suffered.

However, within a few weeks, those who had lost their jobs in China were back at work or had returned to rural China to the collective farm.

Why should China cave in to pressure from America and Europe and turn its economy into another Wild West show?

Also see The Reasons Why China is Studying Singapore

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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too. 

If you want to subscribe to iLook China, there is a “Subscribe” button at the top of the screen in the menu bar.