Potential remains

Currently, BRICS countries have many challenges to development. However, these challenges can be addressed and some of the resolutions may, in turn, enhance cooperation within the group.

It is undeniable that BRICS countries are losing some comparative advantages in terms of economic growth. At present, many emerging economies, BRICS countries included, are encountering challenges such as the rising costs of labor, land, resources and capital, while the return on investment is declining remarkably.

For instance, labor costs in China were merely 33 percent of Mexico’s in 1996, but the ratio soared to 115 percent in 2015. From 2012 to 2015, Morgan Stanley Capital International’s BRIC index, which measures the combined equity market performance in Brazil, Russia, India, and China, was negative. The annual return on investment in BRICS countries also declined sharply. There are a variety of causes for the slumping demand for investment. On the one hand, this indicates a return to the normal level after investors have reevaluated the previously exaggerated investment potential of the BRICS. On the other hand, problems including financing difficulties and excess production capacity that worsened following the 2008 financial crisis have curbed investors’ enthusiasm.

External competition has also grown increasingly fierce for BRICS countries. Developed countries are