The rapid development of emerging economies and developing countries has been one of the driving forces behind the major changes in the international landscape over time, and an important landmark of the unprecedented changes of the century. In the narrative of economic globalization and the evolution of international relations, the phrase “the rise of a group of emerging economies” or “the rise of a group of developing countries” was once one of the most frequently used terms. But what are “emerging economies (emerging market countries)”? What is a “developing country”? What are the differences and similarities between the two? So far there is still no internationally accepted precise definition. So, how should we understand this issue?
The origin of the term “emerging market”
In the early 1980s, the International Finance Corporation (IFC), a subsidiary of the World Bank, noticed that stock markets in developing countries were not attracting foreign investors. As a result, the company began to collect and compile data on the economies of ten developing countries, including Argentina, Brazil, Chile, Greece, India, Jordan, South Korea, Mexico, Thailand, and Zimbabwe, especially on their stock markets, in an attempt to tell international investors that their economic development prospects were promising and that their stock markets were worth investing in.
In 1981, Dutch economist Antonij van Egertemeier, who worked for the International Finance Corporation (IFC), was tasked with setting up a Third World Equity Fund for developing countries. During a presentation of his fund to an event at Salomon Brothers Investment Bank in New York, a Morgan Stanley executive said that such a fund was necessary, but that the term “Third World” was inappropriate because it was often The term “Third World” is not appropriate, as it is often synonymous with “poor and backward”, “crude” and “hopeless”, and needs to be replaced by something else.
Van Egertemeier meditated, and finally one day on the drive to work came up with the “emerging markets” which sounds like a new term that can give people a sense of prosperity, prosperity, vigor. Shortly thereafter, IFC set up the Emerging Markets Data Base, a specialized information service for international investors. At the time, however, only the ten developing countries mentioned above were considered “emerging market countries”. Since then, some famous international investment firms and financial institutions, such as Morgan Stanley, Goldman Sachs, Standard & Poor’s, Banco de España Exterior, and Citibank, have made their own “rosters” of “emerging market countries”, and the World Bank and The World Bank and the International Monetary Fund have also started to use the term “emerging markets” frequently, and more and more developing countries are being labeled as “emerging economies” or “emerging market countries”. “However, there is no clear definition of “emerging markets” so far.
Is there a standard for defining “emerging economies” and “emerging market countries”?
An article published in October 2017 in the British magazine The Economist said, “In a broad sense, an emerging market is one that is neither too rich nor too poor, and not too closed to foreign investment.” Such an approach to definition clearly lacks academic seriousness. In Chinese academia and media, “emerging markets,” “emerging economies,” and “emerging market countries” are also high-frequency terms, with a variety of definitions and opinions. So far, only “E11” and “E30” are probably the most striking, with “E” being “Emerging market/ economy”. E” is the first letter of “Emerging market/ economy”.
The scholars who proposed “E11” defined “emerging economies” as “developing economies with relatively rapid economic growth after World War II, large economic size and population, relatively low current per capita income, high degree of economic openness, and broad representation. They define “emerging economies” as “developing economies with relatively rapid post-World War II economic growth, large economic size and population size, relatively low current per capita income, high economic openness, and broad representation.” Based on this definition, they propose seven criteria for measuring “emerging economies”: relatively high economic growth rates since World War II; comparable economic size and population size; current upper-middle or lower-middle per capita income levels; not among the recognized developed or least developed countries; high economic openness; more widely representative; and less controversial. After analysis and comparison, it is found that the 11 developing countries in the Group of Twenty (G20) can best meet these seven criteria, from which the term “E11” is derived, but can still be fleshed out.
In a video address to the World Economic Forum in Davos on January 17, 2022, UN Secretary-General Guterres said that the global recovery is slowing sharply due to epidemics, supply chains, inflation and other factors, threatening the achievement of the UN 2030 Agenda and the Sustainable Development Goals.
First, which economies can become members of the G20? is a fraught question. Poland, for example, was quite unhappy about its failure to enter the G20 back then. This means that if the G20 expands in the future and Poland succeeds in joining, then Poland will naturally be an “emerging economy” or “emerging market country” and the E11 will become the E12?
Secondly, the “seven criteria” of E11 lack quantitative indicators, which increases subjectivity. For example, what kind of economic growth rate is relatively high? What kind of economic size and population is in line with the criteria? What kind of economic openness is appropriate? As for the “broader representation” and “less controversial”, it is even more justifiable for the public and the private.
Other scholars have used the principles of development economics as the basis for measuring whether a country can be ranked as an “emerging market”, such as economic volume, institutional environment, economic growth rate, industrial structure, urban-rural structure, income distribution, and development momentum. Argentina, Brazil, Chile, Colombia, Dominica, Ecuador, Guatemala, Mexico, Peru, Poland, Romania, Russia. This is where the term “E30” comes from.
