Opportunities and challenges of the BRICS countries

Openness, cooperation, learning and sharing should be strengthened between each other

A featured advantage

The BRICS refers to the English initials of Brazil, Russia, India, China and South Africa. Because the word is similar to the English word brick, it is called the BRICS. The data show that from 2006 to 2016, the proportion of the total GDP of the BRICS countries in the world economy increased from 12% to 23%, the proportion of total trade increased from 11% to 16%, and the proportion of foreign investment from 7%. Rose to 12%. Over the past 10 years, the quality of life of more than 3 billion people has improved. The International Monetary Fund (IMF) report pointed out that in the past 10 years, the BRICS countries have contributed more than 50% to world economic growth.

The “BRIC Five” land area accounts for 26.8% of the world. In 2016, under the background of the global economic slowdown, the contribution of the “BRIC” to the world economic growth reached 50%. According to the IMF, most of the global economic growth in the next five years will come from China, the United States and India. Based on the current US dollar exchange rate and purchasing power parity, the above three countries will complete 52%-54% of global GDP growth.

Brazil

Brazil is the largest country in South America with the fifth largest land area in the world. Brazil is rich in natural resources. It has proven that iron ore reserves account for 9.8% of the world's total reserves, and nickel reserves account for 4.0% of the world's total reserves. Yankuang has proven 4.559 million tons, enough for 800 years worldwide. Forest coverage is 57%, freshwater resources account for 18% of the world's total, and hydropower accounts for 86.5% of its national electricity generation. Coffee, cocoa, sugar cane, corn, soybeans and other production ranks the highest in the world.

Brazil's GDP ranks first in South America. From 1968 to 1973, the Brazilian economy grew at an average rate of 11.2%. In 2010, it once leaped to the seventh largest economy in the world. However, due to the government's poor control over the exchange rate, from 2005 to 2014, the Brazilian real reign The US dollar appreciated by 47%, plunging export competitiveness. In 2015, the real depreciation was 24%, and the 10-year bond yield soared to a record high. In 2015, Brazil's GDP shrank by 3.8%, but it has now ended 8 consecutive quarters of decline, with a positive growth of 0.4%.

South Africa

South Africa, Africa's second-largest economy, is located at the southernmost tip of Africa. It has good geographical conditions. The east, south and west are on the verge of the Indian Ocean and the Atlantic Ocean 600,558. The clinics and the two major oceans are at the forefront. The southern Cape of the Cape of Good Hope has always been called “ One of the busiest sea lanes in the world." South Africa has the most complete industrial system in Africa, generating 60% of all electricity in Africa, and deep-hole mining technology ranks among the best in the world.

Minerals are the main source of South Africa's economy. Among the more than 70 kinds of minerals that have been proved and mined, gold, platinum group metals, manganese, vanadium, chromium, silicon and aluminate rank first in the world. South Africa is the world's largest gold exporter. The Rand mine has so far extracted 35,000 tons of gold and still has 18,000 tons. South Africa's diamond production accounts for about 8.7% of the world, and its largest diamond company, De Beers, once accounted for 90% of the global market. In 2016, South Africa's GDP grew by 0.3%, and the data is expected to reach 1% in 2017.

India

India has the world's largest labor market, and two-thirds of its population depend directly or indirectly on agriculture for a living, and there is huge room for labor appreciation. In recent years, India's service industry has developed rapidly and has become the world's largest exporter of generic drugs and an important exporter of software and finance services.

Indian households have a total of 15,000 tons of gold, with a total value of 3.2 trillion US dollars, 40 times that of the Central Bank of India. India's annual gold trading volume is 45 billion US dollars, consuming 800 tons of gold per year, accounting for 20% of the world's total consumption. According to the World Gold Council, India's gold imports for consumption in 2016 reached 666 tons, exceeding the European Central Bank's total gold reserves. It is estimated that by 2020, Indian gold demand will reach 850-950 tons.

