The raw material super-cycle has completed and the structure of the world economic growth undergoes fundamental changes, write analysts of Citi in the report “After China: Future of World Economy of Natural Resources.” The model, in which China has played the role of the world factory and the developed countries ensured growth at the expense of consumer demand will be replaced by another one: manufacture and final consumption are more equally distributed along the globe.
“None of the big developed countries will be able to reach the level of China,” they believe. India and Brazil will not be able to replace it: in these democratic countries the authorities will hardly achieve the consensus required to maintain a high level of investments into the funds, which would stimulate demand in raw material. In the 1950-1970s Japan and Europe managed to achieve that during the after-war reconstruction, while in the Asian countries the structural reforms in the economy have been started by the authoritarian regimes.
Russia will not contribute into the world demand, it will most likely influence by increasing the supply. “Considering decline of population (first of all able-bodied population), lower oil prices and rather high demand in raw material per capita, the perspectives of growth of demand in raw material in Russia look limited, Citi believes.
The demand in raw material will be mainly distributed throughout the world and will depend on “five developing regions” – India, Association of Countries of South Eastern Asia, Near East, Latin America and Africa.
The countries dependent on the raw material export have been growing rapidly during the super-cycle, but now they faced economic, social and political problems, Citi believes. They will invest more into the processing industries, which will lead to diversification of their economies and world demand in raw material.
Low prices for raw material give a chance to change the economic model. The market has been using “Chinese factor” in the price of raw material for several years, but if Chinese economy does not slow down, the probability of decline of the rates below the current level is not high.
