The last GDP figures for India received mixed reactions. Everything goes as if analysts are still judging the Indian economy performance in relation with the pre-crisis double-digit standard. This is also part of the refrain on the ” end of the emerging miracles “. In reality, everything suggests that emerging economies should stay as a global locomotive for the world economy. In the period 2014-2019, the latest IMF or OECD data, show indeed that the emerging and developing world would contribute 70% to the increase of the global economy. They crossed the symbolic threshold of 50% of the World GDP in 2008 and should reach 60% in 2019.
Yet it is true that nothing will be as before. And for a simple reason: the end of the “Chinese super-cycle“ tri-cade 1980-2010. Instead of going in circles around the upheavals of the global economy, let us remember this African proverb: “If you do not know where you are going, look where you come from.”
The Chinese super-cycle was this tectonic shift in the global economy triggered by the Chinese turn of 1979. More than a billion people was thrown into the world capitalist arena, doubling the available labor force, upsetting relative prices between capital, labor and natural resources, and causing a huge international relocation of factories and markets.
Moreover lowering the barrier of the Chinese wall few years after the Berlin Wall tilted in favor of the entire Third World. As globalization era started and so the history of the Emerging countries, but we did not understand that well as it was written in Chinese characters.
We failed to understand that the 2007 crisis corresponded to the end of the Chinese super-cycle for deep reasons related to the structural change in China. As in the story of animals and plague, everyone has been pulled by China, which weighed roughly one third of the global growth over the period 1980-2010. Today, we all are struck by the end of its super-cycle, including emerging countries: indebtedness, reversal of commodity prices, deflation, environmental crisis etc.
But as Keynes wrote: “the inevitable never happens, the unexpected always happens”. There are actually more reason to believe that the opportunities of the post-china outweighs the adjustment costs. Simply, the new cycle that opens will redraw once more the global economic map. First, if the world growth may definitely lose about 1 percentage point, nothing seems able to stop the globalization process. We simply enter globalization version 3.0 marked by two phenomena: the acceleration of the NBIK technological wave (Nano, Bio, IT and Knowledge), and a premium for the endogenous engines of development as Chinese locomotive is losing fast its steam.
And that is where the emerging map is redrawing. First China, China still China: 4 to 5% growth in the next decade will continue to make it a kind of locomotive for the world despite the high chance of a financial and perhaps a social shock. Simply, the opportunities are not the same in an urban society that is rapidly aging.
Either the challenges are with the internationalization of China Inc. Then, the emerging economies who de-industrialized in favor of China and its plump primary products are likely to suffer a lot of the induced terms of trade reversal, such as Brazil or Russia. Conversely, those such as India and Indonesia, whose manufacturing sectors have been weakened, should rebound as a result of their endogenous potential and the relocation of the this phenomena “made in China”.
Finally, Africa is expected to gradually emerge from its frontier market status both by the relocation effect and by the maturation of the initial conditions of takeoff, that will offset the decline in commodity prices. China, India, but also most of other countries of the South are not mistaken, since they clearly have accentuated their presence on the African continent in recent years.
Simply, the devil is in the details. Playing the new opportunities entails understanding the current differentiation within the emerging countries group and do more than ever the necessary investments: first cross-cultural, since the endogenous-inclusive growth will be based on local cultural substrates; Then into the frugal innovations “low-cost, high tech and high quality”.
The end of the Chinese super-cycle does not herald the end of the emerging country story but the beginning of a new adventure. It is up to India to take the opportunities of the post-china new brave World, and to the global corporates who are willing to play that game.