Emerging and Frontier Markets: Economic and Geopolitical Analysis

[guitar01]

What method is used to put value on human capital? I still think it's an arbitrary concept, a rough approximation at best. AFAIK in accounting recognizing human capital as a type of asset is still problematic, if not against the GAAP. I wonder if it's different in macro-economy as stated in article above.

 

[Aepsilons]

RIO DE JANEIRO, March 3 (Reuters) - The Brazilian real
closed at its weakest level in more than 10 years on Tuesday on
concern about the country's deteriorating economic fundamentals
and uncertainty about the future of a central bank currency
intervention program.
The real has slid about 2 percent since the central
bank signaled on Friday that it would reduce the rollover pace
of expiring currency swaps, derivatives that provide investors
with hedge against currency losses.
The move added uncertainty about the future of the central
bank's currency intervention program, which is scheduled to
continue at least until the end of March.
That leaves the real even more vulnerable to risks such as a
sharp deterioration in economic fundamentals and the spillover
of a growing corruption scandal at state-run oil company
Petrobras.
"Brazil's economic and political situation is creating a lot
of uncertainty among local and foreign investors," said Joao
Paulo de Gracia Correa, a trader with Correparti brokerage in
Brazil.
Petrobras' shares closed 2.1 percent higher, however, after
the oil company more than doubled the amount of money it plans
to raise through asset sales.
A source with direct knowledge of Petrobras' plan told
Reuters that the company will focus on selling minority stakes
as it seeks to retain control of its oil fields, power plants
and utilities.
Petrobras' shares boosted Brazil's benchmark Bovespa index
, which closed 0.6 percent higher.
In the opposite direction, Mexico's IPC stock index
dropped 0.6 percent in its third consecutive session of losses
on investor caution ahead of key U.S. economic data later in the
week.

EMERGING MARKETS-Brazil real weakens to 10-year low on intervention uncertainty| Reuters

 

[Aepsilons]

(Reuters) - Emerging market stocks fell to a three-week low on Thursday as a buoyant dollar and China calling its lowest growth for 25 years a 'new normal' soured the mood among investors.

The MSCI emerging equities index was 0.2 percent lower at a level last seen in mid February, while the Asia excluding Japan benchmark, fell 0.4 percent.

A strengthening dollar, driven by anticipation of tighter monetary policy in the United States, continues to pressure emerging assets. The dollar index reached an 11-year high and most emerging currencies weakened.

"There's a lot of expectations of a Fed rate hike built in. There are exceptions, like the central European countries, but most of the dollar-based currencies are really focusing on the U.S. and the likely pickup in U.S. rates," said Simon Quijano-Evans, head of emerging research at Commerzbank.

Also adding to pressure on emerging markets is the prospect of an economic slowdown in China after Beijing announced a 7 percent growth target for the year and signaled that the lowest rate of expansion for a quarter of a century is the "new normal".

Shanghai stocks traded 1 pct lower while Hong Kong dropped 1.2 percent.

Turkey's lira was 0.9 percent lower against the dollar as investors remained nervous about threats to central bank independence following tirades against monetary policy by president Tayyip Erdogan.

Shares in Turkey's Akbank were 5 percent lower after Citigroup announced it has sold its nearly 10 percent stake for $1.2 billion.

Earlier, the Indonesian rupiah hit a near 17-year low to the dollar while the ringgit slid to six-year lows .

Eastern European bourses were firmer on the prospect of monetary stimulus for euro zone trading partners ahead of a European Central Bank meeting later in the day.

Budapest rose 0.7 percent and Warsaw traded 0.5 percent higher. Poland on Wednesday cut rates by 50 basis points, twice as much as expected, and signaled its monetary easing cycle had come to an end.

That helped the zloty rise 0.2 percent to the euro as the currency is now seen holding its yield advantage over the single currency. The forint rose 0.3 percent

With oil markets holding above $60 per barrel, Moscow stocks advanced, with the dollar-denominated RTS index up 1.5 percent while the rouble firmed 0.1 percent against the dollar.

Belarus' Finance Minister Vladimir Amarin said on Thursday the country plans to issue at least $700 million worth of domestic bonds denominated in foreign currency this year.

