Global power shift to the East a “half-truth”

TV.pngAn interesting opinion piece in today’s China Daily suggests the concept that “the next few years will see a dramatic acceleration in the shift of global economic powers eastward” is “at best, a half-truth“.

Yu Zhongwen notes that this theory has gained ground in recent years, as the media have speculated that “with a combined population of some 2.4 billion at present, China and India, the two vast countries of the East, will reclaim their positions as economic giants in this century“.

However, he goes on to argue that the theory ignores the “obvious fact that the two Asian countries are only developing nations, with their per capita GDP lagging developed countries“. He notes that China’s $3687/ capita and India’s $1122/capita ranks them “103 and 140 in the world”, versus the USA at $46436/capita.

Yu suggests that “the significance of China’s and India’s soaring GDP should not be exaggerated, considering the real scenario where a large proportion of the populace in both nations is leading a relatively poor life.”

This argument, of course, has major implications for chemical industry sales. Until now, Asia’s economic boom has been based on supplying manufactured products to wealthy Western consumers. But this export boom is now ending, as N America/Europe move into an age of austerity.

Chemical and polymer demand are very closely linked to high levels of GDP/capita. Villages without electricity, for example, don’t need to buy many 52 inch HD televisions. Asian chemical industry growth rates could therefore slow quite sharply over the next few years, as countries make the transition from export to domestic demand.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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