Neither India nor Africa will be able to take over from China

Chinese potential growth will decrease markedly as a result of population ageing. The question is therefore whether other countries will be able to take over from China to boost global growth, and India and Africa are often mentioned. But we do not believe that India or Africa will be able to take over from China, for the same reason in both cases: Savings are insufficient to finance the investments needed for growth; This will lead to a shortfall in investment overall and in infrastructure and also to growing external debt; And the growing external debt will lead to a permanent depreciation of the exchange rate, which will make the country poorer due to the deterioration in the terms of trade; Moreover, the population’s level of education is much lower than in China. We believe the "curse of insufficient savings" is a serious obstacle to India and Africa having a vigorous long-term growth and to replacing China as the driver of the global economy.