In 2014, Belarus placed $800 million worth of bonds on the local market.



EMERGING MARKETS-Assets wilt in the glare of stronger dollar| Reuters

 

[Aepsilons]

@LeveragedBuyout


IMF Chief Warns Fed Tightening Could Roil Emerging Markets


MUMBAI—The volatility that hit emerging markets after the U.S. Federal Reserve’s 2013 announcement that it was preparing to tighten monetary policy could return when the Fed actually starts raising rates, the head of the International Monetary Fund warned on Tuesday.

“I am afraid this may not be a one-off episode,” Christine Lagarde said in a speech at India’s central bank. “This is so because the timing of interest-rate liftoff and the pace of subsequent rate increase can still surprise markets.”

Ms. Lagarde added that what she called “the taper tantrum,” which riled Asian markets and sent currencies in the region—including India’s—down against the dollar, could be worse the next time around because of the large amount of liquidity in the global financial system.

While the Fed is starting to mop up liquidity, the European Central Bank has just started a new quantitative-easing program and the Bank of Japan is continuing its own.

After the Federal Reserve inundated the markets with liquidity to ease economic pain in 2008, other central banks followed suit. Seven years later, with the U.S. economy showing signs of renewed strength, the Fed is in the process of normalizing its monetary stance.

“The danger is that vulnerabilities that build up during a period of very accommodative monetary policy can unwind suddenly when such policy is reversed, creating substantial market volatility,” Ms. Lagarde said.

Between 2009 and the end of 2012, emerging markets received about $4.5 trillion in gross capital inflows, representing roughly half of global capital flows, she said. Such inflows were concentrated in a group of large countries, including India, which received about $470 billion.

As economic conditions improve in some advanced economies, investors are likely to rebalance their portfolios out of emerging markets, Ms. Lagarde said.

Ms. Lagarde urged central banks in emerging countries to increase cooperation and be on guard.

“If market volatility materializes central banks need to be ready to act,” she said. “Temporary but aggressive monetary policy may be necessary, particularly on domestic liquidity support to certain sectors or markets and [...] with targeted foreign-exchange interventions.”


IMF Chief Warns Fed Tightening Could Roil Emerging Markets - WSJ

 

[Aepsilons]

Economic Growth In Developing Countries In East Asia And Pacific To Ease Slightly
SINGAPORE, April 13 (Bernama) -- Economic growth in the developing countries in East Asia and Pacific will ease slightly this year, even as the region benefits from lower oil prices and a continued economic recovery in developed economies.

According to the East Asia Pacific Economic Update released today by the World Bank, the developing economies of East Asia are projected to grow by 6.7 per cent in 2015 and 2016, slightly down from 6.9 per cent in 2014.

"China's growth is expected to moderate to around seven per cent in the next two years compared with 7.4 per cent in 2014.

"Growth in the rest of developing East Asia is expected to rise by half a percentage point, to 5.1 per cent this year, largely driven by domestic demand -- thanks to upbeat consumer sentiment and falling oil prices -- in the large South-East Asian economies," it said.

Axel van Trotsenburg, World Bank East Asia and Pacific regional vice president, said despite slightly slower growth in East Asia, the region will still account for one-third of global growth, twice the combined contribution of all other developing regions.

He said low global oil prices will benefit most developing countries in East Asia, especially Cambodia, Laos, the Philippines, Thailand, and the Pacific island countries.

"But the region's net fuel exporters, including Malaysia and Papua New Guinea, will see slower growth and lower government revenues," he said.

Sudhir Shetty, chief economist of the World Bank's East Asia and Pacific Region, said East Asia Pacific has thrived despite an unsteady global recovery from the financial crisis, but many risks remain for the region, both in the short and long run.

"To address these risks,improving fiscal policy is key. With low oil prices, countries -- whether oil importers or exporters -- should reform energy pricing to usher in fiscal policies that are more sustainable and equitable," Shetty said.

The East Asia and Pacific Update is the World Bank's comprehensive review of the region's economies. It is published twice yearly.


BERNAMA - Economic Growth In Developing Countries In East Asia And Pacific To Ease Slightly

 

[LeveragedBuyout]

Worth an update to this thread, given the unfolding Greek tragedy.

