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People's Daily Online>>China Business

Stable shock absorbers

By Xiao Gang (China Daily)

08:59, March 21, 2012

Emerging economies have advantages that will enable them to weather the ill winds blowing from the West.

With growth slowing in the large emerging economies of Brazil, Russia, India and China, there is growing anxiety that the global financial crisis, which began in the United States and then spread to Europe, will finally end up in emerging economies.

To some extent, fears of this "crisis-shift" are increasing volatility in the global markets and casting another shadow over the world economy. Hence it is important for the emerging economies to take actions to alleviate the growth pressures emanating from the Western countries.

Without doubt, the emerging economies have dramatically increased their importance in the world economy. In purchasing power parity terms, they represent 50 percent of global GDP, up from 30 percent just 20 years ago. According to the latest projections of the International Monetary Fund, the 27 countries of developing Asia may contribute nearly 60 percent to global GDP growth this year.

Because of their rich human resources, relatively high saving rates, and rapid urbanization, emerging economies are better positioned to address the new challenges that lie ahead.

During the global crisis, deleveraging in developed countries forced governments, banking systems, corporations and individuals to reduce debt. This process depressed housing markets and slowed consumer spending; and the process is far from over. Meanwhile, jobs, funds and other economic opportunities are shifting to emerging economies.

In addition, many emerging countries, drawing on the lessons learned from the Asian financial crises and other debt crises that took place in the 1990s and early 2000s, have carried out various adjustments and reforms in fiscal consolidation and monetary policy management, and have improved their financial supervision and the development of local financial markets. These moves have played and will continue to play an important role in responding to shocks.

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