Emerging Markets Leading Global Growth

China’s economic recovery is stronger than many investment analysts believes and is helping to fuel a wider resurgence across the Asia Pacific region, according to one monitoring index.

The HSBC Emerging Markets Index (EMI) found that a manufacturing-led bounce recorded the highest growth rate in a year and points to further improvements in the coming months.

They found that emerging markets ended 2012 with a slight increase in their economic growth with goods producers posting the biggest increase in orders since early 2011.

However, the overall speed of growth is still lower than that recorded in the first half of 2012.

Stephen King, an economist at HSBC, said: “Recent improvements in economic growth are encouraging although hardly buoyant and the signs are encouraging in the early part of this year.

Contracting exports

“The growth which is being seen in emerging markets is being led by domestic demand since they are seeing exports contracting, though not at the same worrying pace as in the middle of last year.”

He said that China’s economy has still to pick up in growth but it is a bigger economy now and the country will lead a global resurgence.

Mr King added: “The markets most likely to benefit as economic activity falls away from the ‘old world’ and to the developing markets are those countries which are near to China geographically or which are important for supplying commodities to their economy.

“It’s not surprising that those countries which have managed to increase exports to China have seen quick gains in the last 10 years while those that haven’t have exported to China have suffered from poor GDP growth.”

The UK’s proportion of GDP for goods sold to China is minute while in the US only 0.7% of its GDP is exported there.

BRICS gearing up

Mr King said: “While the EMI may not appear to be very strong currently we will see China have more influence than Europe or the US on the emerging markets and their economic destiny.”

Optimism about business prospects in what are known as BRIC (Brazil, Russia, India and China) economies are still subdued for 2013 but higher than at the end of 2012 with the most optimistic being Brazil’s service providers – mainly because they are gearing up for the country hosting the World Cup and Olympic Games.

India’s business community is the second most optimistic after Brazil followed by Russia and then China.

However, the EMI also flags up a real concern for the BRIC economies which is that they all face a potential inflation risk and increasing costs which will also put manufacturers under pressure.

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