While western civilization is dangerously coming to a zero growth and inflation, Asia is surpassing the entire world. Virus benefited to Asia. On the next decades, we could assist to real changes in terms of leading powers. Economic attractivity is a major factor in investment process.
RCEP, China and capital flows.
RCEP (Regional Comprehensive Economic Partnership): it is the name of the largest free trade agreement in history. Near 1/3 of the global GDP! This agreement could particularly benefit to South Asia and generally to the entire Asian continent for hundreds of billions of dollars.
Politically, it is a crystal-clear signal: Asia DO NOT need western societies. It is a real rupture with the former global world order. This trend is amplified by the economic rupture post-COVID-19. For example, 2021 growth for China could surpass 6% or 7% after a positive GDP variation in 2020.
In 2008, China attracted significant capital flows due to the same growth rupture (widely more intense this time). It has created a bubble on financial markets. The recovery of the Yuan that took place after 2011, alimented a bull market, stopped in 2015 with the Dollar return and policies of the PBC in order to peg yuan to dollar.
Since the beginning of 2020, China entered in a strong bull market on the Yuan and partly on financial markets. This trend could be amplified in 2021. Nevertheless, China could face post-2021 the same risks we observed in 2008. Indeed, China is now shifting from exterior attractivity to interior attractivity, what means a possible economic readjustment on this decade. Inflation on wages and rising intern demand are major factors in the process of emergence. The attractivity of China is changing, what could imply structural adjustments on this decade before to surpass US. As a result, Asia will become the greatest economic power ever.
What about India, South America and Africa?
Economically, growth is determined by two factors: demography on the long-term plan as well as innovations and so productivity. Each factor influences each other. When a territory emerges, it is because of (1) a better relative productive force followed by (2) an intern economic attractivity (strong economic activity, good demographic trend). From 2010 to 2020, China respected this transition process (inflation on wages, intern consummation) with a combined productive force and excellent demographic dynamic.
However, even if Chinese growth stays one of the highest on earth, we can identify a very good dynamic in some African countries, especially sub-Saharan countries. But insecurity stays high and risks can persist and a diminution of these risks could appear around 2030s.
This Map shows clearly the shift between western societies, Africa and Asia. We should assist to a rising attractivity of China for the next decades. Chinese leading attractivity could be followed by India between 2030s and 2060s and then by Africa. African economies are at the same demographic position than China 50 years ago, while India and Brazil are more advanced. Furthermore, south America is an interesting alternative to the decline of western economies.
By Thomas Andrieu FOR ROCHEGRUP.