Looking inward for growth

China to champion BRICS' initiative to bolster trade ties with Africa

China is expected to hold center stage at the summit of BRICS (Brazil, Russia, India, China & South Africa) nations in Durban from March 25 to 27, considering its key role in propping up global and African trade.

Though trade with Africa will be the main theme of the conference, it will boil down to more about China-Africa trade, as China accounts for more than 60 percent of the five-nation group's overall trade with Africa.

The sluggish global economic conditions have prompted the BRICS nations to be reliant on each other and on emerging economies for commercial nutrition, the South Africa-based Standard Bank Group says in a recent research report.

As further proof of the economic interdependence between the BRICS nations, the bank says that last year nearly half of the exports from China, India and Brazil, and nearly half from South Africa, flowed to the emerging markets. Bilateral trade between the five BRICS members amounted to more than $310 billion (237 billion euros) last year, more than eleven-fold the $28 billion in 2002.

Though developed nations have been affected by the macroeconomic and financial fragility, the BRICS nations have been successful in avoiding the sharp moderations in export growth due to their inward focus, the report says.

In real terms, exports from the BRICS nations rose 16 percent in 2010, and by 4.4 percent last year. The cumulative trade of the BRICS nations was estimated to be about $5.6 trillion in 2012 and accounted for 16 percent of total global trade, compared with 10 percent in 2008.

An interesting facet of these economic indicators is the growing proportion of the inward trade among the BRICS nations. Since 2001 intra-BRICS trade has grown at a significant clip and now accounts for nearly one-fifth of the group's total trade with emerging markets, up from just 13 percent in 2008. In contrast, the BRICS nations traded less with the EU last year than they did in 2008, the report says.

"The figures suggest that the BRICS-Africa commercial ties are becoming increasingly vibrant and, crucially, robust, which is a positive factor for the group. But at the same time they have also become more of competitors with one another in Africa, rather than collaborators," Jeremy Stevens, a research analyst with Standard Bank, says.

The bank also cites the example of South Africa to buttress its claims of the growing trade ties helping the five member nations. South Africa's trade with the BRIC nations grew to 19 percent of its total global trade, compared with just 5 percent a decade ago. In value terms, trade rose from $3.2 billion to $37 billion during the same period.

Analyzing the exports alone gives a clear idea of how significant the trade with BRICS has been, the report says. Last year, South Africa's exports to BRIC nations rose 17 percent, the highest growth among the five member economies. China's exports to the group swelled 16 percent, followed by Russia, Brazil (14.5 percent) and India (9 percent).

According to the report, China has been the pivot of the economic resurgence as it accounts for more than 67 percent of the total BRICS trade with the rest of the world. The bank says China's economy accounts for around 55 percent of total GDP of the BRICS nations.

With Brazil, Russia, India and South Africa stepping up their exports to China, these nations have become more closely linked to demand from China for sustenance as it ranks among the top three export destinations for each of these nations.

China accounted for 20 percent of Brazil's exports in 2012, compared with just 4 percent in 2001. It accounted for 10 percent of exports from India and Russia and for more than 30 percent of the exports from South Africa during the same period.

In contrast, the BRICS have made little inroads in selling anything but raw materials to China. In fact, taken as a group, the other BRICS nations account for just 3 percent of China's demand for manufactured and industrial goods.

China, on the other hand, has prioritized selling to emerging markets - especially the BRICS nations. Seven of China's 10 largest export destinations are emerging markets. China has also become the dominant source of goods for the BRICS nations, with Brazil being the only nation where China is ranked behind the US, the report says.

"China has been diversifying its export destinations since the 2008 global financial crisis with more emphasis being given to the emerging markets due to their growth prospects and abundant investment opportunities," says Jin Baisong, deputy director of the department of Chinese trade and studies at the Chinese Academy of International Trade and Economic Cooperation, a think tank under the Ministry of Commerce.

The report adds that among all the BRICS nations, China has been the leader in export competitiveness among all BRICS nations. Though all the BRICS nations have seen rapid wage growth in recent years eroding their competitive advantages, its impact has been the least in China. At the same time, labor productivity of labor in China has increased faster than that of its BRICS peers.

With the exception of the South African rand, the other four Rs - real, renminbi, ruble and rupee - have all appreciated, but it has been the renminbi that has been relatively competitive. China has also gained considerably from the state-led investments in logistics and infrastructure.

Yet another feature of the five-member group has been its growing trade moves in Africa. BRICS' trade with Africa reached $340 billion in 2012, representing a more than 10-fold increase over the course of a decade, the report said. Since 2007, during a period of relatively slow trade growth (for Africa, the BRICS and globally), BRICS-Africa trade has more than doubled, it says.

China accounted for almost 60 percent of the total BRICS trade with Africa, which is broadly commensurate with its economic size within the grouping. Similarly, India's role is consistent with its economic size, while Russia and Brazil are relatively underrepresented, says the report.

"Looking ahead, we hold firm to our widely cited projection that BRIC-Africa trade will eclipse $500 billion by 2015, roughly 60 percent of which ($300 billion) will consist of China-Africa trade," says Simon Freemantle, a research analyst with Standard Bank Group.

The forthcoming summit will provide the opportunity to structure, leverage key starting points for more BRICS engagement, and also outline further avenues for collaboration, the Standard Bank Group says.

lijiabao@chinadaily.com.cn