China, Russia, Africa & Latin America -Economics

In the midst of recent economic and financial downturn, many larger developing economies became the centre of much attention concerning their part in the new economic scenario. This marked a shift in the international attention towards these upcoming regions, particularly Latin America, China, Russia and Africa. Over 2 decades of globalisation further assisted by economic liberalisation caused the rise of what many call the new economic powers. The economic landscape of the world has shifted in the last 30 years. Though the G7 is and will still remain significant, if not the principal organisation, it is expected to further depreciate due to decreasing share in world population and GDP. In the year 1980, 68% of world GDP was represented by the G7; which went down to 61% in 2008 and is further expected to fall as low as 43% by 2030. Whereas G7s 11.2% cut in the total population of the world will go down to 9.6% in 2030 (Appendix 1) (Leipzinger and OBoyle, 2009). On the other hand, it is the developing regions that are filling the gap and achieving economic milestones to generate world interest in their respective economies. Companies in developing markets also now contribute on a much higher scale in the global economy. In 2007, developing countries exported 42% of global produce, while they exported only 28% in 1990 (Berliner, 2010). The fact that MNCs are now not based just in the United States or other developed nations but in many developing and emerging markets as well is a hallmark of an extremely competitive international market due to the rise of such new economic players. 61 of Fortune Global 500 companies are from China (CNN, 2011). Five of the Six largest banks in the world (by market capitalization), Industrial & Commercial Bank of China, China Construction Bank, HSBC (headquarter in Hong Kong), Agricultural Bank of China and Bank of China are headquartered in China (RelBanks, 2011), and three of the ten worlds biggest employers are Chinese (CNBC, 2011). Chinese economy is massive and growing speedily. Over the last three decades, their economy has developed on an average of 8% GDP growth per annum, reaching 7 trillion USD over the course of 2011 (The Economic Observer, 2012). China already is the second largest economy of the world (by GDP), only after the United States. Most impressively, The New York Times reported that initial public offerings in China went up to $34.8 billion in the year 2009, whereas in the U.S. it was just $13.7 billion. With a population of 1370536875 people (National Bureau of Statistics of China, 2011), China welcomes investors from all over the world by offering cheap labor and machinery and a huge growing market. Another example of an economy with massive potential is Russia. The 2012 Russia is indeed not the U.S.S.R. circa 1985, but sure is some force to look at. Domestic demand in Russia, fuelled by consumer finances, boosted the economic development to 5.1% in the third quarter of 2011, the best since 2008 (Chechel and Rose, 2011). Of all the Soviet republics, Russia is the most industrialised. Nonetheless, low investment over the last two decades has turned these industries as outdated and insufficient. Apart from the resource-based production, large manufacturing capabilities have been developed in the country, most importantly- transport gear, food items and

metals. Russia is now world number 3 exporter of primary aluminium and steel. Also, as it inherited much of the defence industrial base from U.S.S.R., Russia remains to be a key exporter of armaments (Miller, 2005). Russia is also the biggest energy exporter of the world. Exports of oil and gas are the basic comparative advantage of Russia (Gaddy, 2011), but President Medvedev is now looking to rid Russia of its dependence on oil. This reaction came when the demand for oil and gas dipped during the 2009 crises and gave the nation the mother of all horrors as Russia's economy contracted by 8.7pc, creating havoc in the stock market and leading to massive factories closure and unemployment (Quinn et al., 2009). Still, Russia remains the economy to invest into by offering good infrastructure and cheaper energy. On the other hand, the continent of Africa remains as the untapped mineral resource of the world. It is a huge land mass where minerals can be found in abundance but still is unexplored when compared to the rest of the world. Africa had a collected GDP growth rate of 4.9% in 2010 and is expected to rush up to 5.8% by 2012 end. FDI in Africa peaked in 2008, going up to $72 billion but has been decreasing since. Most of the FDI flow account to the countries exporting oil (Cohn, 2011). Africa, a vast continent, is divided in many smaller countries most of which are extremely poor, depended on majorly the export of one single commodity, for example, Zambia depends on copper exports and Gambia on peanuts. Such nations get intense reactions with fluctuation in prices of their specialised goods. The rich nationals of Africa include South Africa and the oil exporting countries like Libya and Algeria. In general, Africa is an opportunity waiting for entrepreneurs to come and explore. It has a lot of mining potential with a high output of minerals and jewels. Though poor infrastructure in most part and poverty in general is present in Africa, this continent has a lot to offer for the risk, with even the government providing incentives for FDIs. Another region similar to Africa is Latin America. Latin America, previously plagued by currency depreciations, debt defaults and in requirement for bailouts by developed nations, is now undergoing healthy economic growth that is the envy of the world. Asian demands for gold, tin and iron ore go along with Latin American policies of controlling deficits and lowering inflation by welcoming investment and boosting growth. This regions growth in 2010 was 6.1%, which is expected to slow down to 4.6% in 2012 due to inflation and rising interest rate (Moura and Laverty, 2011). Still, Latin America is experiencing a robust growth period with Brazil leading the group. It is the oil dependent countries here, like Venezuela and Ecuador that are lagging behind their neighbours in growth. Latin Americas growth depicts its trade relations with Asia, where China surpassed the U.S. as the top trading partner of Brazil (Romero, 2010). It is the right time to invest in Latin America, as this is the time for its robust development and growth. Investors can expect government support and incentives for FDIs and the market is welcoming foreign investors. Carlos Slim, considered to be the richest man in the world is investing 8.3billion USD in Latin America; he says whoever doesnt will be left behind. Recently, the growth in these regions is massive and there is no doubt about China and Russia growing up to be the most attractive destinations for investment due to their growing economies and huge market potential with cheaper inputs. Also, with developing nations running out of natural resources

and land for further industries and agriculture, most of the available land and such resources are present in Africa and Latin America. Hence, these regions will have to be tapped for further development of the world and with them inviting investments, it is an icing on the cake.

Reference List
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Quinn, J., Nelson, D., Foster, P., Osborn, A., 2009. The US, India, China and Russia: economic heavyweights shape up for 2010 - Telegraph [WWW Document]. URL http://www.telegraph.co.uk/finance/comment/6889996/The-US-IndiaChina-and-Russia-economic-heavyweights-shape-up-for-2010.html RelBanks, 2011. Worlds Largest Banks by market cap 2011 [WWW Document]. URL http://www.relbanks.com/worlds-top-banks/market-capitalization2011 Romero, S., 2010. Latin Americas Economies Surge Forward - NYTimes.com [WWW Document]. URL http://www.nytimes.com/2010/07/01/world/americas/01peru.html The Economic Observer, 2012. Chinas GDP Up 9.2% in 2011.

Appendix 1