BRIC shoppers will ‘rescue world’: economist

With economies from the U.S. to Japan in recession, Wei and the other 2.8 billion people in Brazil, Russia, India and China may provide the consumer demand needed to counter the slump.

Jim O’Neill, the Goldman Sachs Group Inc. economist who in 2001 coined the acronym BRIC from the initials of the four big emerging economies, says the faster growth investors have come to expect from these countries will survive this crisis. O’Neill, who is based in London, says the citizens of the BRIC nations are poised to spend more. “The BRIC consumer is going to rescue the world,” he says.

China’s leaders are doing their part. The massive 4 trillion yuan (US$586 billion) stimulus plan they unveiled on Nov. 9 signaled their intent to spur domestic consumption to help pick up the slack left as developed economies buy fewer Chinese exports. The first-ever meeting of finance ministers from the BRIC nations, a few days earlier in Sao Paulo, charted a newly assertive role.

“The crisis revealed weakness in risk management, regulation and supervision in the financial sectors of some advanced economies,” the ministers said in a statement. It also showed the resilience of the BRIC economies, they said.

“This is a global crisis and demands global solutions,” says Brazilian President Luiz Ignacio Lula da Silva. “The participation of the developing world is essential.”

Chinese President Hu Jintao said at a summit in Washington on Nov. 15: “Steady and relatively fast growth in China is in itself an important contribution to international financial stability.”

Economic leadership from these nations wasn’t part of the mix in 1997 and 1998, when currency devaluations and excessive debt threw Asia and then Russia into crisis. Back then, the world looked mostly to the U.S. to spark a rebound.

China’s two-year stimulus program calls for spending on housing, roads, railways and airports; tax deductions for businesses that invest in new equipment; and subsidies for farmers.

Equal to about 16 percent of the country’s annual gross domestic product, the plan dwarfs the US$168 billion stimulus in the U.S. in the spring of 2008, which was about 1 percent of GDP. In the weeks since the Chinese effort was announced, President-elect Barack Obama has said he favors a larger stimulus for the U.S. economy; his aides have said it could top US$600 billion.

While Chinese consumers, as a group, still don’t overshadow their American counterparts in total spending, their outlays are growing. China’s retail sales jumped 22 percent in October. Consumer purchases in the U.S., by contrast, dropped in the third quarter for the first time in seven years.

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