Chapter 17
The BRIC Countries in the
World Economy
◼ Outline
Introduction: The BRICs
Demographic and Economic Characteristics
Economic Reform in the BRIC Economies
The Reform Process in China
Indian Economic Reforms
The BRICs in the World Economy
Trade Patterns
The Challenges of the BRICs in the World Economy
Services
Manufacturing
Resources
Unresolved Issues
The Choices Ahead
◼ What Students Should Know after Reading Chapter 17
This chapter is revised from the fifth edition to include material on Brazil and Russia while maintaining a
focus on the two most populous nations of the world, China in particular. In addition to the basic facts
about the economic and demographic characteristics of each country, their trade patterns are described in
detail. The focus, however, is on the changes in policy that led each of them to turn from isolation and
94 Gerber • International Economics, Sixth Edition
successful return or entrance on the world stage. The growth of BRIC exports and the challenges these
pose to other countries is emphasized.
Some of the most important remaining challenges facing the BRIC economies are presented at the
chapter’s end. These include their unbalanced trade patterns, the environmental destruction that has
accompanied their growth, political reforms in China and Russia, and the role of state capitalism. The
◼ Answers to End-of–Chapter Questions
1. How are the BRIC economies alike? How are they different?
Answer: China and India are both are nuclear powers, sites of ancient civilizations, and the two
largest populations in the world. They are similar to Russia and Brazil in that they have
2. Describe the process of Chinese reforms from their beginning in 1978 up until China’s accession
to the WTO.
Answer: First reforms were in agriculture. Special economic zones were introduced to try out
3. What were the factors that led to economic reform in India, and what were the main elements of the
reforms?
4. Why did economic reform in Russia and most other transition economies lead to large declines in
their GDP?
Answer: Russia quickly tried to create a private economy where none had existed before. In Russia,
nearly the entire productive apparatus of the economy shifted hands from the public to
5. Why did Brazil begin its reforms when it did? What were its main challenges?
Answer: Brazilian reforms began at approximately the same time as reforms in other Latin
6. What are the sources of China’s comparative advantage and how does that show up in the goods it
trades?
7. What are the factors that make India competitive in business services and computer and information
services? Do those factors give it a comparative advantage or do they reflect some other source of
competitiveness?
8. What challenges to the world economy are posed by the BRIC economies?
9. Chinese policies have created a great deal of controversy and discussion. For each of the following
topics, describe the issues raised by China’s trading partners and evaluate their concerns.
a. China’s trade surplus
b. China’s exchange rate system
Answer:
a. China has a large trade surplus with the United States but not with all of its trading partners.