Under the existing international monetary system, some emerging economies that depend less on the primary commodities sector are confronted with pressure from international payment imbalances, a chronic threat to the stability of the macro-economy. In addition, economic prosperity always exacerbates international payment imbalances, for vigorous domestic demand will boost imports, but overseas demand may not grow at the same pace.

Since the growth of emerging economies has been excessively dependent on capital inflow and credit expansion in the past decade, risks like economic downturns and recession have hit some hot emerging markets. With the greater inflow of hot money, asset bubbles and liabilities caused by blind expansion and investment, inflation pressure has become more evident.

Incurring social issues

What's worth noting is that economic turning may intensify or even incite social conflicts. Economic crisis complicated by a social crisis will then pose a severe challenge to emerging economies.

In the past decade, the emerging market has undergone explosive growth as a whole, but social contradictions still remain. When the economy grows in pace with unfair distribution of income and corruption, economic expansion will intensify social disparities. When the government is kidnapped by interest groups, economic growth will not benefit all the people. This has been the case in most developing countries.

Take India for example: The country has been touted as having 300 million middle-class people, and its domestic demand-driven growth pattern is said to be far superior to China's export-driven growth pattern. Due to severe distribution inequality, in the early 21st Century when the slogan "India Shining" was popular, its per-capita grain consumption dropped from 174 kg in 1997-98 to 151 kg in 2003-04, the lowest level since World War II. In 2006, its rate of malnutrition was 20 percent, 6 percent higher than the world average; infant mortality rate was 57.4 per thousand, higher than the world average of 49.5 per thousand. These figures fully expose serious gaps in India's income distribution, social justice and living standards. Furthermore, India has registered little improvement in reducing malnutrition, lagging far behind China, Viet Nam and Laos.

Reviewing the past, although many developing countries have experienced economic take-off, few are able to break into the rank of developed countries.

In the coming decade or two, instead of undergoing sustainable economic development, emerging economies are more likely to head into a high-risk period of economic and social turbulence, and their upward momentum may be reversed.

Moreover, conditions of the primary commodities market and shifts of monetary policies by major central banks will become the turning point for the economic development of emerging countries.

Developing countries and regions will continue to polarize over the next 10 or 20 years. China will occupy a favorable position to develop its economy. Nevertheless, it depends on whether China can sustain its economic expansion or further make improvement in the future.

The author is an op-ed contributor to Beijing Review and a researcher with the Chinese Academy of International Trade and Economic Cooperation

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