In recent years, India's economic growth rate is leading the world, but its GDP growth in the first half of this year was 5.7%, which fell sharply year-on-year and quarter-on-quarter, the worst in three years, rooted in radical fiscal and financial reforms. The “Washing Decree” issued by the Indian government in November 2016 has fully entered into a unified tax system for goods and services in July this year. The two measures hit the market order in the short term, causing disorder in the domestic supply chain and distribution chain, resulting in a deterioration of the business environment, bank squeezes and banknotes, and small stores across the country facing closure or annexation. About 300 million Indians are unable to exchange new banknotes because they do not have an ID card, and the decline in personal disposable income has led to a shrinking demand for commodities. Corporate and family wealth has been reshuffled, and the number of unemployed people nationwide has increased dramatically by 1.5 million from January to April this year.

Russia

Russia has the largest land area in the world, with proven reserves of 6.5 billion tons of oil, accounting for 12% to 13% of the world's proven reserves. The proven reserves of natural gas are 48 trillion cubic meters, accounting for one-third of the world's total; forests cover 50.7% of the country's land area, and the volume of wood is 80.7 billion cubic meters, ranking first in the world. Nuclear power accounts for 10% of the country's total electricity, and hydraulic resources rank second in the world. The world's iron reserves are the first, the world's reserves of coal and aluminum are the second, and the reserves of uranium are the seventh in the world. The reserves of manganese, copper, lead, zinc, nickel, cobalt, vanadium, titanium and chromium are among the best in the world.

Russia has increased its national gold reserves at a rate of 200 tons per year, and has increased its gold positions for 10 consecutive years. Since the beginning of this year, the purchase volume has been 113.3 tons, compared with 173 tons, 206 tons and 200 tons in the previous three years. But these figures only account for about 70% of Russia's gold production during the same period. As the world's third-largest gold producer, Russia's global production has declined, and Russia has increased its production against the trend. It plans to increase its annual gold production from the current 270 tons to 400 tons by 2030. Since the beginning of this year, the US sanctions against Russia have been escalating, and the Russian ruble has been seriously devalued and inflation.

China

China's total GDP is second only to the United States, and it is far ahead of other BRICS countries. The population ranks first in the world. In the first half of this year, China's economic growth rate reached 6.9%, exceeding expectations. In 2016, China produced a total of 453.486 tons of gold and consumed 975.38 tons. It has become the world's largest gold producer for 10 consecutive years and has become the world's number one gold consumer for four consecutive years.

China is rich in resources but low in per capita, and its comparative advantage is not obvious. Rare earth reserves account for 56% of the world's total, and are the largest producers and exporters of rare earths. Production has been the world's number one since 1985. The reserves of tungsten, antimony and molybdenum account for 61%, 44% and 43% of the total global reserves, respectively. The per capita resources of coal, oil and natural gas are only 55%, 11% and 4% of the world's per capita level. The majority of mineral resources per capita is less than half of the world average, and import dependence is high.

China's comparative advantages are prominently reflected in infrastructure construction, manufacturing, transportation, power transmission and e-commerce. In the first half of 2017, the contribution rate of China's fixed asset investment to GDP reached 45%, far exceeding the US's 22% and Japan's 30%; the high-tech manufacturing and equipment manufacturing added value increased by 13.1% and 11.5%, respectively. The proportion of industrial enterprises above designated size reached 12.2% and 32.2% respectively. Fixed asset investment has become the largest engine of China's economic growth, and has effectively promoted global demand for commodities such as coal, steel, non-ferrous metals, agricultural and sideline products.

B opportunity

The "BRICs" are distributed in Asia, Europe, the United States and Africa, and each economy has its own characteristics and complementarity. China is a "world factory", Brazil is a "world raw material base", Russia is a "world gas station", India has obvious labor resources and IT advantages, and "Africa Portal" South Africa precious metals and diamonds are well-known around the world.

energy

The BRICS countries account for 36% of the world's energy production and consumption. Russia's crude oil production in 2016 is 1.5 times that of China, India and Brazil; natural gas production and exports are leading the world, while the remaining four countries need imports. China, India, and Brazil are net importers of coal, while Russia and South Africa are net exporters. The “BRIC” renewable energy power generation capacity is 334 GW, accounting for 38% of the world, surpassing the earlier US and EU. Among the seven existing investment projects of the BRICS New Development Bank (NDB), there are six renewable energy sectors. In 2018, China and Russia will officially open energy channels. In the next 30 years, Russia's natural gas exports to China will reach 38 billion cubic meters per year.

gold

Gold is an international reserve asset. In the period of severe inflation and political and economic crisis, gold has become the ultimate reserve means of resisting risks. In 2016, the total official reserves of the “BRIC” gold reached 3,829.82 tons, including 1708.5 tons in China, 1371.22 tons in Russia, 557.7 tons in India, 125.2 tons in South Africa and 67.2 tons in Brazil.

