What market turbulence is telling us - Martin Wolf

... the most important reason of all [for the capital outflows] is realisation of the deteriorating performance of the emerging economies -- in cyclical and, more significant still, structural terms. Of the five Brics (Brazil, Russia, India, China and South Africa), only India is experiencing a revival. Worse, on average, about a third of the slowdown among the 24 largest emerging economies between 2010 and 2014 was structural. A particular concern is the decline in the rate of growth of "total factor productivity" -- a broad measure of efficiency. Also worrying is the slowing growth of trade, itself partly a result and partly a cause of weaker growth. Globalisation is losing dynamism.

... A natural way to solve [China's part in] this problem might be to allow capital outflows, a big depreciation of the renminbi and so a re-emergence of large current account surpluses. But such a "solution" would threaten the stability of the rest of the world economy, particularly since the eurozone and Japan have already chosen much the same option. Beijing is resisting the pressure: gross foreign currency reserves have fallen by $660bn (17 per cent) since June 2014. Yet, if this continues (and it surely will) the authorities will have to tighten outflow controls, which would undermine reforms; or let the exchange rate slump, which would destabilise the world.