Emerging Market Economy

Published Mar 22, 2023

Definition of Emerging Market Economy

An emerging market economy (EME) refers to a country that is in the process of becoming a developed economy. These countries generally have low to middle per capita incomes and are in the process of improving their infrastructure and implementing market-oriented policies. Typically, EMEs experience rapid economic growth as they transition from agrarian to industrialized economies.

Example

China is an example of an emerging market economy. In recent decades, China has experienced rapid economic growth, and it is now the second-largest economy in the world. The country has undergone significant economic reforms to transition from a centralized planned economy to a market-driven economy. This included the privatization of many state-owned enterprises, the liberalization of foreign investment rules, and the establishment of stock markets.

As China has developed and become more integrated into the global economy, its economic growth has attracted the attention of investors and businesses around the world. Many multinational corporations have established operations in China to take advantage of its low labor costs and large consumer market. Additionally, the Chinese government has embarked on major infrastructure projects, such as the Belt and Road Initiative, to connect China with other countries and regions.

Why Emerging Market Economies Matter

Emerging market economies present significant investment opportunities for investors, as they have the potential for rapid economic growth and development. Additionally, the economic success of emerging market economies can contribute to the growth and stability of the global economy. By investing in EMEs, investors can help support economic development and contribute to the reduction of poverty and inequality in these countries.

Furthermore, as EMEs continue to develop and become more integrated into the global economy, they may also become important trading partners and sources of innovation for developed economies.