Is China Enough?

BUENOS AIRES ‒ For many countries in Latin America, demand from China has been essential to maintaining high GDP growth rates over the last decade. But will Chinese demand for commodities be enough to sustain high prices for the region’s exports in the coming years?

During the last two decades, four factors combined to generate a sharp increase in world demand for commodities: rapid growth in global GDP, increasing urbanization in developing countries, a rise in population at a rate of 800 million people per decade, and a significant decrease in poverty. With the exception of global population growth, China has been the most dynamic country in all of these respects.

For example, the number of Chinese living in poverty fell by 650 million over the last two decades. Moreover, China accounts for half of the global increase of 1.5 billion people earning between $2-13 a day in the past 20 years.

But should we expect what happened from 1990 to 2010 to continue in the coming decades? To answer that question, several variables must be taken into account: demand growth, technological change, investment, and the commitment to confront global warming, among others. Bearing in mind such complexity, let’s consider only some determinants of demand that are linked to increased income.