Compared with the “E11”, the “E30” uses more quantitative indicators, reducing the room for arbitrariness and subjectivity, but the “E30” list is also questionable. First, this definition focuses too much on economic factors, ignoring political factors, especially the impact of political stability on the investment climate. Colombia’s civil war lasted nearly half a century and hundreds of thousands of people lost their lives; Guatemala’s insecurity has led to countless migrants trying to smuggle themselves into the United States; Peru had three presidents in one week in November 2020 …… “emerging economies “This beautiful label is suitable for them or not? Second, although quantitative indicators will reduce some subjective bias, it is difficult to completely avoid subjective uncertainty and arbitrariness in the choice of any indicator. For example, economic volume can be quantified, but judging how much volume meets the “criteria” is subjective. The gross domestic product (GDP) of Guatemala and Dominica is less than $80 billion, so it is difficult to say that such a volume is “large.
It should also be noted that the term “emerging economy” should not be static. However, both the “E11” and “E30” have been defined in a static manner so far. In other words, some “emerging economies” will “graduate” to the ranks of developed countries after a certain stage of development, while others should be eliminated due to unfavorable development or decline. Of course, how to define the level of “graduation”, how to eliminate the vain “emerging economies”, whether it is an annual “assessment” or multi-year “assessment”, and who is responsible for the “graduation”? assessment” once a year or once a year, and who should be “assessed”, are questions that are difficult to answer clearly.
Clear definition of “developing countries” is more important
In my opinion, instead of spending a lot of energy on the definition of “emerging economies (emerging market countries)”, it is better to study the definition of “developing countries” in depth. This necessity is related to China’s need to clarify its identity in the process of practicing great power diplomacy with Chinese characteristics. On the one hand, one of the characteristics of great power diplomacy with Chinese characteristics is all-round diplomacy, that is, China develops relations with both developed and developing countries. On the other hand, as a member of the family of developing countries, China will never claim hegemony, engage in expansion, or seek spheres of influence, and is firmly committed to enhancing the representation and voice of developing countries in the international governance system; China’s vote in the United Nations will always belong to developing countries …… These solemn commitments are a permanent part of China’s diplomacy guide. However, denial of China’s status as a “developing country” has been heard from time to time, both abroad and at home, and these voices have become even more prevalent as China’s total GDP has steadily become the second largest in the world and its share of the global economy has exceeded 15 percent.
On November 17, 2021, the seventh batch of Chinese vaccine aid to Cambodia arrived in the Cambodian capital, Phnom Penh.
The U.S. is the biggest advocate of China’s “developing country status”, and on July 26, 2019, the U.S. government issued a memorandum on the status of developing countries in the World Trade Organization, mentioning China 11 times, arguing that China is not a “developing country” and should not be included in the WTO. ” and should not continue to enjoy the preferential treatment to which developing countries are entitled in the WTO.
Some scholars from developing countries have also questioned China’s status as a “developing country”, arguing that the relationship between China and developing countries is not “South-South cooperation” but is characterized by a “center-periphery” relationship, in which China is the “center” and developing countries are the “periphery”, and the “periphery” is dependent on the “center”.
Unfortunately, to date, there is no internationally accepted standard definition of what constitutes a “developing country” and what constitutes a “developed country”, and how to define a “developing country” is also a major question that has yet to be fully answered.
In response to the question “Is Russia a developing country”, a Chinese scholar pointed out that economically developed or underdeveloped actually refers to the developed or underdeveloped market economy. The market system and market mechanism of developing countries are not developed, perfect and sound, and Russia’s market system and market mechanism are also not developed, perfect and sound, so Russia is a developing country. Of course, this statement that defines developing countries by market system and market mechanism is still only a family opinion.
The World Bank publishes the list of low-income countries, middle-income countries and high-income countries every year. According to this list, which will be published on July 1, 2021, countries with GDP per capita above $12,695 are “high-income countries,” those below $10,045 are “low-income countries,” and those in between are “middle-income countries”.
It seems that GDP per capita should be an important indicator to define the status of developing countries. It is true that China’s economy is the second largest in the world and has great potential for economic development, but China’s GDP per capita is only a little over $10,000, making it a “middle-income country. However, is it reasonable to use GDP per capita as a basis for judging developing countries? Many countries around the world have a GDP per capita well above $12,695, but in other areas they are not comparable to developed countries.
To sum up, the most urgent task is not to give a specious or unacceptable definition of “emerging economies”, but to define the basic criteria of “developing countries” at the political, economic, diplomatic and statistical levels as soon as possible, so that China’s long-term developing country status can be understood and accepted by the international community.
