Even before the financial crisis descended on Wall Street in mid-September, the persistent slowdown of Western economies had observers in developed markets increasingly worried that the malaise would inevitably spread to the major emerging markets as well. After all, most of their stock markets slumped dramatically this year—and their economies face continuing inflationary pressures. China, in particular, is struggling with the twin challenges of declining demand from importing countries and an overheated domestic economy. Many executives are now wondering whether their hopes over the past few years for growth in China were not misplaced.
On the eve of the Beijing Olympic Games, in August, we met in Shanghai with long-time emerging-market observer Jonathan Anderson to discuss whether these concerns were justified. Anderson, the author of The Five Great Myths About China and the World and head of Asia-Pacific Economics for UBS, sees quite a different story emerging.