Will the Greek disease infect Turkey? - ECONOMICS

Will the Greek disease infect Turkey?
Mustafa Sönmez - mustafasnmz@hotmail.com

In the eyes of the foreign investor, Turkey and the other Mediterranean EU countries are categorized as 'vulnerable countries,' but their risks and the organs responsible are different. Unlike EU members, Turkey's fragility stems from the private sector

AFP Photo

The Greek people have said “Oxi – No” to the bitter pill of the European Union’s program of belt-tightening.

Greeks, who have been tightening their belts for years, even though they know they will go through even tougher days, said a strong “No” to the EU’s conditions for assistance. The opposition leader Antonis Samaras, who was promoting “Yes,” has resigned. Renegotiations have started officially and unofficially. If a solution is not found, it is even possible that Greece will leave the euro, and many are wondering what reaction the troika will have for this negative answer. However, it is certain that this negative answer will act like a signal flare for opponents of austerity in the Mediterranean basin, such as those with similar issues like Spain, Portugal, Italy and even France.

All of these countries are under pressure from the International Monetary Fund and the European Central Bank (ECB).

Does the fragility of these countries in the Mediterranean basin resemble the fragility of Turkey’s economy? Or, as another Mediterranean country, will Turkey experience what EU member countries are going through? Even if these fragilities look similar, are the resources similar as well? Will the fragility in the Mediterranean spread to Turkey?

In the eyes of the foreign investor, Turkey and the other Mediterranean EU countries are categorized as “vulnerable countries,” but their risks and the organs responsible are different.

The fragility of the Mediterranean partners of the EU is due to public finance. The European Commission and the ECB are also trying to overcome the issue, sometime with the IMF stepping in. But Turkey’s fragility is not because of the public; it stems from the private sector. If the bottleneck is not rectified, then the IMF will step in.

During the 2000 and 2001 crisis, Turkey experienced what the Mediterranean countries are going through. Turkey said “yes” to what Greece said “no” and overcame the problem at a heavy social and political price.

Cracks in the basin
All eyes are focused on Greece. How will it cope with huge debts? How will it cope with an unemployment rate of almost 60 percent of for youth and an average of 27 percent? But it is not only Greece that has problems. Maybe it is a country that has the most striking indicators, but what keeps the focus on this country is its fight with the troika, not succumbing to its conditions.

It is known that when the 2008-2009 global crisis hit the EU, it was the southern countries on the Mediterranean that were hit the worst. The global crisis caused all the vulnerabilities in Spain, Portugal and Italy and even France, as well as Greece, to surface. Fighting the crisis with public funds increased the existing public deficits, rapidly increasing public debts, making the public finance crisis their common problem.

The biggest debtor in all these countries, including France, is the public. Thus operations all focus on curbing the public budget deficit, forcing the public debts to shrink. While these are being conducted, public current expenditures and investments and their possible contributions to growth have decreased, shrinking domestic demand.

It is not easy to compete in external markets with the euro. The euro climate almost obstructs the competitive capacity of these countries. They have lost their ability to devaluate their own currencies to gain competitive power after having switched to the euro. They cannot compete with Germany, Austria and the Netherlands over the euro, especially in high added value products. They are forced to medium and low added value production, to the role given to them in the EU domestic division of labor.

The Turkey experience
Turkey experienced the public finance crisis of the Mediterranean basin countries during the 2000-2001 crisis. The IMF imposed the bitter pill on Turkey, the one Greece and others are now resisting. The crisis was overcome at a huge political and social price. The huge devaluation of the Turkish Lira helped in exports.

The biggest problem of the 2000-2001 conjuncture was not the current account deficit, it was public finance. The current account deficit was not even $3 billion. (Its peak was in 2011 at $77 billion.) The economy was extremely sensitive to foreign sources as today.

