Insights on the changing world order from the High-Growth Markets Summit 2011

Thursday, November 03, 2011 | Posted by: Fiona Cullinan
Categories: Brazil, China , India | Tags: statistics, China, GDP, inflation, Economist, conference, BRIC, High Growth Markets Summit, Jim O'Neill, Indonesia, renminbi, Turkey, Korea, emerging economies, investment banks, Mexico, BRICs, Growth 8, keynote

The Economist’s High-Growth Markets conference, held in London in September, closed with a view of how the world’s most powerful emerging economies are set to change the global economic landscape in the next decade. So who are the ‘Growth 8’ and what other trends are important to note?

There were panels and presentations on the opportunities in Eastern Europe, Africa as the new rising star, what next for Latin America and navigating China’s diverse markets though localisation.

And there were speeches from the former Brazilian president Luiz Inácio Lula da Silva and an opening keynote from Jin Liqun of the China Investment Corporation, formerly China’s vice-minister of finance.

But mostly we enjoyed tuning into Jim O’Neill (pictured) – chairman of Goldman Sachs Asset Management and the man who invented the BRIC acronym in 2001 – whose closing presentation looked at how powerful emerging economies are changing the world order.

Some of the takeaways from Jim O’Neill’s speech include:

• Three issues in the near-term
In the next 12 months, O’Neill highlighted three issues from Goldman Sachs economists research:

• The consensus is more optimistic about Japan than the US or Europe (“pitiful” as this is based on the rebuilding of Japan post-tsunami).
• The world will still grow by more than 4% next year but this will be driven by growth markets.
• Chinese inflation is the big issue and whether it can be brought under control.

• BRICs are NOT emerging markets
The inventor of the BRIC acronym railed against the term ‘emerging markets’ as “idiotic and insulting” when applied to China and other high growth markets since these countries are “increasingly the driver of everything positive in the world economy”. Instead, O’Neill is calling them growth markets.

• Forecasts for the ‘Growth 8’
In 2010, the four BRIC economies, Mexico, Korea, Turkey and Indonesia generated 23% of global GDP. The Growth Market 8 are projected to generate $16 trillion worth of US GDP from 2010-2019 – “more than four times the US and more than twice that of the US and Euro area put together”. O’Neill added that China accounted for more than half of that figure.

By 2020 on these projections, the Growth 8 will be nearly as big as the G7 countries, and within five years the BRIC economies are likely to outgrow the US.

• Who’s leading on fiscal restraint?
Growth market economies “have become more Germanic than Germany” in terms of fiscal restraint and compliance. Budget balances and government debt in growth markets are being kept under control far better than more developed economies.

• Renminbi reform by 2015
O’Neill says China appears to be accelerating reform of its currency with noises being made about full convertibility by 2015. “If that happens, it is going to be transformational – for everybody and everything.”

• The new consumer markets
Growth markets are no longer just cheap producers, but are actually driving global consumption and the world economy. By 2010, the dollar spend of consumer spending in BRIC nations is likely to be big as the US. O’Neill says many businesses aren’t getting this shift or leveraging the new markets.

See the full 30-minute video, and other recorded speeches, on the Economist’s conference videos site.

Image: (CC) Financial Times

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