China is exception in bleak picture for BRICS nations
Updated: 2013-07-29 07:18
By Andrew Moody (China Daily)
Country will be the only one in emerging markets bloc to break out of income trap
China is the only one of the emerging BRICS nations (Brazil, Russia, India, China and South Africa) that is likely to break out of the middle-income trap, Ruchir Sharma believes.
The head of emerging markets and global macro at Morgan Stanley, however, says it will still be a difficult journey for the world's second-largest economy.
"China has just got into the middle-income status so now is the big test as to whether it gets stuck or not.
"I think it is a fair assumption that it will get to the next level and if its economy grows at 5 to 6 percent over the next 15 years, its per capita income is likely to more than double to around $20,000, making it firmly high income," he says.
Sharma was speaking in the lobby of the Ritz Carlton Hotel in Beijing, where he was promoting his highly acclaimed book, Breakout Nations: In Pursuit of the Next Economic Miracles, which has just been published in Chinese as well as in a paperback edition.
He insists the biggest challenge now facing China is adjusting to a slower pace of growth, which he sees as something of a "psychological hurdle".
He believes the new norm for GDP growth should be 5 or 6 percent and that chasing higher rates by artificial stimulus could be destabilizing and halt the country's climb up the global income ladder.
"It is a step function down that needs to be made and it is an adjustment that everyone will have to make and not just in China.
"China is in a similar stage of development as to where Japan was in the 1970s, South Korea in the 1980s and (the economy of) Taiwan in the 1990s. They moved on to the next level but with a slower pace of growth from that point," he says.
His book is not necessarily about China doing well but more to do with the other BRICS countries doing badly.
The BRICS, he argues, are "so last decade" and were largely lifted by a rising tide of global prosperity and a huge demand (apart from India), largely from China, for their natural resources.
"I have been very lucky because the main thesis of the book was that this era of BRICS is over. It was the hot theme of the last decade. Every decade there is some theme that captures the imagination of everyone."
Sharma says that the recent slowing growth of China, by far the largest of the BRICS countries, accounting for 56 percent of the bloc's GDP, partly explains why these nations are now experiencing problems.
"It just so happens that with China's slowdown and commodity prices coming off, this whole BRICS concept is getting badly hit."