China’s economic pain can’t be India’s gain

By Liu Xiaoxue Source:Global Times Published: 2015-9-22 19:38:01

China's economic fluctuation is worrying the international community. But India has a different opinion. It seems to have sensed an opportunity to acquire a competitive advantage over China.

Earlier this month, Indian Prime Minister Narendra Modi, during a brainstorming meeting with Indian bankers and tycoons at his residence, reassured them that the Indian economy will withstand global economic turbulence and China's economic slowdown, and "China's loss is going to be India's gain."

In an interview with the BBC, Indian Finance Minister Arun Jaitley said China's economic downturn is "a great opportunity" for the Indian economy, because "the world needs other engines to carry the growth process … an economy which can grow at eight to nine percent like India has viable shoulders to provide the support to the global economy."

Such Panglossianism, studded with schadenfreude, has raised a public debate, after the media hoopla, in the Indian society and academia.

Optimists argue that the Chinese slump in the stock market may steer foreign investments out of China into India, and India can benefit from China's rising labor costs, due to which international companies will be inclined to shift their production lines from China to India.

But others believe India is still unable to take China's place in the global economic chain, as China's GDP and per capita income are five times that of India, and the foreign exchange reserve 10 times the size of India's. Even if China sustains a growth rate of 5 percent annually, it could add an India-sized economy to its GDP every three years.

Whether Modi and Jaitley's remarks were garbled or exaggerated by media or not, the idea that "China's pain is India's gain" is prevalent. It is a zero-sum game mentality, which might cause unnecessary jitters between both countries in economy. So far, there are no signs showing that China and India are approaching to a full-scale competition.

China's economic restructuring and industrial upgrade have dimmed the dazzling economic data of the past, with foreign funds withdrawing and manufacturing industries shrinking.

This change, as for China, is bitter but necessary. China should move toward the upper reaches of the global chain, so its excess capacity could be transferred to other countries which still depend on making massive low value-added products.

During the process, a volatile stock market, the withdrawal of foreign funds, and the relocation of factories are all contractions before the economy notches up an upgrade.

The process will be a win-win instead of a "lose-win" for China and India. Since both economies are not at the same level of development, they can achieve a mutually beneficial industrial conjunction. China's excess capacity, along with the withdrawn international funds from the Chinese market, is what India desires.

"China's pain is India's gain" is a political slogan to buoy up the Indian public. Since Modi took office one and a half years ago, the once assertive politician has met quite a few challenges. His land reform plans have been quietly removed from the spotlight and his Swachh Bharat Abhiyan (Clean India Mission) is also struggling. Even the last quarter's economic growth rate, which was expected to be 8 percent, was actually 7 percent. Modi and his government need a new impetus to brace themselves up in front of the public.

It is true that economic rivalry between India and China is increasing. New Delhi has filed the greatest number of anti-dumping complaints against Beijing in the WTO, and India is very concerned about China's products taking an upper hand in the Indian market as the Regional Comprehensive Economic Partnership talks have made breakthroughs recently, under which India has to exempt the taxes of 42.5 percent of products for its Chinese competitors in the next 10 years.

It is possible that China and India's economic competition, as the Indian economy develops to a certain point, will be expanded worldwide. But, so far, the Chinese economy shouldn't be at the priority of India's concerns, because the economy is still vulnerable due to many problems such as a weak work ethic, poor quality control and the terrible enforcement of business contracts.

India is a large economy, but for now, its major competitors do not include China, but economies like Vietnam and the Philippines, which are eager for investments and infrastructure development, many of which are from China.

India should understand that without a proper environment to attract these crucial elements, its ambition to be a world economic engine is merely a dream.

The author is an associate research fellow at the Institute of Asia-Pacific Studies at the Chinese Academy of Social Sciences. opinion@globaltimes.com.cn



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