{"id":1293,"date":"2014-02-06T13:17:44","date_gmt":"2014-02-06T12:17:44","guid":{"rendered":"http:\/\/blogg.lnu.se\/china-research\/?p=1293"},"modified":"2014-02-06T13:17:44","modified_gmt":"2014-02-06T12:17:44","slug":"emerging-markets-the-same-old-story","status":"publish","type":"post","link":"https:\/\/blogg.lnu.se\/china-research\/?p=1293","title":{"rendered":"Emerging Markets \u2013 the Same Old Story"},"content":{"rendered":"

1. Financial markets have become nervous again about emerging markets. We have seen this flock mentality some months ago. Now it\u2019s back again. Surprised?<\/p>\n

2. The answer is \u201cyes\u201d and \u201cno\u201d. Yes<\/em>, because many analysts never seem to understand how emerging markets really work. They are far from perfect. Shortcomings can be found in many respects: politics, social issues, the financial system, other institutional conditions, macroeconomic balance, etc. No<\/em>, because financial markets frequently tend to show flock mentality, overconfidence and overreactions also when it comes to emerging markets. This is not new. Now, it\u2019s time again.<\/p>\n

3. Many financial analysts complain about lame structural efforts in many emerging economies. What do they expect? Sure, there are so many institutional and political impediments for improvements in this group of countries. Corruption, nepotism and rent seeking are just three of them. How on earth can rapid<\/em> reduction or elimination be expected in all these complicated areas? By the way, emerging countries do not have homogeneous political, social and economic conditions<\/p>\n

4. Consequently, emerging markets have been analyzed too negligent for a long time – and they still are. They are, of course, different from mature countries which by the way can be very reluctant on economic reforms as well. Thus, we should analyze the group of emerging economies and their individual \u201cmember countries\u201d at least somewhat differently.<\/p>\n

5. One of the major analytical problems is the fact that Western emerging market analysts too much and for too long time have been concentrating on GDP growth and too little on other important indicators, those from microeconomics and financial markets included. Too much focus on GDP growth may be misguiding, particularly in the medium and longer run.<\/p>\n

6. Furthermore, it\u2019s not good enough to watch developments in China, India or other emerging economies only from the screen. All these emerging countries function differently compared to our part of the world. \u201cScreen analysis\u201d gives, of course, country analysis even more herd behavior.<\/p>\n

7. However, it\u2019s not easy to get out of this analytical dilemma. Most employers would not allow their economists, strategists or sales planners to travel to all these interesting emerging countries in order to get more necessary impressions from \u201cfield research\u201d. But it should be done wherever the financial resources are in place.<\/p>\n

8. Speaking on my own behalf, I have to conclude that my recent trip to China a few weeks ago gave me more input for the interpretation of the Third Plenum\u2019s communiqu\u00e9 than all the hundreds of pages I read about China\u2019s new economic strategy. Or I should put the following way: just reading about these 16 major points of reforms and their 60 subtitles would not have been enough.<\/p>\n

9. What makes future economic developments in China particularly exciting is the great number of goal conflicts that may emerge from these 60, more detailed reform areas. Such an analytical exercise demonstrates that structural reforms in emerging countries are not easy at all. <\/strong><\/p>\n

10. Deepened studies of this kind could make many Western analysts a little bit more humble. The current arrogance against many emerging countries – despite all their really existing shortcomings – cannot always be considered as fair.<\/p>\n

 <\/p>\n

\"\"<\/p>\n

Hubert Fromlet<\/em><\/strong>
\n<\/em>Visiting Professor of International Economics, Linnaeus University
\nEditorial board<\/a><\/p>\n

 <\/p>\n

Back to Start Page<\/a>
\n<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

1. Financial markets have become nervous again about emerging markets. We have seen this flock mentality some months ago. Now it\u2019s back again. Surprised? 2. The answer is \u201cyes\u201d and \u201cno\u201d. Yes, because many analysts never seem to understand how emerging markets really work. They are far from perfect. 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