Commodities exhibit a one decade up,two decades down cycle,notes Ruchir Sharma,Managing Director,Portfolio Manager and Head of Global Emerging Markets Equity Team at Morgan Stanley Investment Funds.China is the 100 pound gorilla in the commodity marketplace.
A China slowdown is a principal part of the commodity slowdown thesis.The best case for China is 6-7% growth.It's quite a shock for those who are used to 7-8% growth.It's a very natural slowdown.At a per capita income of 6,000 dollars a year,all developing economies slow down.
China is systematically deploying its wealth,but their debt to GDP is close to 200%.The reason for their slowdown is,the number of people entering the labor force and moving to cities is slowing down.It's demographics.It's like Japan in the 1970s.
We are now in a post-China world.Look to the Philippines,Indonesia and Thailand.For the first time,the Philippines now have a stable political leadership intent on increasing the country's wealth,Mr.Sharma pointed out.
Ruchir Sharma,CFA,is the author of the book "Breakout Nations."A Newsweek columnist and contributor to The Wall Street Journal,he has a BA in Commerce from Shri Ram College of Commerce in Delhi.
Morgan Stanley(MS)
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