China stands tall amid emerging market slowdown

BEIJING - China stands out as a star performer amid the slowdown in the world's emerging markets, with its economy showing increasing signs of picking up.

A recent report by the Organization for Economic Cooperation and Development (OECD) forecast economic growth to pick up steam in China.

The OECD's leading indicators suggested that, after slowing earlier this year, economic growth in China may continue to revive after a pickup in the third quarter.

China's National Bureau of Statistics said in October gross domestic product in the three months through September was 7.8 percent higher year on year, compared with 7.5 percent in the second quarter.

While China is struggling to maintain relatively robust growth, the size of the slowdown in some other emerging economies is surprising.

According to the OECD report, growth would remain sluggish in India, Brazil and Russia, and the slowdown in emerging economies could taint global growth in 2014.

The report lowered 2014 global growth by 0.5 point percentage to 3.6 percent "due to weaker prospects in many emerging market economies," prompted by "abundant capital inflows and credit growth."

"Contrary to the situation in the early phases of the recovery when stimulus in emerging market economies had positive spillovers on growth in advanced economies, the global environment may now act as an amplifier and a transmission mechanism for negative shocks from emerging market economies," said Pier Carlo Padoan, OECD deputy secretary-general and chief economist.

After a decade of stunning economic performance, emerging markets have now found themselves at a crossroads.

The economic growth rates for India, Russia and Brazil in 2007 were 9.6 percent, 8.1 percent and 5.4 percent, respectively.

In the latest IMF economic outlook report, however, the forecast for the Russian economy this year was lowered to 1.5 percent. India's growth forecast was cut sharply by 1.8 points to 3.8 percent while Brazil's was left unchanged at 2.5 percent.

To achieve sustained economic growth is not an easy task for emerging economies. As Ruchir Sharma, managing director of Morgan Stanley Investment Management, has said: over the course of any given decade since 1950, on average, only a third of the emerging markets have been able to grow at an annual rate of 5 percent or more. Less than one-fourth have kept up that pace for two decades, and one-tenth, for three decades.

And Sharma also pointed out that, as of 2011, the difference in per capita incomes between the rich and the developing nations was back to where it was in the 1950s.

This round of economic cooling, stemming from some deep-rooted structural flaws, poses grave challenges to the emerging markets and leaves them no choice but to take bolder and wider measures to deepen institutional reform.

Only those who commit to reform and succeed in restructuring can progress to the next round of growth, and China is no exception.