As the industrialized world slides toward possible recession,
could still-booming developing nations come to its aid? Can China
Hardly. Economies such as China's and India's are growing fast,
but they are still much too small to pull giants such as the United
States or Europe out of a swamp, say most economists.
For the first time, though, developing countries - now accounting
for more than half of global economic growth - could probably ride
out the storm afflicting richer nations.
"China is not going to save the world," says Jonathan Anderson,
chief economist at UBS Bank in Hong Kong. "But it is part of a very
different picture. The US, Europe, and Japan will go in one
direction, and the developing world will carry on."
And if the emerging markets do keep growing during a developed-
world slump, economists note, they could at least cushion the blow
for others. They will continue to import the industrial machinery
that US and other advanced nations make and will still have an
appetite for raw materials such as oil and minerals from the Middle
East, Africa, and Latin America.
Since China, Russia, India, and Brazil, the main emerging
markets, account for only about $6 trillion of gross domestic
product (GDP) - compared with $32 trillion in the US, Europe, and
Japan - the developing countries' continued growth can only "cushion
the US decline in a modest way," says Arthur Kroeber, head of the
Dragonomics economic consultancy in Beijing.
America still holds the key to much of what happens in the world
economy this year, economists say. Other countries are already
ratcheting down their growth forecasts because of headwinds facing
the world's largest consuming nation.
Falling stock prices a worry
At the same time, many financial analysts fear that the subprime
mortgage crisis has yet to fully unravel, and that banks worldwide
could see their balance sheets weakened, linking much of the global
economy in a slowdown.
"The strength of emerging economies is in some ways self-
sustaining," says Ed Yardeni, president of Yardeni Research in Great
Neck, N.Y. But "a recession in US could ... interact with the credit
crisis to become something really awful."
One sign of worry about global financial "contagion" is the
performance of stock prices: Shares in banks outside the US have
fared worse than US banks themselves over the past three months, and
stock markets in emerging nations, Europe, and Japan have all fallen
even harder than Wall Street.
When they met in Tokyo last weekend, however, finance ministers
from the world's largest economies, the Group of Seven, said
"emerging-market economies are forecast to continue robust, if
slower, growth. …