All the way to the bank of BRICS

Economist who coined the term still confident in emerging economies

A BRICS Bank could help foster even more trade between the countries involved, said Jim O'Neill, chairman of Goldman Sachs Asset Management.

O'Neill, also known as Mr BRICS, coined the acronym BRIC in 2001 to refer to the developing nations Brazil, Russia, India and China. In 2006, BRIC was formalized at the initiative of Russia and enlarged in 2011 with the addition of South Africa.

This year, the establishment of a development bank is expected to be one of the highlights when leaders of the BRICS economies meet in Durban on Wednesday.

"If, in fact, the BRICS bank is announced, this will be the beginning of an institution that sort of becomes a World Bank for their huge sphere of influence," O'Neill told China Daily in an exclusive interview.

In his mind, the bank could be helpful in promoting BRICS countries' trade. He is eagerly awaiting the BRICS summit to see whether they announce the formation of the bank.

The BRICS Bank is part of a strategy agreed to at last year's summit in New Delhi looking at long-term investment opportunities within the countries making up the group.

It is envisaged that the bank will provide pooled funds for targeted infrastructure projects and key sectors, while supporting and driving increased commerce between the BRICS and other emerging economies.

On BRICS' achievements in the past decade, O'Neill noted, "Economically, the achievements are much bigger than politically."

With respect to economics, he said, BRICS countries — except South Africa — have become much bigger much more quickly than he expected, even if they have lost some momentum in the past 12 months.

He used "remarkable" to describe their developments. In 2011 alone, their collective GDP increased by around $2.3 trillion, which is equivalent to the size of Italy's.

"By 2015, if not before, the combined size of the BRICS economies seems highly likely to become as big as the US and they are set to become as big as the G7, as we assume, by 2027," O'Neill said.

"It is transforming everything in the world economy, including the patterns of world trade and finance," he added.

O'Neill continues to put his confidence in emerging markets, remains bullish on China, and believes the country's slowing 2012 growth will pick up in 2013.

O'Neill first came to China in 1990, and since then has witnessed profound changes and transformations in the country. He shaped an era for Goldman Sachs Asset Management by shifting focus from G7 countries to emerging markets, particularly China.

"The importance and scale of China for the world, never mind within the BRICS group, is next to none and vital for us all," he said.

As a result, he said, the decisions China makes — both in its own right and within a BRICS context — are extremely important.

"This decade, China will grow by around 7.5 percent (annually) and I am happy with that."

He is also a bit surprised by the weakness of the retail sales numbers reported this year, which suggests that China needs to boost consumption, which might need more policy support.

Assuming the Chinese government does pull that off, O'Neill said it would mean China will succeed in doubling both real GDP and real incomes this decade as planned, and this would be good for the world.

Other BRICS countries, O'Neill said, need to concentrate on their own priorities rather than worry about China, as they also have things to achieve.

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