Changing China

from Global Investing:

What worries the BRICs

Some fascinating data about the growing power of emerging markets, particularly the BRICs, was on display at the OECD's annual investment conference in Paris this week. Not the least of it came from MIGA, the World Bank's Multilateral Investment Guarantee Agency, which tries to help protect foreign direct investors from various forms of political risk.

MIGA has mainly focused on encouraging investment into developing countries, but a lot of its latest work is about investment from emerging economies.

This has been exploding over the past decade. Net outward investment from developing countries reached $198 billion in 2008 from around $20 billion in 2000. The 2008 figure was only 10.8 percent of global FDI, but it was just 1.4 percent in 2000.

Not surprisingly, the lion's share comes from the BRICS -- Brazil, Russia, India and China -- which together made up 73 percent of outflows last year. BRIC outward investment jumped to $144.3 billion in 2008 from $29.6 billion three years earlier.

Perhaps the most interesting data, however, concerned political risk insurance. MIGA studied the kind of insurance BRICs outward investors were taking to see what kind of things worried them.

Brazil had a mixed of concerns, but Indians were most worried about transfer and convertibility restrictions, the Chinese concerned themseves with war and civil disturbance and Russians were extremely worried about breaches of contract.

Sceptics might be tempted to see this as a reflection of national concerns. But MIGA said it was more micro than that. Russian investment, for example, is dominated by commodity exploration, an area said to be more subject to contract problems than others.

from Global Investing:

Time to kick Russia out of the BRICs?

It may end up sounding like a famous ball-point pen maker, but an argument is being made that Goldman Sach's famous marketing device, the BRICs, should really be the BICs. Does Russia really deserve to be a BRIC, asks Anders Åslund, senior fellow at the Peterson Institute for International Economics, in an article for Foreign Policy.

Åslund, who is also co-author with Andrew Kuchins of "The Russian Balance Sheet", reckons the Russia of Putin and Medvedev is just not worthy of inclusion alongside Brazil, India and China  in the list of blue-chip economic powerhouses. He writes:

The country's economic performance has plummeted to such a dismal level that one must ask whether it is entitled to have any say at all on the global economy, compared with the other, more functional members of its cohort.

I have just returned from Moscow, which is always dreary around this season. But this year, the mood among the capital's eloquent liberal economists has hit a new low. For the last seven years, Russia has undertaken no significant economic reforms. Instead, the state has been living off oil and gas, like a lucky but undeserving rentier."

Economically, Åslund has the numbers on his side. The International Monetary Fund estimates that the Russian economic will contract by 6.7 percent this year, while China will grow 8.5 percent and India 5.4 percent. There is less of a case for Brazil, with a contraction of 0.7 percent projected, but it is still doing far better than Russia.

But the BRICs concept is not just about economics. As mentioned, it is a marketing device to urge investors to focus on the big emerging players. From an investment standpoint, it could be argued that Russia is leading the BRICs. Its stock market is up 128 percent this year versus around 80 percent for the other three.

At very least, however, Russia's economic underperformance and stock market outperformance does suggest it is the outlier of the group.

from MacroScope:

Why the BRICS like Africa

There is little doubt that the BRICs -- Brazil, Russia, India and China -- have become big players in Africa. According to Standard Bank of South Africa, BRIC trade with the continent has snowballed from just $16 billion in 2000 to $157 billion last year. That is a 33 percent compounded annual growth rate.

What is behind this? At one level, the BRICs, as they grow, are clearly recognising commercial and strategic opportunities in Africa. But Standard Bank reckons other, more individual, drivers are also at play.

In a new report, the bank looks at what each of the individual BRIC countries is trying to do. To whit:

-- Brazil's immediate intererest in Africa is securing access to natural resources, particularly oil. But is also motivated by a desire to create a new "Southern Axis" with itself at the forefront.

-- Russia is also interested in Africa's natural resources. But it faces a problem because of the sullied reputation of the Soviet Union during the Cold War. So Moscow has also embarked on a rebranding programme within the continent by ramping up its aid programmes.

-- India is attracted to Africa in part because of long historic ties. Commercial engagement, however, is also motivated by a need to guarantee the natural resources it needs for its own growth. Furthermore Africa is seen politically as a key ally in the pursuit of a competitive advantage over its Asian competitor China.

