Part III – Clash of the Giant Economies

(The third and penultimate post on Indo-China relations)

India and China: ‘Rivals in Partnership’

To determine the accuracy of such a conclusion, it is important to observe the growing influence of Indian and China in terms of economic growth and geostrategic, regional clout. These instances are indicative of the intense rivalry and competition that exists among these emerging nations, even as they continue to foster their economic relations through boosting of trade volume.

The Economy

While the West struggled to cope with a devastating financial crisis, China’s economy showed little signs of slowing down. To be fair, the Chinese were affected by the crisis as export demand slowed down, and legions of workers in the world’s factory lost their jobs. Nonetheless, as developed economies shrank in various quarters from late 2008 to mid-2009, China grew by an astounding 8.9% – so momentous, that there was talk of quickly reining in the Government’s stimulus packages. China’s strong productivity growth, augmented by a manufacturing sector, had opened up after market reforms in the late seventies, and since then, has not looked back. Despite fears being cast on a regular basis about the collapse of an overheated economy, China has grown by leaps and bounds to be the world’s third largest. Perhaps its impact on the global financial scene can be summed up the fact that nearly half of the U.S. Treasury bonds are held in China, and amounts to trillions of dollars. If China were to pull the plug today, several economies would feel the ground shake beneath their feet.

However, the Chinese dragon faces stiff competition from the Indian tiger – the impact of the credit crunch was mitigated by the conservative banking system in India, and the country’s diverse public sector. Arguably, India’s services-run economy fared better than China, as the latter’s heavy reliance on export demand and foreign investment fell by a considerable margin. Notwithstanding a high rate of unemployment and significant swathes of population living below poverty line, it is certain that the Indian economy will be a force to reckon with in the years to come.

(To be continued..)

Image courtesy Chinadaily.com

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