Meanwhile, China aside, the average large EM has experienced rising inflation and an expanding current account deficit, with monetary policy moving in the direction of tightening. The lesson is that EMs have not decoupled; instead, many of the biggest emerging markets have been contributing to global demand, using up policy space, and slowing for a lack of world growth.
Now they must rebalance and restructure to ensure economic stability. What role will China play in our fortunes? We know that policymakers are trying to find a path between keeping growth strong and rebalancing away from investments and exports. We really don’t know how this process will affect us.