Written by:
Paco Litonjua, Year 12
The 21st Century is poised to be an era of drastic socioeconomic change and development. With the nations of Europe and America plagued by mounting deficits and crippling austerity, the center of global economic growth is expected to shift further East in the coming decades. For the first time in over two centuries, Asia will once again cement its foothold as the preeminent player in global politics, culture, and development. Assuming current economic trends persist, the continent is projected to account for over half of global output by mid-century. With investment rates averaging at 35% of GDP, the staggering pace of development has undoubtedly created an atmosphere of intense competition between the nations of Asia – each eager to reap the full benefits of the region’s increasing prosperity. No rivalry, however, is more hotly contested nor has a greater impact on the global geopolitical environment than that of India and China.
Despite being next-door
neighbours, the two East Asian giants have never quite seen eye-to-eye. Ever
since a brief but bloody border war in 1962, a relationship of mutual animosity
and caution has continued to exist between the two nations. Moreover, vast
ideological and political differences plague the two countries. On one end of
the spectrum, China remains governed by a one party communist regime which,
despite its best efforts to integrate free-market capitalism into the economy,
is still characterized by massive state-run industries and extensive central
planning. India on the other hand is the world’s most populous democracy, with
over 550 million eligible voters and has one of the lowest rates of government expenditure
in the G20. Now, with the eyes of the world firmly fixed on Asia, tensions between
these two major powers seem as high as ever.
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| The complicated and divisive border between China and India has been the source of much diplomatic tension in recent years. |
As of now, China
seems to be the clear winner of Asia’s economic tug of war; with almost every
statistic pointing in favour of the world’s most populous nation. It is no
secret that Chinese growth has been one of the greatest success stories of
economic development in recent memory. In a little over two decades, the nation
has transformed from a largely agrarian society to the so called ‘factory of
the world’. The consistent double-digit growth rates in GDP have escalated
urbanisation to a massive scale - pushing hundreds of millions of workers from
their countryside dwellings to the nation’s sprawling city centers. In the next
couple of decades, China’s output is expected to surpass even that of the
United States. At the core of the nation’s development are the economic powers
vested in the reigning communist party. Unlike any other major economy, the
Chinese government is able to directly alter almost every aspect of the economy
through its state run industries and extensive bureaucratic system. In this
sense, through implementation of periodic 5-year plans, the government is able
to rally their nation of 1.3 billion to achieve their specific socioeconomic
goals.
However, many economic analysts argue whether China’s dominance in Asia and by extension in the rest of the world can be maintained in the coming decades. Experts cite the quality rather than the quantity of economic growth in the country as the main hindrance to the nation’s prospects of sustained growth. As an exporting giant, China relies heavily on foreign demand to fuel domestic growth. However, with the onset of the global financial crisis, China’s growth in recent years has slowed due to a sharp decrease in consumption in the developed economies. Furthermore, the Chinese government has recently been criticized for placing too great of an importance on general economic statistics, such as GDP growth rates or rates of urbanization. In the government’s quest to maintain high GDP growth rates, the regime has demonstrated its central planning policy as ‘a clear waste of economic resources’, which helps boost levels of GDP yet don’t really create anything of value in the economy. The most famous example of such a failed government project is the city of Ordos, Inner Mongolia; a modern ghost town that houses a population of around 60,000 yet is built to a capacity of 2,000,000.
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| The quality of China's economic growth is questionable as entire cities remain empty. |
On the other hand,
certain economists, such as International Monetary Fund CEO Christine Lagarde,
believe that India may become the next ‘catalyst for global economic
development’. Experts cite India’s large English speaking population as a clear
advantage over their Oriental counterparts. Due to a shared official language
and political agenda, India shares a closer relationship to Western economies
than China and so holds greater prospects of integrated, globalised
development. For instance, the business process outsourcing (BPO) or call
center industry is one of the largest sectors in the Indian economy, whereas
this industry is virtually nonexistent in China. Furthermore, the abundance of
private sector financial services firms that provide small short-term loans or
other sources of capital to even the poorest of Indians help steer the country
towards the path of inclusive growth – that is, economic growth in which all
socioeconomic classes benefit from development.
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| Large business process outsourcing centers (BPOs) are now commonplace in India. |
Taking
everything into consideration, it is of course difficult to come to any sort of
concrete conclusion in a situation as complex and divisive as this. However, as
the economic dice plays out, competition between China and India will undoubtedly
remain at the top of the global current affairs agenda for much of the
foreseeable future. Perhaps, with the help of the West, the transition of
economic dominance to Asia will be one of relative peace and stability; a shift
that ultimately fosters inclusive economic growth and cooperation rather than
competition.
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