-- For China, Africa provides a long-term partner in its ongoing bid to gain global economic ascendancy, providing it with the resources, markets, geopolitical support, and, eventually, food and social security in the form of a growing and engaging diaspora.

from India Insight:

India, China leaders move to ease new strains in ties

While Indian Prime Minister Manmohan Singh's meeting with Pakistani President Asif Ali Zardari in Russia captured all the attention,  Singh's talks with Chinese President Hu Jintao may turn out to be just as important in easing off renewed pressure on the complex relationship between the world's rising powers.

India said this month it will bolster its defences on the unsettled China border, deploying up to 50,000 troops and its most latest Su-30 fighter aircraft at a base in the northeast.

While upgrading the defences has been a long-running objective, the timing seemed to suggest New Delhi's renewed fears of "strategic encirclement" by China by deepening ties with all of its neighbours, not just Pakistan but also Sri Lanka and Nepal.

The chief of the Indian air force, reflecting the anxieties in the security establishment, said China was a far bigger threat than Pakistan because so little was known about Beijing's combat capabilities.

Predictably enough, the Indian military moves and statements drew a strong response from China's official media warning that New Delhi's tough new posture was dangerous if it thought it would compel China to cave in. Beijing was in a different league, both in terms of national power, economic scale and global influence, the media said.

On Monday, Hu and Singh met on the sidelines of the Shanghai Cooperation Organisation and the BRIC meeting that followed in the Urals city of Yekaterinburg. Details from the meeting were sketchy, but the Press Trust of India said the two leaders supported an early meeting of a joint economic group to push trade ties. 

They also touched on the border dispute at the heart of the more than four decades of distrust, noting that top negotiators were due to meet in August. The People's Daily said Hu stressed on expanding economic cooperation and investment flows and aims to take bilateral trade to $60 billion in 2010. It stood at $51.8 billion in 2008, the paper said.

from MacroScope:

Victory for emerging BRICs?

Emerging market ministers, particularly those from the BRIC economies -- Brazil, Russia, India and China -- are painting this weekend's G20 meeting as a victory in dragging them out of the shadows of global policy-making.

The finance ministers' statement included the promise of more money for the International Monetary Fund and regional development banks, on whom struggling emerging economies rely for support.

It accelerated a review of IMF quotas by two years to 2011, which should give emerging economies more say in the running of the multilateral lender. It also suggested that the headship of IFIs -- international financial institutions -- would no longer be guaranteed to Americans or Europeans. 

BRIC countries even issued their own communique, ahead of the final statement. "There is a conclusion that has been reached in recent years, which is that the resolution to today's global problems is only possible with the participation of emerging countries," Brazil's central bank governor Henrique Meirelles told MacroScope.

 "There is a natural evolution of the decision-making process, which many important countries agree on, that decisions move from the G7 to the G20."

But were there actually any major concessions?  Tim Ash,  head of emerging Europe, Middle East and Africa research at RBS thinks not.

"Clearly they would like things to change, but I'm not sure that much has actually changed," he says.

Argentina see off sorry Brazil

The cheers before kickoff in the Beijing Workers’ Stadium were for five-times world champions Brazil and Ronaldinho. At the final whistle, the Chinese crowd rose to acclaim Argentina after a 3-0 win against nine-man Brazil sent them through to the Olympic final.

China may be a relatively untapped soccer market, but the 50,000 plus crowd knew that the best team had won on the night.

The Olympic tournament, with its uneasy format of under-23s and a smattering of over-age players, has plenty of critics, but Brazil v Argentina is a big match in any competition.

So much so that even the ultra-efficient Beijing organisers struggled to shoehorn the hundreds of accredited press and associated media folk into the seating reserved for them. The post-match press conference was an all-ticket affair, with Portuguese and Spanish-speaking reporters given priority.

Argentina, inspired by captain Juan Roman Riquelme and the darting Lionel Messi, made their superiority count after halftime, running in their three goals in the space of less than 20 minutes.

