Emerging markets: Views from the experts
1. Geopolitical risk returned to the forefront as border tensions between China and India heightened, with the latter imposing economic measures including banning 50 Chinese apps and cancelling government contracts with Chinese contractors.
While geopolitical headlines relating to China have created noise and near-term uncertainty in recent years, they are unlikely to derail China from its path to recovery, in our view. The latest stimulus measures, including sizable fiscal spending, announced at the National Party Congress in late May, should provide positive catalysts to the domestic recovery in the nearer term.
The government did not set an explicit growth target for China’s economy for 2020 due to the high level of uncertainty around the pandemic and global situation. However, it emphasised that employment as well as social measures (protecting basic livelihood) will be key priorities this year.
2. The COVID-19 pandemic continues to add momentum to the discussion on deglobalisation. This term has many potential meanings. It could simply refer to the re-shoring of certain strategic businesses, a reduced reliance on foreign supply chains, or the creation and/or support of national champions. However, some portray it to mean something more material. For instance, the collapse of international trade agreements and the organizations and associations that oversee them. So far, there is little evidence to suggest the latter is the case. Our view is that not all countries are keen to disrupt existing trade relationships.
3. As we continue to shift toward a knowledge-based global economy, we are seeing a rise in the importance of intangible assets. In fact, several emerging markets are now leading in terms of innovation in areas such as e-commerce, e-learning, digital payments and mobile banking.