At the UBS Greater China Conference in Shanghai (14th January 2013), Jon
Anderson, now of EM Advisors Group, and I debated this important topic in
front of a packed lunchtime audience. What follows is a fuller version of my
rather shorter address.
Economists build models about the way they think economies work, and make
predictions about outcomes, and projections far into the future. When the
Goldman Sachs economists wrote the now famous paper ‘Dreaming of the
BRICs’ back in 2003, they persuaded a lot of people that the global system was
changing not just for a decade or so, but forever. By the time the financial crisis
erupted a few years later, it had become almost common to talk about the about
the irreversible decline of the West, and the correspondingly irreversible
ascendancy of China, India, Brazil, Russia and other major emerging markets.
This ‘self-evident’ world view has probably been sitting rather uncomfortably
with seasoned equity market investors, who have experienced emerging market
euphoria and disappointment in the past, even before being scarred or put off by
the rather poor performance of many large emerging equity markets in 2011-
2012.