Editor's Note: Ahead of the Group of 20 summit of the world's largest economies in Russia, the International Monetary Fund noted that developing countries have been hardest hit in the past few months by the US central bank's warning that it will soon taper its massive bond-buying program that poured cash into the economy to stimulate it. The subsequent slowdown in emerging markets, particularly Brazil, China and India, could hold back global economic growth, the IMF warned. What risks lie ahead and how can the BRICS nations coordinate efforts to deal with the potential impact? China Daily interviewed four economists for their views.

The long-term quantitative easing measures adopted by some developed economies after the financial crisis have led to a continuous increase in global liquidity. As a result, emerging countries have been burdened with spillover costs such as asset bubbles and imported inflation. Currency depreciation in several countries such as India has weakened their international competitive edge while other countries such as Brazil have failed to resolve their own problems by shedding the adverse impacts onto emerging countries.

Since the United States Federal Reserve indicated in June that it may start tapering its quantitative easing measures, the international capital market has been saddled with increasing expectations of higher dollar returns. Patterns in global capital flows have been altered and large amounts of cross-border capital flows have been flooding back to the US. Emerging economies, including Brazil, India and South Africa, have suffered from currency depreciation, slumps in their stock markets and drops in market value since the capital withdrawal.

The US has yet to decide a specific timetable for its QE exit, but a long wait will bring volatility in commodity prices. A long drawn-out capital withdrawal will bring more fluctuations to the capital market in emerging economies, which have already suffered from economic slowdowns. Emerging economies have been the major driving forces of post-crisis economic growth and any slowdown in growth for these nations will bring further uncertainties to a global economic recovery.

Whether the next US Federal Reserve leader will be current vice-chairwoman Janet Yellen, former treasury secretary Larry Summers or somebody else, the simple reality is that moving too fast or too slow could severely disrupt the lingering recovery in the US. Consequently, the Fed will opt for gradual unwinding. Nonetheless, the economically more vulnerable BRICS nations are not immune to adverse impacts.

In the short-term, the volatile “hot money” flows into BRICS have declined. India's growth potential has been downgraded. Brazil struggles to sustain its growth trajectory. In Russia, growth forecasts have been reduced. Similar challenges have been seen in Turkey, Mexico, Indonesia and other large emerging economies.

As they say, “easy come, easy go”. When foreign investment is driven by opportunism, emerging economies must remain cautious. They need patient foreign investment rather than fickle hot money. Also, it seems that current markets are a bit too pessimistic about some BRICS nations and too optimistic about the G7 club, particularly Europe and Japan.

The likely tapering of asset purchases by the US Federal Reserve comes in response to a better outlook for the country's economy. Our near-term forecast suggests that the US will continue to grow at 2.5 percent this quarter and the next. In this context, the increase in long-term interest rates in the US represents good news, as it signals the US economy is beginning to come out of a great recession. It will be positive for BRICS, as rising US imports are likely to benefit the exports of those nations, though to varying extents.

In the second quarter, the growth of GDP in BRICS picked up but remained weak by historical standards. However, the economies of the BRICS nations show considerable differences. India and Russia are experiencing sharp slowdowns in growth, while activity has been well maintained in Brazil and South Africa. In China, a recovery appears to be underway.

The current weakness in exchange rates of the BRICS nations mainly reverses earlier movements. Immediately after the crisis, exchange rates appreciated as the Federal Reserve eased its policy. Once a policy change seemed likely, exchange rates fell. In most cases, the fall has more or less offset the previous rise. The principal exceptions are India and Russia, where exchange rates have sunk below their levels during the peak of the 2008 crisis. Growth has slowed markedly in these countries.

These exchange rate gyrations have, of course, created some problems for these countries. Current account deficits have widened, but the movements have not been equal across the BRICS. The largest adverse changes were once again in India and Russia.

The major risk facing most of the BRICS nations is that depreciation in exchange rates would spark a new round of inflation. Countries with credible monetary policies should be able to avoid major surges in inflation. Three of the BRICS nations generally aim for about 4.5 percent inflation. To help remain within their targets, two of these countries have raised interest rates.

The tapering-off of the US Federal Reserve's quantitative easing policy has caused some turbulence in emerging economies such as India, Indonesia and Brazil. With the prospect of excessive easing of monetary policy ending and resulting in an increase in US power, international capital flew out of these countries and the local currency values tumbled. But it is worth noting that the turmoil was also caused by these nations' domestic deficiencies, such as excessively high deficits in current accounts and loose capital account management regimes.

The Fed has good reasons to scale back its huge bond-buying program. The initiative was in response to the country's economic crisis and the policy had a role in the US and global economic recovery. Now, with growth recovering and the jobless rate subdued, it is reasonable for the US to cease its QE. Also, it did signal to the world before taking action.

The US QE tapering has a limited impact on China. China has a good current account surplus and $3.5 trillion in foreign reserves. Its capital account remains controlled. Actually, as the US tightens its money supply, China could have more room to adjust its monetary policy independently.