At the beginning of February 2001, with the lira’s value plummeting, the crisis came. With the Feb. 28, 1997, post-modern coup, while the Islamist Necmettin Erbakan government and its successor, the Justice and Development Party (AKP), were saved from the bitter pill, the previous coalition governments were the administrators and victims of this terrible conjuncture. The coalition governments formed between 1998 and 2002 were the ones to conduct all these unpleasant operations. The masses were left poor and unemployed. They paid for the measures in the 2002 elections in failing to clear the election threshold. While they were paying the price, the breakaway from the Welfare Party (RP), the neoliberal AKP formed by Abdullah Gül and Recep Tayyip Erdoğan, enjoyed the fruits of their predecessors’ labors: public finance, the infrastructure for privatization and well-functioning relations with the IMF inherited from their predecessors.

The world situation from 2002 to 2007 also helped this rectified economy. AKP governments were in power during days of abundant liquidity and resources poured in, boosting growth. The masses who opted for the AKP after the 2001 crisis, when there was no serious alternative, voted for the AKP for two more terms. The AKP, on the other hand, with this dream climate, started building a regime.

Today’s vulnerabilities
The many sources of income pouring in after 2002 turned Turkey’s economy into one that was focused on the internal market and engaged in construction without a master plan, while also spending foreign exchange without making gains. Turkey’s stock of foreign debt climbed to over 50 percent of national income to $400 billion. Of the debts, two-thirds belonged to the private sector, while nearly 40 percent were short-term.

The fragility in the Turkish economy today stems from the difficulties in ending the dependency on foreign resources and debt obligations. An important aspect of this fragility is the fact that 40 percent of the total debts are in 12-month terms, which slows down the flow of foreign capital and hinders Turkey from fulfilling its obligations. There is no problem in the public deficit, but the private sector is unable to invest while Turkey has had either difficulties in renewing debts or has been forced to shoulder heavy losses by paying its debt installments at higher rates. Moreover, the ECB does not function like a lifesaver in the way that the European Commission does.

In the event of problems, the only door to knock on is that of the IMF – but its prescription will be decidedly unpalatable.
July/13/2015

 

[Hamartia Antidote]

Speaking of Greece.
Excuse my bolding....

What Greece's Tsipras needs: A good tax collector - CBS News

The Greek debt standoff between Prime Minister Alexis Tsipras and the rest of the eurozone is eclipsing what may be the Greek leader's most vexing political challenge: getting his citizens to declare their real income and pay the taxes they owe on it.

As in so much of the world, cash is king in Greece, and as a consequence tax authorities have to count on the honor system. And if a recent academic study is right, it's Greece's most prominent citizens who are stiffing the tax man and helping undermine their own country's economic viability.

"For every dollar that is reported, 80 cents is not," said Adair Morse, a professor with the University of Chicago's Booth School of Business. Morse was one of the authors of a breakthrough study released earlier this year. The report -- "Tax Evasion Across Industries: Soft Credit Evidence from Greece" -- documented that tax evasion was most prevalent in the ranks of Greece's highly educated professionals like doctors, lawyers, engineers, accountants and even journalists.

"Even though, as a Greek, I was aware of the pervasive nature of tax evasion in my country, I was surprised by the estimated magnitude of the phenomenon," said Nikolaos Artavanis, a study co-author and professor at the University of Massachusetts's Isenberg School of Management.

"Also, it was striking the fact that top-evading industries were shown to be highly educated professionals with high social status as doctors, lawyers and engineers," Artavanis added. "This was in contrast to the prior perception in Greece that the large tax evaders were low-income self-employed professionals (i.e. plumbers)."

The study estimated that in 2009 alone, 28 billion euros of income went untaxed, which would have produced a tax revenue yield equivalent to 32 percent of Greece's deficit.

The researchers achieved their breakthrough analysis by getting one of Greece's largest national banks to open its books to them. In reviewing the bank's loan and mortgage applications from 2003 through 2009, they discovered the bank's loan officers were actually including the applicants' off-the-books cash flow for the purpose of extending credit.

Extending "an entitlement to informal income provides a property right" that gave borrowers the ability to further leverage their undeclared income, said the study. The practice also ensured that lending officers would advance professionally because their performance was measured on the volume of loans they generated.

Put perhaps most vexing for Prime Minister Tsipras was the scholars' findings about how hard it was to get meaningful tax reform through the Greek parliament, noting how such measures had failed to pass. "We find that the industries represented in parliament are those that evade taxes, even when we exclude layers, half of the non-lawyer parliamentarians are in the top four tax-evading industries," the report concluded.

