Major players in the global financial markets include the global money market, stock exchange, international banks and multinational corporations (Giddy, 2015). These remain very important markers for banks in terms of strategic planning with a focus on Expansion. Emerging economies and its middle class population have and will remain the key to global economic growth.
Since 2013, emerging economies have sent shivers among established economies like the USA, UK and Western Europe. Countries like China, India, Brazil, Russia, and South Africa have been top on this list. Of note, China surpassed USA as the worlds biggest trading nation in 2013((Magnier, et al., 2015)). The Chinese economy expanded by 7.7% in 2013 and slipped down to 7.4% in 2014. Prior to this Chinese economy had been expanding by figures exceeding 10% for decades since 1978 (Magnier, et al., 2015). Another country that deserves highlighting is India. In 2015, Indias economy grew by about 7% almost matching Chinese growth. This confirms Nouriels notion that emerging economies would grow by figures above 5% year by year after 2013.
This being said, there have been major expansions of Pan African banks which are gaining importance over established European banks and American Banks. The major drivers for this have been the end of apartheid for South African Banks, Major increases in minimum capital requirements in Nigeria, Limited opportunities at home in Morocco and an expansion in Mobile payments in Kenya.
In China, the major driver for economic growth has been the huge investments by its government in manufacturing industries, further facilitated by bilateral agreements between it and countries like Hong Kong and Macau. It also joined the world trade organization in 2001 further fueling its development by creating markets in various areas. It enjoyed free trade agreements with Asian countries including, Chile, Costa Rica, Thailand, New Zealand, Pakistan and Singapore (Magnier, et al., 2015).
The major driver for Indias economic growth has however been its own domestic market. With a population only rivalled by China, India has the market base required to sustain its own economy (BBC BUSINESS, 2015). This growth has on its side, an increase in consumer spending of 7.4% (Zhong & Kala, 2015)Looking at African countries, Kenya has been recently the upgraded from underdeveloped to middle economy. This makes its stand in the global market more attractive for Global banks which have been injecting huge loans into projects that finance manufacturers in that country.
Brazils economic growth does not confirm the beliefs of Nouriel. Its economic growth has been consistently below 5%, being 2.7% in 2013 and 0.1 in 2014 (THE WORLD BANK, 2015). Brazil however has had its export potential to thank for its growth. It has large natural resources and a variety of manufacturing and agricultural produce. Its expanding domestic market also supports it.
The middle class population in these countries serves as its biggest consumers. The total population of middle class people in Asia is a whooping 525Million (EY.COM, 2015). A close look at this reveals that this is more than the total population of EU countries. Any Global Bank with growth in their mind must focus on the middle class in the emerging economies since these are the countries which take a major part in global economic growth.
The Federal Reserves exit from Quantitative easing a program which it held for 6years with the main aim of keeping interest rates at zero finally ended in 2014 without causing any shakes as would have been expected. A closer look at quantitative easing will reveal how the Federal Reserve made a definitive move to ensure that banks would become profitable for the coming years and would remain so for a while longer after stopping its program. Americas middle class have one way or another grown in purchasing power over this time. Anyone who needed credit during the period would get it a zero interest rate (Moore, 2014). For global Banks similar drivers exist as they depend majorly on emerging markets to expand. Therefore any global bank planning an expansion will be eyeing these African countries as they shift into major economies.
Advanced economies have emerged fairly well after the recession. Japan unveiled a new package where its economy was able to regain its a feeble 0.25% growth is 2014. This was majorly due to tax hikes which demotivated investors in its market. This drums the point home where Global banks with views to expand would strategize to stay away from it and think of expanding into emerging economies.
Growth in the Banking Sector leans on these countries since they have higher GDP growth rates. Strategically, major market participants like the IMF are already shifting ground to support more African Countries. Key players in the global market including corporations are already setting up manufacturing plants in low cost production areas like China, India, South Africa and Brazil. Banks expanding into these areas will reap huge profits.
BBC BUSINESS, 2015. India's economic Grwoth Slows to 7%. [Online] Available at: www.bbc.com/news/business-34107648
EY.COM, 2015. Hitting the Sweet Spot. [Online] Available at: www.ey.com/GL/en/Issues/Driving-growth/Middle-class-growth-in-emerging-markets
Giddy, I. H., 2015. Global Financial Markets. New York: Stern School of Business.
IMF SURVEY, 2015. Pan African Banks Expansion Could Boost Sytemic Risks. [Online] Available at: http://www.imf.org/external/pubs/ft/survey/so/2015/pol020215a.htm
Magnier, M., Wei, L. & Talley, I., 2015. China Economic Growth Slowest in Decades. [Online] Available at: www.wsj.com/articles/china-gdp-growth-is-slowest-in-24-years-1421719453
Moore, H., 2014. The Fed has quietly ended its stimulus. Now the hard work really begins. [Online] Available at: www.theguardian.com/business/2014/oct/29/fed-quietly-ends-stimulus-hardwork
THE WORLD BANK, 2015. GDP Growth (Annual %). [Online] Available at: www.data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
Zhong, R. & Kala, A. V., 2015. India's Economy Outshines Neighbours. [Online] Available at: www.wsj.com/articles/indias-economic-growth-slows-1441025725
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