Which country comes out of slowdown earlier?
To understand this, I believe we can look at two metrics.
Capital waiting to be deployed could be a metric to understand how effectively can the wealth creation engine be primed. The current US consumption based wealth-creation will have to be rewired to domestic demand driven wealth creation. This is one reason why investors look for telecom and FMCG companies. They are better wired for such situations. But the real boost comes from entreprenerial activity that feeds into such sectors or creates new markets around such concepts. These entrepreneurs drive value creation and GDP growth. The question really is how much capital is available to be deployed into the economy. This consitutes available bank credit,
The second metric is effectiveness of the wealth distribution engine. We can call it multiplier effect. If an economy has enough structures to distribute the wealth creation across the population then better are its chances in current situation. Here, a consumption based economy like India would feature higher than manufacturing-export let China. But evaluating this factor is a little soft-factor based analysis.
Investors have figured out the first one and therefore rushing into China. Yet, most have very limited understanding on how the second factor works. I think both factors are necessary to create a push out of the slowdown. But given how connected capital is globally, I think the weight of second factor might be higher. What say ye?