China to BRICS, Emerging Markets Pose Global Risk
• The emerging markets represent a serious risk to global financial stability and economic activity
• China is a focal point given its size, but the connections to BRICS and smaller EMs make them just as potent
• GDP contribution, panicked capital repatriation, cross-boarder defaults and other triggers exist
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China's troubles can easily turn into the world's problems. However, this isn't the only emerging market economy that poses a risk to the global financial system. The BRICS are among the largest economies in the world. Moreover, their collective growth through and after the Great Financial Crisis represent an out-sized contribution to the world's recovery. An interconnected global financial system further leverages the risk to even smaller EM players. Speculators' unchecked exuberance over the past years has raised the general risk profile of portfolios to liquidity problems. Cross-boarder loans further exacerbates headline issues like fading global consumer demand, tumbling local currencies and plunging commodity prices (traditionally considered a boon for the market). We discuss the tiers of EM groups and the type of risks they pose to the world in today's Strategy Video.
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