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India Takes The Population Throne

Weekly Briefs
24 Apr 2023
6 min read
India Takes The Population Throne

China-watchers will be relieved after data last week showed the world’s second-biggest economy grew more than expected last quarter. That matters considering China’s outsized role in driving global GDP growth, with forecasts by the International Monetary Fund showing that China – alongside India – will together account for about half of global growth in 2023. But risks remain, with property investment in China contracting during the quarter. And a recent stress test conducted by Bloomberg Economics painted a pretty grim picture should China’s property sector slump further. Speaking of India, the nation reached a historic milestone last week, surpassing China as the world’s most populous country. Over in the UK, new data last week showed the country’s inflation rate remained stubbornly high in the double digits in March, fueling bets for further rate hikes by the Bank of England. Finally, lithium prices are plummeting, and the slump will impact the entire EV value chain. Find out more in this week’s review.


New data last week showed China’s GDP expanded by 4.5% last quarter from a year earlier, handily beating economists’ estimates for a 4% gain. The strong showing was driven by several factors, including a strong rebound in domestic consumption after the abandonment of strict zero-Covid restrictions unleashed pent-up demand in the retail sector. Retail sales rose 5.8% last quarter, which included a 10.6% jump in March alone – their biggest monthly gain since June 2021. Exports showed strong growth too, up 8.4% in the first quarter, while fixed-asset investment increased by 5.1%. Overall, the first-quarter performance should put China on track to meet its 5% growth target for 2023, with economists expecting momentum to pick up in the second quarter (helped by a low base effect).

China's first-quarter economic growth exceeded economists' estimates but was still short of the government's full-year target of 5%. Source: FT

China’s rebound will be crucial to global economic growth this year as developed countries contend with persistently high inflation, rising interest rates, and disruptions from the ongoing war in Ukraine. According to updated forecasts earlier this month, the International Monetary Fund (IMF) said that China and India will together account for about half of global growth in 2023, underscoring Asia’s increasing heft in the world economy. In fact, the wider Asia Pacific region, which includes other economic powerhouses such as Japan, Korea, and Australia, will contribute over 70% of global growth this year. But no matter how you look at it, China is still expected to be the world’s biggest growth engine for some time to come, with the nation’s slice of global GDP expansion expected to represent 22.6% of total world growth through 2028, according to the IMF. India follows at 12.9%, driven by the nation’s booming population (more on that in a minute).

China is expected to be the world's biggest source of economic growth over the next five years. Source: IMF, Bloomberg

Considering China’s outsized role in driving global GDP growth, investors are nervously monitoring what could potentially derail the country’s economy. And there’s one risk that stands out above all: China’s slumping property sector. In fact, the GDP data last week showed that the sector’s woes continued at the start of the year, with property investment contracting by 5.8% during the first quarter, driven by a 19.2% slump in new housing starts. 

To see why this could morph into a bigger risk, consider a recent stress test conducted by Bloomberg Economics, where a 15% drop in property investment was simulated over the next year. Such a scenario would create a crash landing that deals a “devastating blow to China’s economy”, according to the economists. And even after assuming the government taps stimulus to stem the crisis in the form of policy rate cuts and a widening of the fiscal deficit, the property slump would cause GDP growth to slow to 2.9% in 2023 and 2.8% in 2024, the economists estimated. Without any policy response, the downturn would be even grimmer: GDP would increase by just 1.9% this year, followed by a 0.4% contraction next year.

Going back to India for a minute, the nation reached a historic milestone last week, surpassing China as the world’s most populous country. According to the UN’s Population Dashboard, India’s population surpassed 1.4286 billion, slightly higher than China’s 1.4257 billion people. That marks a historic crossover moment for the two neighbors and geopolitical rivals. And while China’s population is aging and shrinking, India’s is relatively young and growing, with half of the population under the age of 30. What’s more, over two-thirds of India’s population are of working age (between 15-64 years old), meaning the country can both produce and consume more goods and services, drive innovation, and more. That’s why India, which already has the third-highest GDP in Asia, is set to be the world’s fastest-growing major economy in the coming years.

India has overtaken China as the world’s most populous nation, according to UN data released last week. Source: The New York Times

Moving on from Asia, new data last week showed Britain’s inflation rate remained stubbornly high in the double digits in March. Consumer prices in the UK rose by 10.1% last month from a year ago, driven by the strongest increase in food prices in more than four decades. While that was a slight deceleration from February’s 10.4%, economists were expecting a bigger slowdown to 9.8%. What’s more, core inflation, which strips out volatile food and energy components, and services inflation both remained unchanged in March at 6.2% and 6.6% respectively.

Headline inflation in the UK remained in double-digit territory last month, while core and services inflation remained flat. Source: FT

These two indicators of underlying price pressures are closely watched by the Bank of England (BoE), and the fact that neither of them fell last month makes it more likely that the central bank will raise interest rates at its next meeting in May, continuing its most aggressive monetary tightening cycle in four decades. In fact, interest rate futures are now fully pricing in two consecutive 25 basis-point hikes by the BoE in May and June, with a further increase expected later in 2023 that would take the key rate to 5% by September. That’s the highest level anticipated by traders so far this year.

Price pressures in the UK are not subsiding as quickly as hoped, strengthening the case for more interest rate hikes. Source: Bloomberg


Supercharged in recent years by strong EV demand and limited supply, the price of lithium carbonate in China, which serves as a global price benchmark for the essential battery metal, soared more than 10x from early 2021 to a record 597,500 yuan last November. But that sharp rally has flipped into reverse, with lithium prices collapsing by two-thirds so far this year. The plunge can be attributed to two key factors: a surge in global lithium supply expected to come online this year, and a slowdown in EV demand in China – the world’s biggest EV market – after the government cut subsidies to the sector. In fact, the year 2023 marked the official end of China’s 13-year-long policy of subsidizing EV purchases.

The price of lithium has collapsed by two-thirds so far this year on the back of an expected surge in global supply and a slowdown in EV demand in China. Source: Bloomberg

The slump will be felt across the entire EV value chain. Lithium miners, for example, are price takers who’ll have to swallow lower revenues as the price of the commodity falls. Battery producers and EV firms, meanwhile, are both engaged in their own separate price wars, with both most likely taking the opportunity offered by lower lithium costs to slash their own prices to protect or expand their market share. All in all, that means EV costs are set to fall, which should accelerate adoption even further, benefiting firms at the very end of the value chain – namely: 1) firms that build and operate EV charging stations; and 2) electric utilities that generate and distribute the necessary power.

This week

  • Monday: German Ifo survey (a closely watched business climate index that acts as an early indicator of morale in German industry). Earnings: Coca-Cola, Activision Blizzard.
  • Tuesday: US consumer confidence (April), US new home sales (March). Earnings: 3M, General Electric, General Motors, McDonald’s, PepsiCo, Spotify, Alphabet, Microsoft, Visa.
  • Wednesday: US durable goods orders (March). Earnings: Boeing, Meta Platforms.
  • Thursday: US GDP (Q1), eurozone economic sentiment (April). Earnings: Mastercard, Merck & Co, Amazon, Intel, Snap.
  • Friday: Japanese retail sales (March), Japanese unemployment rate (March), Bank of Japan interest rate announcement, eurozone GDP (Q1). Earnings: Chevron, Exxon Mobil.
General Disclaimer
The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial instrument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.

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