The “BRICS” Emerging Powers Summit

June 22, 2011

On April 14, 2011, Chinese President Hu Jintao and leaders from Brazil, Russia, India and South Africa (countries now known as the BRICS) met on the far southern Chinese island-province of Hainan Island.

The most telling result of the summit was the decision to refuse mutual payments in US dollars. This means that the BRICS countries will give credits to one another in their national currencies and the development banks of these countries have signed an agreement about a further gradual withdrawal from loans in American dollars.

The move opened lines of credit in these countries national currencies in order to dilute their overreliance on the U.S. dollar as the BRICS seeks more independence from American political influence.

In addition, China and India agreed to reestablish defense ties and initiate closer border cooperation. China also agreed to deepen its “strategic partnership” with Russia. The biggest gains to come out of this summit may be the BRIC access to Africa due to its newest member, South Africa.

The BRICS nations now accounts for over 40% of the world’s population, but only 18% of its GDP in 2010 and the IMF says the BRIC nations will account for 21.6% of the world’s GDP by 2015, while the International Business Times reports that these nations are expected to represent 47% of the world’s GDP by 2030.


Aljazeera English says, “While many developed nations are struggling with the aftermath of the global recession, the economies led by the leaders of the BRICS nations are still booming.”

Another way to look at this is to compare the BRICS with the GDPs and labor force of the European Union and the United States.

We often hear that the United States has the largest GDP in the world, which was $14.72 trillion in 2010 with a labor force of 154.9 million as estimated by the CIA World Factbook.

The CIA World Factbook listed the European Union (probably due to the Euro) as the world’s largest economy at $14.89 trillion with a workforce of 225.2 million (2009 est.).

When we combine the GDPs and the labor force of the BRICS nations, we see a combined GDP of $21.079 trillion and a labor force of almost 1.5 billion people.  If the BRICS developed a standard currency as the European Union has done that would create the largest economy on the planet with largest work force.

The BRICS is also calling for a greater say on the UN Security Council, which only China and Russia have a permanent seat on now.

Goldman Sachs investment banker Jim O’Neill to highlight Brazil, China, Russia and India’s similarities in terms of their potential for development and growth, created the term BRIC. South Africa was not a member at the time.

To discover more about the BRIC/S see Move Over America, the BRIC is Coming, The Growing BRICs, Brazil’s Growth Depends on China and China Reaching out to South Africa

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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.

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Posted by Lloyd Lofthouse

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.

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Posted by Lloyd Lofthouse

Chicken Little-Henny Penny says, “China’s Bubble is Bursting!”

May 17, 2011

The Chicken Little-Henny Penny story is a fable about a chicken that believes the world is ending. The phrase “The sky is falling!” features prominently in the story and is now a common idiom indicating a hysterical or mistaken belief that disaster is imminent.

Chicken Little’s warnings or predictions of calamity, especially without justification, dates from 1895.

Because of this, the tale has become politicized and one example appeared on ZeroHedge.com when Tyler Durden submitted this post, “Chinese Real Estate Bubble Pops: Beijing Real Estate Prices Plunge 27% In One Month”.

Durden writes, “Prices of new homes in China’s capital plunged 26.7% month-on-month in March, the Beijing News reported Tuesday, citing data from the city’s Housing and Urban-Rural Development Commission.”

Durden says, “IF” the pummeling in the Beijing real estate market shifts to other cities not only is the Chinese tightening regime over, but the SHCOMP (?) in the next few weeks could get very interesting as people understand the world’s biggest marginal bubble has popped.”

“IF” I had a dollar for every time I’ve read a “Sky is Falling” prediction of China’s economy, I’d take my wife out to dinner, shopping at Nordstrom’s and a movie on the weekend.

China’s real estate market only represents about 15% of China’s GDP while in America, that number is more than 70% of GDP, which explains why America is in the cellar with its economy and China is still growing but just slower.

Meanwhile, Tory Capital.com reports “China’s First Quarter 2011 GDP Rises 9.7 Percent,” while Mostly Economics.com compares that to the US annual rate of 3.1%.

A better, possibly more informed comparison between China and America’s economies may be found at Heritage.org where Derek Scissors, Ph.D. writes, “Its (China) raw population means that the PRC will likely pass the U.S. at some point after a resumption of market reform.”

However, Scissors says for that to happen, “The 2012 Communist Party Congress (must) nullify actions by the 2002 Party Congress and restore Deng Xiaoping’s economic model—this would enable roughly two more decades of rapid growth, perhaps in the 7 percent to 8 percent range, then gently decreasing to the 5 percent to 6 percent range over time. China would then surpass the U.S.” as the world’s largest economy.

Back to Durden’s Chicken Little-Henny Penny statement. The drop in “new housing prices” in Beijing may be a response to complaints from the people that prices were out of reach of many. Instead of a bubble bursting, the Party may have let some air out so it would not explode as it did in the US in 2008.

Discover The Fear of Mao Buying the World

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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.

2 Comments | business, capitalism, China, economy | Tagged: , , , , , , , | Permalink
Posted by Lloyd Lofthouse

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.

2 Comments | China, economy, education, India | Tagged: , , , , , , , , , , , , , , , , , | Permalink
Posted by Lloyd Lofthouse

The “What If” Housing Bubble in China

August 29, 2010

Charles Hugh Smith writes for the Daily Finance and claims that China’s Housing Bubble Will End Badly.

That’s not going to happen for several reasons. The first reason is that China’s economy does not depend on the housing market to survive. Most people in China still don’t own their homes even in the cities.

In the US, housing loans to GDP were 79% but in China, that number is about 15%, which means real estate in China doesn’t prop up the economy.

Let’s look at one fictional individual who loses his job in China and can’t make his mortgage payment.

If he always lived in the city and has family (even distant relations), he will move in with them and rent his home to make the payments. The family may even pitch in so he doesn’t lose the home.

If that fictional Chinese man came to the city to work from a village, he returns home.  The peasants in rural China don’t have to worry about losing those homes.  In fact, it’s as if China had two economies: rural and urban.

If the government needs to develop the land the peasant’s home sits on, a new home is provided. More than seven hundred million Chinese live in villages owned by collectives and the central government. Those peasants don’t have a mortgage payment, pay rent or property tax.

Even in urban China, people only pay property tax once when they buy the home they live in.  Property tax for your home isn’t an annual burden as in the US.

Another factor is that the average savings rate in China is 40% and the wealthiest Chinese own about 40% of urban real estate.

See Betting Against China’s Housing Market

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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.

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.

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Posted by Lloyd Lofthouse

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