In Tsipras's latest proposal to European officials, he calls for the creation of an autonomous revenue agency, a major crackdown on tax evasion, across-the-board tax hikes and the end of popular subsidies for the powerful Greek maritime industry.

Tsipras is also calling for increased cooperation between Greece's tax authorities and other European countries like Switzerland and Luxembourg that have been active as so called off-shore sanctuaries for foreign depositors. Specifically, Tsipras wants other "EU member states to provide data on asset ownership and acquisitions by Greek citizens."

"Without a good tax collection system, they will not be able to pay off the new debt," said Michael Hadjiloucas, with the New Jersey-based Greek American Chamber of Commerce.

 

[LeveragedBuyout]

This is a case where the bad news is also the good news. Bad news: growth is slowing. Good news: the factors causing slow growth are known, and if they are rectified, faster growth may resume.

---

http://blogs.ft.com/gavyndavies/2015/07/13/whatever-happened-to-the-brics/

Whatever happened to the Brics?
Gavyn Davies

| Jul 13 05:00 | Comment | Share

When Jim O’Neill coined the acronym Bric in 2002, he brilliantly identified the main force that would drive global economic growth for the next decade. These four economies – Brazil, Russia, India and China – had little in common, except that they had the scale and growth potential to transform the growth rate of global GDP as never before. For many years, their startling performance was the main manifestation of the phenomenon that became known as “globalisation”.



When the leaders of Brics (which has included South Africa since 2010) met for their annual summit last week, however, they knew that their collective lustre had faded. The bursting of the Chinese equity bubble, following the hard landing in the real estate sector, now looms as a major downside risk for global financial markets and world economic growth. Brazil and Russia have been mired in deep recessions, taking the aggregate Brics growth rate down to only about 2 per cent in April, according to Fulcrum’s “nowcast” activity models. Although these models have identified a pick-up in recent weeks, growth in the Brics remains well below its (falling) long-term trend rate, and Markit reports that manufacturing business surveys in the emerging economies fell in June to the lowest readings since the financial crash in 2009.

Since 2010, the long run underlying growth rate of the Brics has slowed from 8 per cent to 6 per cent. This is not surprising in view of the pronounced tendency for economies to revert to their mean long-run growth rates over time. But the actual growth rate has dropped even more sharply, from 11 per cent to 5 per cent. A cyclical downturn has been built on top of a secular one.

What had once been the brightest spark in the global economy has now become its big headache. What went wrong with the Brics and can they recover?

The graphs below show that the Brics were negligible contributors to global growth in the 1990s, but by 2010 they were contributing between one third and one half of all global growth, depending on whether the data are measured in market exchange rates or PPP rates. Since 2010, although the absolute growth rate of the Brics has declined considerably, so too has growth in the advanced economies. Consequently, the Brics share in global growth has actually remained roughly unchanged. Furthermore, the IMF expects the Brics share to remain fairly constant as the global economy recovers in the next five years:



If the IMF forecasts are correct, the Brics will remain central to global growth prospects for many years to come. But IMF and other GDP forecasts have consistently been far too optimistic for the past five years, with persistent downward forecast revisions failing to keep pace with the repeated disappointments in reported data.

Recently, the situation has deteriorated markedly, with a big decline in Brics growth rates being detected by our “nowcast” models early this year. Growth in China fell to about 5 per cent before recovering in recent weeks; Brazil and Russia have collapsed deep into negative territory; and even India, the markets’ favourite since the arrival of the Modi government in May last year, has been growing at only half its trend rate.

There has been an unmistakable cyclical contraction throughout the Brics, and it is very debatable whether this has now hit bottom:



There are several reasons for this simultaneous slowdown in what are four very different economies.

The first reason is that the Brics story has always been dominated by China, which alone represents 56 per cent of Brics GDP. When China sneezes, most other emerging economies catch a cold. Brazil and Russia (and many smaller Asian economies) are essentially supplier economies to China in commodities and manufactured products. Chinese underlying GDP growth has slowed from 11 per cent in 2007 to 7 per cent now, and other economies have suffered accordingly. The resulting reversal in the secular commodities super-cycle is probably not over yet, and commodity-producing emerging economies will continue to suffer accordingly.

