Who’s Poised to Be the Next China?

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For more than a decade, China has been the engine driving global economic growth. A leader in the emerging market economies with double digit GDP growth, a newly capitalist political regime and a rising middle class gave investors a guaranteed way to maximize profits. The exponential growth caused demand for commodities like steel and aluminum to rise and helped lift markets worldwide.

But China’s days as a fast growing emerging market economy are numbered. GDP is decelerating and settling into a normal pace for a developed economy and the global economy has yet to recover from the demand vacuum China left behind.

The Next Generation

Investors might already be familiar with the BRIC economies: Brazil, Russia, India and China. These have been the staple for high growth emerging markets for more than a decade, but their reign may be at an end.

Brazil and Russia have been gripped by recessions and China’s story is essentially at an end, leaving only India as the one BRIC economy that could rise up as a replacement. With a fast growing population and radical political reforms, India is well positioned to take over China’s place in the global economy. India’s GDP growth has risen more than 76 percent since 2008 and is now expected to be at 7.1 percent for the first quarter of 2017. In comparison, China’s GDP growth rate is less than 7 percent.

But the real growth may come from the new MINT economies: Mexico, Indonesia, Nigeria, and Turkey. These countries all share several similar qualities – a young workforce, a changing political paradigm focused on pro-business policies and no dependence on a singular industry.

These economies look much like the BRIC’s did several decades ago and could be where the next big emerging market boom comes from. While all four countries still face significant challenges, there are a number of positive developments that investors should take notice of. Still, Mexico looks like it’s in the best position to break out as an emerging market favorite.

Mexico has successfully diversified its exports, no longer being oil-centric and focusing instead on its growing manufacturing sector. As the closest manufacturing powerhouse to the United States, Mexico could undercut established manufacturing bases like Taiwan and China with a lower cost of labor and lower cost of transportation.

The longer the global economy goes without a country to take over China’s place, the closer we get to an equilibrium, in which case it won’t matter. Once the global economy balances with the lack of a high demand emerging economy, any new growth should have a hugely positive effect. Still, there are plenty of new economies developing that could take center stage.

The most likely scenario is that more than one economy emerges with high growth prospects. Diversifying your emerging market investments might be the best way to take advantage of the next big global growth boom.