The "BRIC" includes the world's largest gold source, maximum output, maximum processing and largest consumer market. It can join hands to achieve self-sufficiency and master the right to speak and pricing in the international gold market.

Commodity

There are exchanges between the “BRICs”, covering not only energy and various mineral resources, but also a variety of agricultural, forestry, animal husbandry and fishery commodities, and China is the world's largest population and the largest consumer of commodities.

China is Brazil's iron ore, oil and agricultural 000061, shares attending largest exporter, Brazil has also become China's second largest importer of agricultural products. In the first half of this year, 33% of Brazil's agricultural products were exported to China, with exports reaching US$13 billion, equivalent to twice the export of EU agricultural products, up 21% year-on-year. China is the most important import market for Russian agricultural products and logs. The export volume accounts for about 30% of the total agricultural exports, of which more than 98% are aquatic products, as well as wheat, milk powder, oilseeds and oilseeds. The trade volume in 2017 is expected to exceed 800,000 tons. India's exports of Chinese products are mainly aquatic products, cotton, vegetable oil, spices, feed and so on. China is South Africa's largest trading partner. South Africa's exports to China are mainly fruit and wine. In 2017, the trade volume will exceed 2 million tons.

China mainly exports labor-intensive products such as raw silk, fruits, vegetables, beverages, aquatic products, garments and fabrics to the BRIC countries. Since 2010, China's import and export of agricultural products to the BRIC countries have increased by 50% and 23% respectively, much higher than the 14% growth rate of world agricultural products in the same period.

Infrastructure, communications, financial services

Complementary resources have stimulated the huge demand for infrastructure, processing logistics and transportation. Such as the Chinese pay to build 601,800, shares attending the construction of Brazil Rio Metro Line 4, the entire 16 km run 13 minutes, passenger transport about 30 people a day after the opening of the line, all-manufactured trains China. In 2001, China Communications Construction entered India and successively built the Mumbai Cross-sea Bridge and the Delhi Metro CC12 tender project. In 2015, it also contracted the dredging project of the “Bronke” port channel in St. Petersburg in Russia with a contract value of US$110 million.

For example, in 2016, COFCO Group's agricultural products and food business volume in the BRICS countries was 13.54 million tons, with an amount of 3.4 billion US dollars. In 2017, the total operating volume is expected to exceed 15 million tons, and the amount exceeds 3.7 billion US dollars. Invested 2.1 billion US dollars in the BRICS countries, accounting for nearly half of the Group's overseas investment, covering warehouses, transfer stations, crushing plants, refineries, export terminals and so on.

CITIC Heavy Industries 601608, the stock company established a Brazilian company in Belo in 2011, a South African company in Cape Town in 2012, and an Indian company in Kolkata in 2016. The Russian spare parts service base currently under construction is also accelerating. In recent years, CITIC Heavy Industries has provided various major technical equipment and project general contracting services for more than 20 multinational companies such as Brazil's Vale, India's Tata Group, Russia's Copper, and South Africa's Bateman.

Lenovo Group has set up four factories in India and Brazil, with an annual output of more than 28 million smart devices, with an output value of more than 4.5 billion US dollars, and created more than 20,000 jobs.

With the rapid development of e-commerce and Internet consumption, Alipay entered South Africa in June this year; Alipay officially cooperated with Moscow Transportation Department in July; India's electronic payment platform “Paytm” and Indian version of Alipay were also invested and provided technical support by Alibaba.

Investment and trade require a large amount of funds and comprehensive financial services. On July 21, 2015, NDB opened and its headquarters is in Shanghai. The first chairman of the board of directors was nominated by Brazil and the president was appointed by Indian Kmart. Each accounted for 20% of the shares.