But many emerging economies, including China and India (as well as Korea, Taiwan, Hong Kong etc), are commodity importers, and these should be gaining from lower energy and metals prices. Surprisingly, most of these economies have failed to benefit from the recent commodity shock, and instead GDP growth has slowed down sharply. Something else must be going wrong in these countries.



One common factor is a decline in credit growth, often from stratospheric levels, leading to a sharp tightening in domestic monetary conditions. China is, of course, the prime example of this phenomenon, but it is far from the only one. Brazil, India, Russia, Hong Kong, Singapore, Indonesia, Philippines and Thailand have all seen bubble-like increases in credit/GDP ratios since 2010, and they now face prolonged workouts from the excesses caused by earlier lax policies.

In 2015, declining headline inflation has generally not been matched by reductions in policy rates, so real interest rates have risen, causing increases in non performing loans. India, for example, is battling against this latter phenomenon, with the central bank struggling to bring down real lending rates in the banking sector.

A further disappointment on the policy front has been a failure to maintain market-friendly and business-friendly advances in domestic regulatory and taxation policy. The original catch-up in growth rates owed much to closing productivity gaps with western nations as trade expanded, the population shifted to cities and public investment surged (especially, again, in China). It was always assumed that the later phases of catch-up would be more difficult, relying on economic reforms that would prove politically difficult to implement.

The World Bank ranks 189 countries each year on the “ease of doing business”. The Brics are ranked as follows: Russia 60th, China 90th, Brazil 120th, and India 142nd. With even Greece being ranked ahead of each of the Brics, there is clearly much more work needed if the Brics growth miracle is to resume.

Even now, in their troubled state, the Brics are expected by the IMF to provide up to half of global growth in the rest of this decade. But the control of excessive credit can be a prolonged and difficult job. There could be more disappointments ahead.

 

[Indos]

 

[LeveragedBuyout]

Currency update, courtesy of the Hurriyet Daily News. The article has a focus on Turkey, but this info-graphic is worth pulling out in order to highlight just how widespread the economic damage is:

Will a 3-lira dollar lead to an economic crisis in Turkey? - ECONOMICS

 

[Fenrir]

If they are rectified, faster growth may resume.

Between Brazil's political corruption scandal, Russia being its normal self, India - possibly facing a leader with diminished power, pending the outcome of elections:

Gunned Down: The Wild Lawless State That Could Break Modi's India - Bloomberg Business

South Africa, who has never fit the BRICS mold and China who's slowdown isn't looking too good right now, I can't help but think the "if" part isn't being taken seriously in BRICS nations.

Looking back at that article and your lead, what comes to mind now? Has BRICS taken any steps to mitigate their troubles? I haven't really seen any action apart from China, but the effectiveness of its actions are debatable too ( such as its market intervention, only to see stocks completely erase 2015 gains and its backtracking on some pledges to liberalize their economy. Also the devaluation of the RMB when Chinese exports weren't facing a competitiveness problem, the problem was demand).

China Stocks Erase 2015 Gain as State Support Fails to Stop Rout - Bloomberg Business

If anything, in just two months since that article was written, things have gotten worse.

 

[LeveragedBuyout]

Between Brazil's political corruption scandal, Russia being its normal self, India - possibly facing a leader with diminished power, pending the outcome of elections:

Gunned Down: The Wild Lawless State That Could Break Modi's India - Bloomberg Business

South Africa, who has never fit the BRICS mold and China who's slowdown isn't looking too good right now, I can't help but think the "if" part is being taken seriously in BRICS nations.

Looking back at that article and your lead, what comes to mind now? Has BRICS taken any steps to mitigate their troubles? I haven't really seen any action apart from China, but the effectiveness of its actions are debatable too ( such as its market intervention, only to see stocks completely erase 2015 gains and its backtracking on some pledges to liberalize their economy. Also the devaluation of the RMB when Chinese exports weren't facing a competitiveness problem, the problem was demand).


If anything, in just two months since that article was written, things have gotten worse.

