The "Next China" Mirage: Indian Industrialization Won't Rescue EM Exporters

CEE Staff
Aug 31, 2025
6 min read

Updated: Dec 25, 2025

For two decades, a plurality of small economies have built their position in the global marketplace on a simple premise: China's insatiable appetite for inputs. It's well known though that this engine of global growth is sputtering under the weight of debt, demographics, Donald (Trump), and a dosage of the middle income trap.

Yet, as China's property sector unravels and its economy pivots away from heavy industry, a new narrative has taken hold in policy circles and investment committees: India will be the next China. The hope is that as India industrializes, its demand for raw materials will seamlessly replace China's, buoying commodity-dependent economies for another generation. This hope, however, is a mirage.

A rigorous, data-driven analysis reveals that India's economic model, scale, and import structure are fundamentally different from China's. To expect India to fill the commodity demand gap left by a slowing China is not just optimistic; it is a dangerous misreading of economic reality that could leave EM exporters exposed to a painful structural shock. The quantitative chasm between the two giants is simply too vast to bridge, and the nature of India's growth trajectory does not align with the needs of commodity producers.

A Chasm of Scale:

The most immediate flaw in the "India as the next China" thesis is the staggering difference in economic scale. In 2024, China's total goods imports amounted to approximately $2.59 trillion . In the same year, India's total imports were just $697.75 billion —less than 27% of China's. This means India would need to nearly quadruple its import volume simply to match China's current, and likely slowing, level of demand.

This gap is even more pronounced when examining the specific trade relationships with commodity-exporting regions. In 2024, Latin America and the Caribbean (LAC) exported approximately $190.9 billion worth of goods to China . In stark contrast, India's total imports from the entire LAC region were estimated to be between just $15 billion and $20 billion . This represents a demand shortfall of over $170 billion from a single region. The story is the same in Africa, which exported $99 billion to China in 2024 , but only $32.15 billion to India . Combined, these two regions face a commodity demand gap of nearly a quarter of a trillion dollars...a chasm that India's current growth trajectory cannot realistically fill for decades, if ever

Manufacturing vs. Services Growth

Beyond the sheer scale, the fundamental nature of India's economic growth model is misaligned with the needs of commodity exporters. China's economic miracle was built on a foundation of heavy industry and manufacturing, an approach that is voraciously commodity-intensive. At its peak, manufacturing accounted for over 30% of China's GDP, driving massive imports of iron ore, copper, coal, and crude oil to build cities, infrastructure, and factories. This is the engine that powered the economies of Brazil, Chile, and much of sub-Saharan Africa.

India, however, has followed a starkly different path. Its growth has been famously led by its world-class services sector, not manufacturing. While China was building the world's factory floor, India was building its back office. The manufacturing sector's share of India's GDP has remained stubbornly stuck between 13% and 17% for decades , a far cry from China's industrial might. A software engineer in Bangalore does not generate demand for Brazilian iron ore; a call center in Hyderabad does not import Chilean copper. This services-led model, while a powerful engine for India's domestic growth, is a poor substitute for the hard-asset, commodity-hungry industrialization that defined China's rise.

The End of an Era: China's Peak Demand is in the Past

The final, and perhaps most critical, piece of the puzzle is that the world is looking for a replacement for Chinese demand precisely because that demand has already peaked and is now in structural decline. The property engine of China's commodity consumption is in a state of protracted crisis. Real estate investment fell by 15.9% in the first eleven months of 2025 , and steel production, the primary proxy for industrial commodity demand, is down nearly 11% year-on-year as of November 2025 . China's demand for iron ore, copper, and other key industrial inputs is not just slowing; it is contracting.

This is a structural shift. China is attempting to pivot its economy toward domestic consumption and higher-value manufacturing, a model that is inherently less commodity-intensive. Therefore, EM exporters are not looking for a new customer to replace a growing China, but a new customer to replace a China whose demand is shrinking from a historically unprecedented peak.

Where Will Growth Come From? A New Playbook for EM Exporters

If the era of a single, dominant commodity buyer is over, where can emerging market exporters find growth over the next decade? The answer lies not in finding a new China, but in adapting to a more fragmented and complex global economy. Several pathways offer potential, though none provide the easy, singular demand of the past.

First, the ASEAN bloc represents a source of modest but real demand. With a combined import market of $1.67 trillion and a manufacturing sector projected to grow to $2.3 trillion by 2029 , countries like Vietnam, Indonesia, and Thailand are on their own industrialization paths. However, their collective import scale is still significantly smaller than China's, and their growth is more balanced, meaning they are unlikely to replicate China's voracious appetite for raw materials.

Second, the global energy transition offers a compositional shift in commodity demand. The world will need less thermal coal and perhaps less oil, but vastly more lithium, cobalt, nickel, and high-grade copper to build batteries, electric vehicles, and renewable energy infrastructure. This presents a significant opportunity for mineral-rich countries in Latin America and Africa. However, this is not a simple replacement. It requires new investments in mining and processing for these specific "green" minerals. Furthermore, as the recent price collapse in lithium and cobalt demonstrates, these markets are prone to their own boom-and-bust cycles and are not a guaranteed panacea .

Third, intra-regional trade (or "South-South" trade) holds immense, largely untapped potential. Intra-African trade, for example, grew to $220 billion in 2024 but still only accounts for 16% of the continent's total trade, compared to over 60% in Europe . Deepening regional integration by reducing tariffs, improving infrastructure, and harmonizing regulations can create new, more resilient markets closer to home. This strategy builds economic complexity and reduces reliance on distant, single-source buyers.

Finally, the most durable solution lies in moving up the value chain. Instead of exporting raw iron ore, nations can invest in processing it into steel. Instead of shipping raw lithium, they can develop battery manufacturing capacity. This strategy of domestic value addition captures more economic benefit, creates higher-skilled jobs, and builds a more sophisticated industrial base. It is the most challenging path, requiring significant capital, technology, and policy commitment, but it is also the most direct route to breaking the cycle of commodity dependence.

Conclusion: Facing a New Reality

For commodity-dependent emerging markets, clinging to the hope that India will seamlessly step into China's shoes is a recipe for policy paralysis. The data is unequivocal: the era of a single, dominant commodity super-cycle driven by one country's industrialization is over. Governments and investors in these nations must urgently pivot their economic strategies.

This requires a fundamental rethinking of national development models. The focus must shift from simply extracting and exporting raw materials to a more diversified economic base. This includes investing in downstream processing and manufacturing to capture more value domestically, fostering new export industries beyond commodities, and aggressively seeking out a wider array of smaller export markets to replace the singular reliance on China. The transition will be difficult, but it is necessary. The mirage of the next China offers a comforting illusion, but the reality of a post-peak world demands a clear-eyed and immediate response.