China and Brazil part 1: Surplus put to use?
This article from the FT contains a number of Chinese points of view from Beijing think tanks worth getting to grips with as the picture around imbalances doesn’t appear to be getting any clearer.
In the background, another big idea has been gathering support, with much more potential to have an impact soon. A growing number in Beijing are calling for some of the reserves to be channelled to the Bric nations – Brazil, Russia, India and China – and other developing countries. This is not just about snapping up oilfields and copper mines on the cheap, as China has been doing all decade. The stated goal is much bigger: to use the reserves to help stimulate a new cycle of development and trade between China and with the developing world.
It is clear that China is in it for the long haul in the developing world and that at the moment, it is not really sure how to, nor under pressure to, use its surpluses. Would it make sense to pump it into, say, Brazilian infrastructure upgrading? Well, yes. Helping to boost consumer demand through civil infrastructure projects, while at the same time improving industrial infrastructure – and easing of access to commodities – will let China share over the long term in Brazil’s growing prosperity.
The article, though admitting limitations of this type of idea, goes on to explain its current attraction:
Yet the idea is potentially powerful because it goes with the grain of big shifts in the global economic map that are already taking place. China is at the centre of powerful economic new links between developing countries. In the past Brazil’s economy would have been felled by a US crisis but Brazil could in fact grow this year. Fifteen years of sound economic policies have helped but it is no coincidence that China has this year become Brazil’s biggest trading partner. South Africa tells a similar story.
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