If this post seems China-centric, that's because China has a disproportionate influence among the BRICS. While each BRICS case has its own specific proximal causes, I always fall back on the following post earlier in the thread:

Emerging and Frontier Markets: Economic and Geopolitical Analysis

The common theme tying the BRICS together is the lack of strong institutions (widespread corruption in all, lack of rule of law in Russia, India, China, and South Africa, weak regulatory and judicial controls, etc.), which leaves them unable to adapt and execute policy efficiently in order to deal with the change in the economic cycle. Most are flailing, and Xi Jingping has been railing against the vested interests which are fighting back against his reform efforts.

In addition, most of the BRICS outside of China were not diversified enough, and passively relied on the booming commodity trade with China to power their economies. Now that China is slowing and commodity prices are crashing, so does the primary engine of growth for the BRICS. And until or unless India substitutes for that demand, this engine of growth is unlikely to restart soon. As your article points out, India's case is quite complicated, and there is little prospect of India fulfilling that role in the near or even medium term.

The Headwinds Facing China
So what ails China? Clearly, that's a matter of intense debate, and I only reluctantly discuss this in a PDF thread (although there are several other threads where PDF denizens are flailing in an attempt to answer this question, or deny that China even has a problem).

That said, in abstract, you have already expertly identified the issue: it's lack of domestic demand. China's consumption as a percent of GDP is approximately 36% vs. 68% in the US (World Bank). Consumers are repressed by the government in favor of other growth factors, namely investment and exports. The Brookings Institute has a nice write-up about the rebalancing effort that is necessary for China, but the trend does not provide much hope:

The path to sustainable growth in China | Brookings Institution

China has driven the investment- and export-led growth model to its logical end, with over-investment in capacity outstripping demand, leading to a rapid debt build up:

BlackRock: Soaring Chinese debt a major concern - Business Insider

Blackrock:
“China has been taking on increasing amounts of debt to maintain growth. Yet it has been getting less bang for its yuan as growth has edged down. Credit growth is not just losing its potency; it is turning into a poison. Debt is growing faster than borrowers’ ability to service it. The resulting debt mountain stood at $28.2 trillion at the end of 2014, according to a McKinsey report. The debt cannot be rolled over indefinitely. China’s debt-to-GDP ratio has reached almost 300%. Government debt makes up a relatively small share of the total, with the bulk in the corporate sector”.

It's also worth reading this Reuters article explaining the dangers, but I will include the top-line summary here.

CORRECTED-Manage, meddle or magnify? China's corporate debt threat| Reuters

* China's corporate debt 160 pct of GDP, twice U.S. level
* Estimated to climb 77 pct to $28.8 tln over five years
* Increased bank lending not going to most profitable areas
* Manufacturers' loan to core profit ratio rising sharply
* Loan quality, pricing compromised by 'open credit taps'

China has been able to sustain this model for decades because of the demographic dividend it enjoyed (an increasing labor pool migrating to urban centers to provide cheap labor), favorable trade conditions (China opened up to the world in the age of GATT, WTO, and widespread tariff elimination), and the strong desire of advanced economies to offshore their manufacturing sectors in order to increase profit margins. All of these factors are coming to an end.

Declining demographics leading to wage pressures:
The End of Cheap Labor- Finance & Development, June 2013

World trade volume growth appears to be permanently impaired:

WTO | 2015 Press Releases - <!--WTH:INSERT_TITLE-->Modest trade recovery to continue in 2015 and 2016 following three years of weak expansion <!--/WTH:INSERT_TITLE--> - Press/<!--WTH:INSERT_COUNTER-->739<!--/WTH:INSERT_COUNTER-->

Re-shoring appears to be the new fad:
Record number of manufacturing jobs returning to America - MarketWatch

Xi Jinping's Reform Program
The CCP leadership is a largely professional and experienced group, and is aware of these issues. That's why Xi attempted to implement his market-based reform program to tackle the debt-misallocation problem and adjust the growth model from investment- and export-led model to a consumption-led model. He thought the best way to carry this out would be to purge those political enemies who opposed his vision, and present it as an anti-corruption drive in order to generate the political capital necessary to execute painful and unpopular policies. We know what happened with the real estate bubble, the stock market bubble, and the inept RMB devaluation. It's not working out so well, but that's because Xi is treating the symptoms, not the cause. To close the circle, the driver of imbalances in the Chinese economy is lack of domestic demand.

