Po­ten­tial re­mains

ChinAfrica - - Cover Story -

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

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