NDB has created a new equal cooperation mechanism. As the first international multilateral development bank independently established and led by emerging market countries, since its operation in July 2015, it has supported 11 projects, including 4 in China and 3 in India. 2, 2 in Russia, 1 in South Africa and Brazil. Since 2009, the People's Bank of China has signed bilateral bilateral currency swap agreements with a total of more than 3.11 trillion yuan in total with 30 overseas monetary authorities.

Derivative market

In the BRICS derivatives market, Russia’s Moscow Stock Exchange ranked fourth in the world in terms of volume in 2016, with 10 types of foreign exchange derivatives, RTS stock index futures and MICEX stock index futures. Investors can use rubles, US dollars, euros and renminbi. As a trading margin.

Brazil's stock exchange has the market value of the top five in the world, providing coffee, raw sugar, ethanol, cotton, corn, soybeans, beef cattle, calf and other futures and options contracts. In 2016, its interest rate futures contract ranked second in the world, foreign exchange contracts Ranked fifth in the world. The four clearing houses of foreign exchange, futures, stocks and bonds have become one of the highlights.

In 1875, Mumbai, India established the Cotton Exchange, only 10 years later than CBOT. The Indian commodity market system is divided into three levels, mainly six national futures exchanges. Among them, the multi-commodity exchanges established in 2003 were the largest, accounting for 87% of the transactions. The Indian derivatives market has gold, ferrous metals, non-ferrous metals, energy and soybeans, rapeseed oil, sesame oil, peppermint oil, palm oil, potatoes, spices and other agricultural futures contracts, but also launched carbon financial derivatives.

The Johannesburg Stock Exchange of South Africa acquired the South African Futures Exchange and the South African Bond Exchange in 2001 and 2009, offering a variety of derivatives transactions including futures, securities, bonds, indices, interest rates, currencies and commodities. In 2012, futures trading volume ranked sixth in the world, and currency derivatives trading ranked ninth in the world.

The Brazilian Securities and Futures Exchange, the Moscow Stock Exchange and the Johannesburg Stock Exchange have successively cooperated with China's securities and futures exchanges.

C challenges

The table shows the proportion of the BRICS and G7 countries in the world GDP from 2017 to 2021 (IMF forecast)

The global economic downturn, the United States and Western countries continue to increase economic sanctions against Russia, frequently promote trade protectionism, suppress the price of oil and mineral resources in the BRICS countries, and depreciate the currency. According to WTO data, in 2016 alone, 45% of anti-dumping investigations and 71% of countervailing investigations were directed against BRICS countries. According to the US International Trade Commission data, as of June 28, 2017, 52% of anti-dumping and countervailing measures were directed at steel products, 61% of which were for the “BRICs”.

Institutional differences form trade barriers. In 2017, the trade volume among BRICS countries has exceeded US$350 billion. "There is friction in trade." Countries have gradually revealed a variety of non-docking, uncoordinated, and unsmooth links in market mechanisms, standards systems, financial support, and security.

"As President Xi Jinping said, the BRICS countries are like five fingers. They all have their own strengths and they are a fist." Chinese Foreign Minister Wang Yi made such a description of the BRICS cooperation during the two National Conferences this year. So, how to weave this bond of the BRICS cooperation mechanism more robustly?

The first is to set up a free trade zone. The BRICS countries urgently need to improve the domestic tax system first, open up the market to each other, and better play their comparative advantages by eliminating trade barriers and increase the level of trade and investment liberalization.

The second is to improve the tax cooperation mechanism. Successfully held in Hangzhou on July 27, the heads of the “BRIC Five” tax authorities jointly signed the first institutional document of the BRICS tax cooperation – the BRICS Memorandum of Tax Cooperation, the first official document Raise cooperation in the taxation sector of the BRICS countries to the institutional level. In order to continue to enrich and improve the taxation cooperation mechanism, avoid double taxation, and reduce the tax burden of investment by multinational corporations, China has signed tax treaties with other BRICS countries to effectively protect the legitimate rights and interests of enterprises “going out” and “bringing in”. .

The third is openness and cooperation. The BRICS countries should take the lead in integrating their traditional cooperation networks, span geographical and cultural differences, and form a more open and inclusive cooperation platform on a global scale to help developing countries, including emerging economies, better express their shared vision and Claims and work together to provide solutions.

The table shows the economic growth rate of the BRICS countries (unit: %)

The table shows the contribution rate of the BRICS countries to world economic growth.

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