How to Generate Demand
As much as it pains me to say this, some form of social safety net is necessary in order to allow the citizenry to open the purse strings and spend, rather than desperately save and essentially self-insure against unemployment or medical bankruptcy. An old article, but it illustrates how much was promised and how much remains to be done:

China hopes social safety net will push its citizens to consume more, save less

Aside from the individual benefits, there is a larger economic imperative to the new social programs. The country's leaders want to persuade Chinese citizens to spend more and save less, a goal that analysts say could be achieved if the government provided a safety net. Increasing domestic consumption would decrease China's reliance on the American and European export markets for its growth -- a goal also being pushed by Washington and China's other Western trading partners.

The key reason Chinese save so much and consume so little, experts say, is because without dependable government payments, they need to sock away money for the future -- for medical emergencies, for children's educational expenses, as a guarantee against a job loss or to help elderly parents.

That results in China's infamous high savings rate:

Tinkering with open capital accounts, interest rate liberalization, or inclusion of the RMB in the IMF's SDR program does nothing to address China's domestic demand problem.

Because the CCP is so opaque, it's difficult to know if Xi tried and failed, or only went through the motions of trying to implement reforms as a cover for his program of purging political rivals. But until China seriously tackles the demand issue, China will remain at the mercy of other countries' appetite for Chinese exports.

Russia
Seeing Russia destroy foreign food imports leads me to believe that no amount of suffering on the part of the Russian citizenry will dissuade them from supporting Putin's program of rebuilding Russian glory. Hence, the economy is a secondary consideration, so there's little reason to analyze it more deeply.

Brazil
Corruption and the end of the commodity boom. Not much more to say.

South Africa
Same as Brazil, but the factionalism and racialist politics makes a turnaround difficult to expect.

India
As you pointed out with your article, India's fractured political system has stymied Modi's reform program. This is both a blessing and a curse: a blessing, because the autonomy available to each Indian state means that visionary local politicians can implement their own version of the Gujarat model, and effect an economic turnaround. It's a curse because the central government can play only a marginal role in helping India reform and move forward. That said, I've been impressed by Modi's salesmanship and his attempt to turn lemons into lemonade with his "Make in India" program, which appears to be yielding dividends, although the jury is still out:

India’s foreign investment data looks great—but the problem is with India Inc - Quartz

Also fortunate for India, if we can say that, is that it still has the investment lever available to it. India's infrastructure is sub-par, so intensive capital investment can produce quick results for the Indian economy, even if other thorny issues like GST reform continue to face delays.

Conclusion
While we focus on the BRICS, the truth is that the entire emerging market cohort has been too complacent in implementing economic reforms. From Malaysia's protectionism to Turkey's stubborn current account deficit and addiction to dollar-denominated debt, there is much to be done to ensure that the emerging markets reinforce their economies and make them more resilient against the economic cycles of the G-7.

To answer your question, I do not think that the emerging markets have taken these issues seriously, or done enough to rectify them. Therefore, we can expect a lot of pain in emerging markets as developed markets recover (see my post earlier today about the mass devaluations in EM currencies) and serve as a magnet for capital seeking low-risk, steady returns protected by robust legal systems.

 

[LeveragedBuyout]

My last post was clearly inefficient. This is how to communicate concisely:

http://ftalphaville.ft.com/2015/08/24/2138162/bloodbath-charted/

 

[Fenrir]

My last post was clearly inefficient.

By your own standards? Because I found it to be wonderful! I try to be interested in economics and finance, but usually end up confused. Your posts tend to be a whole lot more helpful then any article on Bloomberg or Reuters.

 

[LeveragedBuyout]

By your own standards? Because I found it to be wonderful! I try to be interested in economics and finance, but usually end up confused. Your posts tend to be a whole lot more helpful then any article on Bloomberg or Reuters.

Thank you for your kind words, and I feel the same about your military-related posts--I am here to learn, after all. Please keep up the good work!