China pulls away from BRICs
China pulls away from BRICs as destination for business growth
China has pulled away from its BRIC counterparts in terms of the development of its business growth environment according to the Grant Thornton Global Dynamism Index (GDI) 2013. The index reveals that while the Chinese economy has significantly improved its attractiveness as a place to do business over the last twelve months, Russia, India and Brazil have fallen away and face significant challenges.
Developed in conjunction with the Economist Intelligence Unit, the GDI ranks 60 of the world's largest economies on 22 indicators of dynamism. The findings show that China ranks third globally, behind Australia and Chile. China has risen 17 places from this time last year, largely driven by increases in R&D, IT spending and labour productivity.
Ed Nusbaum, global CEO at Grant Thornton, commented: “Growth in China is slowing as the new leadership rebalances the economy away from exports and investment towards a more sustainable, consumption-driven model of growth. However, the positive news is that this is not dampening business expansion prospects. The GDI shows increasing science & technology activity, which will help sustain economic growth potential by boosting the quality, productivity and efficiency of outputs.
“China is not only a massive market, but it is also developing fast. Ten years ago cheap labour was a draw for business leaders but wages have risen and the emergence of the Chinese consumer offers a different type of opportunity. Foreign business leaders are now looking to invest in order to sell locally rather than export back. The index shows that the government still has work to do to improve rules and regulations but the growth opportunities are too big to ignore."
By contrast, the other BRIC economies have all fallen down the rankings this year. Brazil slid eleven places to rank 42 this year; Russia fell three places to rank 43; and India dropped six places to 48.
Ed Nusbaum added: “The index suggests the BRICs are no longer travelling together. All have slowed over recent months, but it appears China is handling this transition most effectively – certainly as far as prospects for business growth are concerned. The challenge for the other BRICs is to manage the challenges the index reveals and develop their attractiveness to dynamic businesses.
"The Brazilian economy grew by just 0.9% in 2012 and the popular unrest we saw during the Confederations Cup is a symptom of slowing growth, rising inflation and the end of the credit and commodity-fuelled boom. The government has promised greater political transparency but economic policy remains confusing for investors. India is caught between a falling rupee and slowing growth and has enacted a raft of reforms, including opening up key sectors to foreign investment. Russia remains heavily reliant on global commodity prices and the government recently announced a package of economic measures including a range of infrastructure investments and breaks for small and medium-sized businesses."
Dominic King, Research Manager, dominic.king@gti.gt.com, +44 (0)20 7391 9537
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