The global economy is facing its third major brake on expansion in five years as emerging markets slow from China to Brazil, provoking debate about how much policy makers should respond.

Three years after industrializing nations led the world out of the U.S. mortgage meltdown-induced recession, the reliability of the power source is waning as Europe’s debt crisis persists. The International Monetary Fund sees them growing an average 5.8 percent in the half-decade through 2016, almost two percentage points less than the five years before the 2009 slump.

Finance chiefs at the IMF and World Bank annual meetings left Tokyo this weekend at odds over how to address the issue, with South Korea’s central bank chief urging Asia to add stimulus as Russia and Brazil called on rich nations to fix their own challenges. At stake is a world economy Bank of Israel Governor Stanley Fischer calls “awfully close” to recession.

“There is a concern that in the near term the engine of growth that provided such a great support seems to be slowing,” said Jacob Frenkel, chairman of JPMorgan Chase International and Fischer’s predecessor in Israel. “They still continue to grow, but we’re seeing a slower pace than anticipated all over the world.”

The IMF meetings ended yesterday with both expressions of optimism that Europe now has a policy infrastructure to quell its turmoil, and a clash between Germany and the fund over what lies next for cash-strapped nations such as Greece.

Developed economies including Switzerland and Japan joined Brazil in sounding the alert on excess currency strength, while delegates disagreed over the right degree of budget austerity as they pushed the U.S. to avoid tumbling over its fiscal cliff.

“Ministers discussed a short-term response for the global economy, but their opinions weren’t harmonized in one direction,” South Korean Finance Minister Bahk Jae Wan told reporters in Tokyo. “The world has a leadership problem.”

Investors may still not be fully tuned into the risks, said Barry Eichengreen, an economics professor at the University of California, Berkeley. While U.S. stock benchmarks last week fell the most since June, the Standard & Poor’s 500 Index (SPX) is still up 19 percent from a year ago. By contrast, the MSCI Emerging Markets Index has risen less than 6 percent the past 12 months.

“I’m worried that stock markets in the United States in particular have gotten ahead of economic growth,” Eichengreen said in an interview in Tokyo.

The size of the latest shock may be underscored this week, when China will report its economy probably grew 7.4 percent last quarter, according to the median estimate in a Bloomberg News survey. Such a pace would be the slowest in three years.

If unchecked, the fading could deal a blow to already-weak rich nations, warn economists. Slackening Chinese demand led Alcoa Inc. (AA), the largest American aluminum producer, to last week cut its forecast for worldwide consumption of the metal by 1 percentage point. The U.S. last week reported a widening trade gap for August as diminished global demand caused exports to fall to the lowest level since February.

China, the world’s second-largest economy, alone accounts for 65 percent of seaborne iron ore demand and 40 percent of copper consumption, leaving producers such as Australia, Brazil and Chile vulnerable, Gustavo Reis, a Bank of America Merrill Lynch economist in New York, said in an Oct. 5 report. (Bloomberg)