Download - How emerging markets are shaping the world
How emerging markets are shaping the worldA brief analysisJohn Birchall
As the US fades other are growing
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US Emerging Other
Global grow th contributions
What is driving this? The collapsing price of technology
The political openness generated by, first, the adoption of outward looking policies by the Chinese under Deng Xiaoping in the early 1980s and, second, by the fall of the Berlin Wall in 1989
These are massive shocks that have rocked the competitive equilibrium of the world economy through both labour and capital flows
The fall in real communications prices
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Ocean Freight AirTransatlantic phone Satellite
Cost of transport and communications
The history of China’s economy
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GDP per capita, 1-1700 AD $$
Now it’s edging into the lead
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Per capita GDP % of World Av erage (LHS)Share of World Ex ports % (RHS)
China's Geopolitical standing, 1820-2003
The US would have fallen faster if the merging markets had not been hungry for US goods
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Ex ports Residential inv estment
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Who drives US export growth?
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% Pts % PtsContributions to 2007 US ex port grow th
The Eurozone is increasingly influenced by China and Eastern Europe
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Japan id also increasing its dependence on emerging markets
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The emerging markets influence on capital markets
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Dev eloping Countries Dev eloped Countries
Total foreign ex change reserv e holdings USDbnUSDbn
This is driving demand for asset back securities
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Official purchases Corporate bondsCorporate equity FDI
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But personal debt is also increasing
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Non-financial corporate business Households
% GDP% GDP US outstanding debt
Might loose monetary discipline in emerging markets be partly responsible for commodity price increases?
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Economist food prices (LHS)Economist metal prices (LHS)Brent oil prices (RHS)
USD/BBLIndex 2000 = 100
Have US consumers finally run out of steam?
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And their spending on capital items is slowing
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%% Peak to Peak - US total inv estment
Will China have to re-value?
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Consumer price inflation CNY v s USD (RHS)
% Yr China
Could Brazil (BRIC country) be the new leader?
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BRL v s USDBrazil nominal effectiv e ex change rate (RHS)
Index 2000=100
The food price problem
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It’s across all markets
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$/MT$/MT Thai Rice prices (B Grade)
Stocks are low
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Wheat also
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Wheat - ending stocks Mln tonsMln tons
Problems of the developing world
Food and energy price uncertainty makes inflation targeting more difficult…
…and requires tough decisions on interest rates…
…when the rise in global inflationary pressures is someone else’s fault