Decoupling Comes of Age October 12, 2009
Recently I spoke at a China-India Investment Summit in Hong Kong and I put forth my belief that the Big Emerging Markets were in fact de-coupling economically from the United States. Not surprisingly this view was challenged by a prominent economist who pointed to the fact that the U.S. was still the world’s largest economy and that the Big Emerging Markets (BEM’s) of China, India and Brazil only accounted for less than 20% of global GDP. True enough but that fact masks some key trends that reinforce the concept of decoupling which is in fact occurring at this very moment. These key trends include the following: 1. Last year surpassed the United States as Brazil’s leading trade partner. 2. Inter-Asia trade continues to grow and Singapore, South Korea, Indonesia and China have all moved into positive GDP growth. 3. While the United States is expected to register anemic economic growth in 2010 of 1.5% to 2% the Big Emerging Markets are all expected to register GDP growth rates in the range of 4.5% to 9%. 4. All of the BEM’s are experiencing rapid growth in domestic consumption making them less dependent on exports. 5. BEM’s exports are now increasingly between the BEM’s as noted by the China-Brazil trade relationship. Conclusion: The United States while still important in the global economy is no longer the center of the universe. That center is shifting east and the sooner economists and investors recognize this fact the better it will be.
