In the past, a sharp slowdown in the United States would trigger a severe decline in world growth. But now the dynamic of the world has changed with a fundamental shift being under way.
Trade with emerging economies has saved America from recession
"We are experiencing the first episode in history of reverse coupling, in which the rest of the world pulls the U.S. forward rather than the opposite," said Fred Bergsten, director of the Peterson Institute for International Economics, a leading think tank in the United States.
Bergsten told Xinhua that he believed that "trade has saved America from recession" because "the improvement in trade balance has accounted for the totality of U.S. economic growth over the three quarters."
Bergstan's opinion was echoed by many U.S. economists and officials.
U.S. Treasury Secretary Henry Paulson has repeatedly stressed that he believes the U.S. economy will not fall into a recession, given that the world economy, especially the economy in the emerging countries, is fundamentally strong.
In spite of the pronouncements of many observers that recession had already set in, the U.S. economy grew at an annual rate of 1.9 percent in the second quarter of this year, up from a 0.6-percent increase in the first quarter and a 0.2-percent decline in the fourth quarter last year.
The U.S. Federal Reserve has concluded that the showing was mainly due to the strong growth of U.S. exports, especially the exports to emerging markets.
China, the biggest emerging market, is now contributing more to global demand than the United States, said Jim O'Neill, chief economist at Goldman Sachs, noting that add on the BRICs, namely Brazil, Russia, India and China, the impact grows.
The strong dynamism of domestic demand in emerging and developing economies has provided a "trade shock absorber," enabling a robust expansion of U.S. exports over the past year even as U.S. domestic demand has slowed, also said a recent report by the International Monetary Fund (IMF).
Emerging markets transformed into locomotives of world economy
Analysts believe there have been two important shifts in the growth dynamic of the global economy.
The first is that emerging economies have been transformed into locomotives of the world economy, as China has accounted for about one-quarter of global growth over the past five years, according to data provided by the IMF.
The BRICs have accounted for almost half of global growth and all the emerging and developing economies together for about two-thirds, compared with about half in the 1970s.
Secondly, the pattern of trade has changed. Almost half of exports from emerging and developing economies are now directed towards other such economies, with rising intra-regional trade within emerging Asia most notable.
"While some U.S. companies may have cut jobs by outsourcing to China, think of how many more jobs they might be cutting if they were losing money or barely profitable," said Zachary Karabell, president of River Twice Research.
Africa has also benefited from the emerging economies.
Investment commitments in Africa by emerging financiers jumped from less than 1 billion dollars per year before 2004 to 8 billion dollars in 2006 and 5 billion in 2007 dollars, said a recent report by the World Bank.
Growing infrastructure commitments by emerging countries in Africa are helping address the huge infrastructure deficit of the continent, Obiageli Katryn Ezekwesili, the World Bank's vice president for the Africa region told Xinhua.
As a result, the global economy has clearly decoupled itself from the United States and world growth is likely to approach 4 percent in both 2008 and 2009 in spite of the sharp slowdown in the United States, said Bergstan.
"The traditional relationship where the world catches cold when the U.S. sneezes' no longer holds," he noted.
"China now plays a decisive role in the world economy as indicated by its dominant role in global economic growth," he told Xinhua.
(Xinhua News Agency August 25, 2008)