All the marginal decisions went their way – Brazil appealed in vain for offside when Sergio Aguero scored his second to put Argentina 2-0 ahead. Shortly after Brazil’s Pato had the ball in the net, but this time the goal was ruled out for offside and there was no way back.

So plenty to think about for national coach Dunga, who has given the impression during this tournament of wishing he were elsewhere. Plenty too to ponder for Ronaldinho, who looked out of sorts as he prepares for life with AC Milan after a disappointing  final season with Barcelona.

South American rivalry to spice up the Games

Only one thing would give Argentina more pleasure than winning their second Olympic gold and that would be to stop Brazil from winning their first in the process.

The Olympic soccer tournament does not cut much ice in Europe but it is taken much more seriously in South America. Brazil have won the World Cup five times, the Copa America eight and the Confederations Cup twice and their failure to add an Olympic gold to their collection rankles.

It would be especially painful if their latest attempt to win the competition is ended by their greatest rivals.

So, when the two sides meet in the Beijing Workers Stadium in Tuesday’s semi-final, it will not be quite the real thing but almost — possibly around 70 percent.

The Olympic tournament features under-23 teams but both teams have taken advantage of a rule which allows up to three overage players per team. Brazil have selected Ronaldinho as one of their quota while mercurial playmaker Juan Roman Riquelme is part of Argentina’s.

Argentina also have Lionel Messi, who falls within the age limit. Several other players make regular appearances at senior level including Fernando Gago, Javier Mascherano, Sergio Aguero and Pablo Zabaleta.

On the Brazilian side, Anderson and Diego make frequent appearances at senior level while Marcelo, Rafinha, Hernanes and Breno appear set to break into the squad.

Beijing podcast — day nine

The podcast team reflect on insane Usain, Phelps fatigue and the most dangerous man at the Beijing Olympics.

I’m joined by Julian Linden, Belinda Goldsmith, Brian Homewood, Erik Kirschbaum and Neil Maidment to look at the dafter side of the Beijing Games.

And if you were in any doubt as to the talents of Mr Linden, listen out for him playing the piano in the background.

Click below to play.

A Ronaldinho revival? Don’t speak too soon

Ronaldinho’s two-goal performance against New Zealand in Sunday’s Olympic Games has already been hailed as some sort of revival after his miserable last season with Barcelona.

The former World Player of the Year showed flashes of his best form in the 5-0 win with plenty of cheeky flicks, shimmies and stepovers. And, of course, he grinned.

“This was a reward for everything which I have done and for all the people who believed in me and helped me to start playing again,” he told Brazilian media.

But the performance needs to be put into context.

The Olympic soccer tournament is an under-23 competition and Ronaldinho is competing as one of the three permitted overage players per team.

Brazil’s opponents qualified from a group in which Fiji were their strongest opponents. They have only three professionals in their 18-man squad. Most of the other players are university students who play football for fun.

Ronaldinho has just signed for AC Milan. He will play in arguably the world’s most unforgiving league and is going to have to fight hard just to get into the team every week.

Dunga far from happy despite Brazil win

If there was an Olympic gold medal for whingeing then Dunga, coach of the Brazilian soccer team, would be among the early contenders.

The 1994 World Cup winning captain, who as a player was an example of resilience and dedication to the cause, is not a happy camper.

First, he was complaining about the food — “When you try to talk to the chef to change the menu, he has to talk to his boss, who has to talk to his boss, who has to talk to his boss and by that time the Olympics are over” — and lack of training time in Shenyang, where Brazil have started their campaign to win a first gold in Olympic soccer.

After his team struggled to beat nine-man Belgium in their opening match on Thursday, he blamed  the pitch and his opponents for making life difficult (isn’t that what they’re supposed to do?).

“The ball bounces around all over the place and you need two or three touches to bring it under control,” he snarled. “The opposition just kept putting all their players behind the ball and used the high ball into the area. They’ve been together for four months and we got together 15 days ago.”

But the unhappy truth is that Brazil should have swept their opponent aside and might have done so if Dunga had been just a little more adventurous. A team boasting players such as Werder Bremen midfielder Diego, Premier League players Lucas and Anderson in midfield, AC Milan prodigy Alexandre Pato in attack, plus Ronaldinho, should not play in fits and starts as Brazil did on Thursday.