Why should your business be global?
There are many reasons to which we periodically refer. Certainly top line growth is the main factor for many companies. But diversification into counter cyclical markets should be nearly as high on the list. What would happen if the Chinese market were to slow? Certainly you should consider the implications, but you should also ensure that your global portfolio is diversified to minimize the impact (and perhaps even capitalize on the consequences) of a slow down in China which might translate into a pick-up elsewhere. While China provides an easy example, there are a host of other potential consequential opportunities around the world.
Q: If China goes into recession, could this also create a recession in other emerging markets?
Emsbo-Mattingly: I’m partial to analyzing emerging markets on their fundamentals. There are commodity-dependent economies, and those economies would certainly not benefit from a weak China. But there are also export-oriented economies that compete with China for market share. These economies may already be benefiting from China loosing its competitiveness due to rapidly rising wages and operating costs. Southeast Asia, ironically, may be a potential beneficiary. Plus, many of these countries, India and Brazil in particular, have growing domestic economies and I believe they could do quite well, even with a weaker China.