Economist Stephen Green looks at how — or if — China fits into the emerging markets universe.
Stephen Green: What is China? It’s a great question. We were just doing some work looking across the EM universe and just looking at GDPs and we created a, sort of an EM, or these EM indicators and we were just looking at the GDPs. You put China together with the next 15 biggest EM, EM countries, China’s about 50 percent of that universe. You’ve got one country and 15 other counties, and one country accounts for 50 percent.
China in a way is a, kind of a, is a universe in and of itself, and if it’s going to be growing officially seven percent, unofficially probably nearer four or five percent, four, five, six percent for a few more years, that sort of difference is just going to become bigger. So, you know, I tend to tend to think we need to think about the U.S., Europe, China and EM. And obviously EM is a very varied thing. Brazil is very different from Indonesia, it’s very different from India. But just in terms of scale and the, kind of the broader global impacts that these countries have, you know, China is very, much more like the U.S. than it is like Brazil.
When the U.S. grows today it encourages global growth. When Europe grows today, it doesn’t really have much of an impact on many other countries. When China grows today, it doesn’t really have a global impact, but it has a huge impact upon commodity exporters. So that’s in, that’s Brazil and Indonesia, the Middle East.
In that respect it makes much more sense to think about China as a, an economy with its own cycle, with its own dynamics that we need to really be, understand in a lot more detail than thinking about China as part of a broader EM universe. And all those countries have investment opportunities. There are great companies in Indonesia and Brazil and India, but those economies don’t have the global impact that China is having today.
So China is probably an emerging market, but it’s a very special emerging market, and I think we have to spend a lot more time trying to understand what’s going on there.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.