Power Up

As Chinese Premier Wen Jiabao informed the world recently, he's a "little bit worried." Not about China, mind you, but about the United States. "We have loaned huge amounts of money to the U.S., so of course we have to be concerned," said Wen earlier this month, warning America to "honor its word" and "ensure the safety of Chinese assets." Translation: Those guys on Wall Street really screwed up. We think the dollar might tank and erase the value of our $2 trillion in T-bills. Get your act together.

It's a stunning turnabout from even a year ago, when such warnings were almost always issued by rich nations, like the U.S., to poorer ones. But a lot has changed in recent years and recent days. Emerging giants like China are stronger, more economically competent and vastly richer. Their confidence has only increased amid a calamity that is widely described as the worst "global" recession in 70 years, but is in fact not truly global. It is shrinking the richest economies, but only slowing the emerging giants. This year GDP is expected to contract by 3 percent in the U.S. and Europe, and by close to 6 percent in Japan, while continuing to expand in China and India by 7 and 5 percent, respectively.

That growth gap is destined to reshape the economic future of the world. Goldman Sachs chief economist Jim O'Neill now predicts that the major emerging markets—Brazil, Russia, India and China, a.k.a. the BRICs—could overtake the combined GDP of the G7 nations by 2027, nearly a decade sooner than the forecast in a landmark study a few years back. The ascent of the formerly poor giants is accelerating, and their confidence is evident not only in the utterances of Wen Jiabao. Manmohan Singh of India has blamed the "massive failure" on authorities in "developed societies," but his peers all name America by name. Vladimir Putin of Russia scorns "the irresponsibility of the system that claims leadership." Luiz Inácio Lula da Silva of Brazil, in an interview with NEWSWEEK (following story), says the U.S. bears the brunt of responsibility for the crisis, and for fixing it at the upcoming G20 summit in London.

Power is not only shifting toward the BRICs, but among them as well. For all their outspokenness, Brazil and Russia have been hit much harder by the crisis than India and China. Dependent on sales of commodities that are shrinking rapidly in price, Russia's economy has fallen off a cliff, and could shrink 3 percent this year. Brazil will likely stagnate. Their recoveries could be slow and painful, too. Goldman Sachs projections for the period from 2011 to 2050 show Russia growing at just 2.8 percent, Brazil at 4.3 percent, China at 5.2 and India at 6.3. If those figures turn out to be correct, three of the top four economies in the world—China, the U.S., India and Japan, in that order—would be Asian within the next two decades. The Asian Century is almost here.

The markets seem to know it. While the S&P 500, down about 45 percent last year, has plummeted another 15 percent since the start of 2009, the Shanghai Composite Index is up by 20 percent, continuing a rally that began in November.

The grim consumer outlook, unemployment paranoia and general siege mentality that's taken hold in the West is also largely absent in Asia. In China and India, sales of cars, white goods and many other types of consumer products are still rising, in large part because of the strong and swift stimulus measures taken by these nations, which have clearly learned a lot about macroeconomic policymaking since the 1990s. Capital goods and machinery are showing double-digit growth in India, and cement sales in China have suddenly risen, now that it's getting warm enough to build. Russia once again is the outlier: consumer spending there is still down sharply.

Americans are ceding the role of world's most resilient shoppers to the Chinese and Indians. Chinese bank lending this past December was up 1,000 percent over the same period last year, as the government lowered interest rates, reigniting the real-estate market. "That's opening up a whole new, broader base of local people in China who can now afford apartments—and believe me, the demand is there," says Michael Klibaner, head of China research for the real-estate marketresearch firm Jones Lang LaSalle.