An emerging market is identified as the economic growth engine leading the global economy from the front. The emerging markets create a spectacular environment and exhibit numerous trends that may be beneficial but can also accompany certain risk factors. With the already stable economies of the world demonstrating tough times, these emerging markets’ and their performance have brought in a great deal of relief into the global market after years’ of sporadic consummation by the stronger economies.
One of the primary reasons that these emerging economies are preferred is due to the easy availability of natural resources in these destinations along with cheap labour and low-cost of manufacturing. An emerging market is apt in many ways as it fulfils the requirements companies are looking out for. With the rapid population growth, sustained economic development and growing middle class are some of the attractive factors these economies exhibit.
Among such nations, one of the most promising economies in recent years is China. It stands as the second – largest industrial trading nation, with extraordinary output from well-maintained machinery and electrical products, which also constitute the export products at large. The Chinese ministry is also planning to establish a diversified sales network across the globe overpowering the prevailing global business opportunities. The robust demand of Chinese machinery and electronic products has already earned a name throughout the world. Among the exporting category, the Chinese products with greater export demands are machinery and electronic products including automobiles, appliances, and mechanical equipments.
Although the major countries operating as the export markets for China were the United States and EU, there are other markets opting for Chinese products and these are the emerging economies like Middle East, Africa and South America. China is also planning to expand their export market territory to countries like Pakistan and South America.
Emerging or developing markets are usually responsible for driving global trade growth by more than 8% annually. This can be inferred from the performance of the five largest emerging economies in the world, also collectively called BRICS – Brazil, Russia, India, China, South Africa- accounting for 18% of total global trade and about 45% of current growth.
Most of the emerging and developing economies are also referred to as transitional economies as they exhibit characteristics of both open and closed economy market and usually one can observe a shift between these two forms. The transition or shift includes a structural or policy reform which may be in the form of currency or capital market changes. If a particular economy is drawing a significant amount of foreign investment, it implies that this emerging economy has potential. The influx of foreign investment into the economy creates better infrastructure and long-term investment opportunities. Hence a foreign investor searching for ideal investing destinations can predominantly focus on such economies expecting good returns.
There are certain repercussions towards investing in emerging economies as they pose certain risks for the investors in comparison to a developed economy. Therefore, an investor should investigate all the available resources before diving into a certain market.