THE cloud hanging over emerging markets seemed to darken in the past week. As it was, fears that the Federal Reserve is about to raise rates, pushing up debt-servicing costs and sucking capital out of emerging markets, had been weighing on currencies and stockmarkets from Brazil to Turkey (see chart). Now a fresh worry is blotting the horizon. On August 11th China engineered a small devaluation of the yuan, prompting concerns that, with growth sputtering, its government was ready to risk a global currency war.
The angst about the state of the world’s two biggest economies is understandable. China’s economy has slowed markedly: it is likely to grow by 7% this year, its most languid rate in a quarter-century. In addition the government has been trying to reorient the economy from investment to consumption. For emerging markets that had been catering to China’s investment binge—those selling it coal and iron ore, copper and bauxite—the past few years have been little short of brutal. The economy’s slowing and rebalancing explain much of the 40% fall in commodity prices since their peak in 2011 and, by extension, the travails of...
from The Economist: Finance and economics http://ift.tt/1DPZTOF
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