There has been an unprecedented transformation of world trade in recent years, which emanated from emergence of new economies such as China, India, and Brazil. These nations are today important parties in global trade, contributing to the movement of commodities between regions. A wealthy corporate man, Kavan Choksi, who deals in business management and wealth consultancies, contends that with the advent of the new global environment, traditional trade patterns, wherein major exporting and importing nations were advanced, have been replaced by the new world order.
This seismic shift has opened exciting new opportunities for businesses worldwide and shaken up established trade policies, bringing new challenges and opportunities for governments and policymakers alike.
Understanding Emerging Market Economy
An emerging market economy refers to the progression of a developing nation in terms of global market participation and growth. These countries typically possess some, but not all, the characteristics of a fully developed market. While strong economic growth, high per capita income, and dependable regulatory systems are benchmarks for developed markets, emerging economies are building up their infrastructure and establishing their economic presence on the world stage. These nations provide a unique investment opportunity for those willing to take on a higher level of risk in pursuit of potentially high returns. As they continue gaining traction, emerging market economies’ prospects appear promising.
A developing emerging market transforms itself from an infant economy to a robust industrial power. This occurs when the economy starts integrating into the global financial markets, leading to a stream of liquidity in domestic debt and equities’ trade and foreign direct investments. These emerging market economies can be found all over the word including India, Mexico, Russia, Pakistan, Saudi Arabia, China, and Brazil etc. These countries’ citizens benefit from this economic growth since their living standards are elevated and the creation of modern financial and legal institutions. It is one of the essential stages of history that will determine the future of these nations and the overall globe. (Source: Investopedia)
The Influence Of Emerging Economies On Global Trade
The rise of emerging markets is a phenomenon that is dramatically transforming the global economic landscape. One of the most prominent examples is China, which has gone from struggling to the world’s second-largest economy.
According to United Nations data, China now dominates the world stage through its exports, accounting for almost 15% of all exports and international trade. This newfound success has the potential to shape the economies of other nations that trade with China and beyond. As global markets evolve, how we trade, and the products involved will likely change, and so will how we measure economic success. The rise of emerging markets is just the beginning of what could be a much larger shift towards a worldwide economy with new opportunities and challenges for everyone involved. (Source: UNCTAD)
Kavan mentions with their lower wages, plentiful land, and business-friendly governments; emerging markets are proving to be hotspots for low-cost production. These emerging markets have quickly become the largest beneficiaries of the shift toward unfinished goods, showing no signs of slowing down. Whether you’re a manufacturer looking to lower costs or an investor seeking new opportunities, the appeal of these rapidly growing economies is hard to ignore.
According to the World Trade Organization’s (WTO) data (Source: however, emerging and developing economies have gone ahead and contributed approximately 48 percent of world’s merchandise export in 2019 as compared to 33 percent in 1990 (tutor2u). On the other hand, the share of developing countries as a whole in the world merchandise exports also increased tremendously, from 34% to 48%. The above numbers imply a massive global transformation with rapidly rising importance of emerging economies in the global commerce. It thus marks the arrival of a new era of economic development in which the so-called developing countries stand on the same footing as the developed states.
Furthermore, according to Kavanemerging, economies have hugely impacted global trade by altering their trade patterns.2 For example, china is a major player in the world trade market for goods such as machinery and electronic appliances. As such, many countries have become outdated and irrelevant in these areas due to the growth of China. This has led to skewed trends in Chinese trade that are still affecting the balance in international trade. China has relied on its vast production capacity and workforce to ensure that it still remains more competitive and sells its products at affordable prices.
There is no denying the fact that China’s emergence as a major player in the world economy happened with a great speed. The country’s share of world electrical and electronic equipment exports shot up from just 4% in 2000 to a staggering 30% in 2018, according to data from the United Nations Conference on Trade and Development (UNCTAD) (Source: tutor2u). There has been a great impact by these developments around the world, particularly in East Asia. These sub-regional nations are also integrated into this chain of production.
China is currently an emerging market and in part due to booming industries. Services are the largest working sector and account for nearly one-half of national income in China. Similarly, the Chinese economy has boosted it beyond other major exporting countries in the world. Except for iron and electrical appliances, the Chinese play leading roles in almost any other manufacturing field. Finally, despite the fact that agriculture is no longer the major contributor to its domestic market, it still remains among the leading industries alongside services and manufacturing. China’s exports of rice and soybeans, the agricultural commodities, keep the world population fed. In summary, these three lead industries have contributed to the remarkable growth in China’s rate GDP.
The emergence of developing economies as major importers of goods has taken the world by storm. Within sectors like energy, minerals, and food, these economies have become major consumers of products from other countries. In 2019, developing and emerging economies accounted for a staggering 58% of world merchandise imports, up from 42% in 1990, according to data from the WTO (Source: tutor2u). Kavan underlines that these economic regions should be taken into consideration not only as exporters, but as consumers of vital goods provided by other regions of the world. This is a remarkable change that means some companies that target that market must reconsider their targeting strategy. However, the development of these emerging economies as importers of goods provides future prospects and challenges for world trade in the coming years.
Developing economies have become major trade partners in international trade and have redefined the traditional trading patterns in more than one count. Such trends have various implications for future global trading system and the respective economies, which should not be neglected with shift in trade patterns and relative importance of importers. Kavan stresses that recognizing these emerging economies’ growing significance and impact on global trade and market dynamics is essential. The rise of emerging economies is not just a passing trend but the onset of a new reality set to redefine the world order.