In a recent round of conferences about the so-called emerging-market economies, I often found myself at odds with other analysts and had to keep making the same points repeatedly. To save time in the future, here they are:
1. The emerging economies are more different from one another than they are alike. China is bigger than Germany, France and Italy combined, even in current dollar terms. On the basis of new purchasing-power-parity estimates, China might already be as big as the US, South Korea is as rich as Portugal and not far behind Spain: it has plenty in common with those “advanced economies” and nothing in common with the “emerging markets” of Africa.
2. The mood of the markets is sometimes good for a laugh, but not much else. At one of the conferences, I was assigned this question: “Is this emerging-market crisis going to be as bad as 1998?” This was in March. For the year to date, with the important exceptions of the Chinese and Russian markets, virtually all emerging-market equity indexes are showing stronger gains than the US, many of them at doubledigit rates.
3. Let’s stop supposing that the advanced economies can have a good recovery while the rest fall back —let alone fall as far as they did in 1998. In differing degrees, the US, Europe and Japan all need to export their way to a full recovery from their post-2008 doldrums.
If their export markets in Asia and Latin America collapse, that won’t happen. The idea that the developed world is back while the emerging-market economies are in trouble doesn’t add up.
4. Let’s stop talking down China’s economic strength. Many complain that its official statistics are inflated: partly, I think, this reflects the belief (or hope) that a nondemocratic country is bound to fail. Skilled China watchers are appropriately sceptical and look at other indicators as well.
They find that China’s growth is no illusion. Bear in mind, too, that China’s government resisted the new PPP revisions because they showed the economy to be larger than the authorities want to acknowledge (for purposes of development assistance and global obligations).
5. Relatedly, the global economy is doing better than many suppose. Thanks to China and other large emerging economies, growth in global gross domestic product will approach 4% a year over the course of this decade, according to the International Monetary Fund — higher than in either of the previous decades.
The new PPP data suggest that the world economy is growing even faster than the conventional measures suggest: even at a supposedly slow rate of 7%, China will contribute more than twice as much as the US to this year’s rise in global output.
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