Risks rise over future growth in China and India

Chemical companies, Consumer demand, Economic growth


Many chemical companies now believe it is inevitable that China and India will reach developed economy status. Some even believe that their strong growth will mean “the end of economic cycles”.

But as we discuss in chapter 6 of ‘Boom, Gloom and the New Normal’, the new International eChem/ICIS eBook, there are three major risks to this rosy scenario:

China’s demographic timebomb. Its one-child policy was introduced in 1978, to counter fears of over-population and famine. By China’s own accounting, about 400m births were prevented between 1979 and 2010.

This has reduced today’s 25-to-35-year-old age group by 75%. As demographer Kenneth Gronbach notes, “the 30-somethings will have to do the majority of China’s production, consumption and taxpaying, and when you have a 75% reduction in the group that is chiefly responsible for those activities, you’ve got a real problem“.

Lower incomes. China and India’s “middle class” have incomes that are only a tenth of those in developed markets, as we discussed in Chapter 4. This has major implications for the nature of consumption – and for the type of products that companies will need to make to prosper.

The transition is not guaranteed. It takes 50 consecutive years of 7% annual growth for a country to boost per capita income from $500 to $20,000, says Nobel Prize-winning economist Michael Spence. China’s per capita GDP was only $4382 at end-2010, and India’s $1371, according to the International Monetary Fund. So both countries have a long way to go.

Recent growth in China and India has also come at a price: Poor air quality, chronic water shortages and deforestation. Equally, China needs to rebalance its economy away from its over-reliance on exports.

India must improve its atrocious infrastructure, and reform the harmful government subsidies that are holding back the agricultural sector. It is also often forgotten that India is home to a third of the world’s poor people, with 37% of its population (410 million) classified as poor by the World Bank. Its literacy rate is only 61% – and just 48% for women.

The new chapter therefore argues that China and India will require quite different products and services from those sold in the West. It also warns that their growth should not be taken for granted. Companies need to develop robust Scenarios, to manage the uncertainty this will create.

FREE DOWNLOAD OPTIONS FOR CHAPTER 6
Click here to download a 2 page summary of the Chapter .
Click here to download the full Chapter
Click here to view the 4 minute video with Paul Hodges

PREVIOUS POST

EU's plan to borrow from the poor boosts S&P 500

31/10/2011

Many chemical companies now believe it is inevitable that China and India will r...

Learn more
NEXT POST

Political, Social concerns drive non-Western companies

02/11/2011

Many chemical companies now believe it is inevitable that China and India will r...

Learn more
More posts
Stormy weather ahead for chemicals
24/03/2019

Four serious challenges are on the horizon for the global petrochemical industry as I describe in my...

Read
$60bn opportunity opens up for plastics industry as need to eliminate single-use packaging grows
17/03/2019

150 businesses representing over 20% of the global plastic packaging market have now agreed to start...

Read
Ageing Perennials set to negate central bank stimulus as recession approaches
10/03/2019

The world’s best leading indicator for the global economy is still firmly signalling recession...

Read
BASF prepares its UK supply chain for Brexit
24/02/2019

BASF has been working with Ready for Brexit (the online platform I co-founded last year) as part of ...

Read
Companies and investors have just 30 working days left to prepare for a No Deal Brexit
17/02/2019

Companies across the UK and EU27 are suddenly realising there are now just 30 working days until the...

Read
The BoE’s pre-emptive strike is not without risk
12/02/2019

The Financial Times has kindly printed my letter below, arguing that it seems the default answer to ...

Read
IKEA heads into the circular world with furniture subscription trial
10/02/2019

“Once upon a time, Granny and Grandad used to go to a large shop on the motorway to buy their ...

Read
Fed’s magic money tree hopes to overcome smartphone sales downturn and global recession risk
03/02/2019

Last November, I wrote one of my “most-read posts”, titled Global smartphone recession ...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more