“Chindia” essay

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“Chindia” was a term coined by Jairam Ramesh, Minister of State for Commerce in the Indian Government. (Sheth, 2011)

Basically, the name "Chindia”, describes the simultaneous rise of both China and India and its impact on Asia and the world at large. It refers to India and China joined together in terms of economic growth and development to represent the highest potential for economic growth in the world for the next 50 years. The cooperation between those two countries had a link already in the ancient times. This was when Buddhism was taken to China from India. Numerous writings of Chinese travelers prove that claim. However, in post-colonial times there was a lot of antagonism between both countries due to the politics of the day. (Ramesh, Making Sense of Chindia, 2005). Most economist and analyst worldwide compare China and India as complementary. While China is heavily strong in the industrial sector, India on the other hand is the leader in the IT and software sector.

Over the last 30 years the inevitable rise of China and India “Chindia” has established a potential force to become the next largest economic power in the world in the years to come. Occupied by over 40% of the world population, taking the role of the industrial/manufacturing and back office of the globe, Chindia has taken the focal point of world’s global attention, as main producer, supplier and major consumer.  China with its massive industrial factories, acts as the world’s main workshop, while India on the other hand, and with its rapid growing IT and outsourcing sector is turning out to be the worlds-back office. These two roles played by the two countries are complimentary despite the fact that both are competing for the same resources. By instituting the name “Chindia”, the Indian MP Ramesh attempted to give a descriptive phenomenon of the two combined economic giants. Fueled heavily by enormous population about a third of the world’s population, cheap labor, huge domestic markets,  and governments in pursuit of investment friendly policies worldwide, both China and India are projecting their influence virtually in all aspects of the 21st century world economy.

China global supremacy of becoming the second largest GDP nation was realized in year 2010, after outshining Japan ten years prior than expected. Recent estimates shows that soon the U.S. will be overtaken by China to become the largest world economy by 2020. With India and China being in the forefront, 50% of world’s gross domestic product (GDP) will be accounted by Asia. Having overtaken Germany in 2010, China has already attained the position of being the largest global exporter. In 2010, China rated the highest sales in automotive market records of about 18 million unit sales of new vehicles compared to about 12 million U.S. unit sales in the same year. It has also emerged to be the largest market for mobile phones with an estimate of 800 million of Chinese population having cell phones.

The growth of India has also surpassed projections. It has taken position as the largest in cell phone market, the largest producer of motorized scooters and the most prominent manufacturer of small automobiles. Join those accomplishments with India as the highest ranking global provider of IT services and a surging economic power. China and India are in a state of economic revolution and transformations inexperienced since 18th and 19th centuries’ industrial revolution that converted the world. “Chindia” a combination of China and India embodies a promising and exceptional investing opportunity in two global surging economies with strong influence in the world market.

The rapid rise of these two economic giants has fostered healthy competition between China and India. As their robust economies merge, the two nations still find grounds for which to co-operate. Increasingly, regional, economical, political  and worlds business leaders point out that Sino-India relation are currently at their best and getting better as days go by. The extent to which China and India can expand and strengthen their co-operation will be the main determinant of the potential economic growth of Chindia in the next 50 years.

Today we are writing of the year 2011 and the expression “Chindia” is getting more and more relevant for our society due to the extreme economic growth in China and India. The perception of United States towards the rise of both China and India is an important factor in the future evolution of U.S.-China-India relations and regional security. That is the reason why U.S. is concerned about that rise since U.S. is aware of the huge economic potential of those countries. There are many economic factors which indicate that Chindia is on the best way to become the leading economic power in the world in a few years to come. Most economic analysts perceive China to be strong in manufacturing and infrastructure while India is perceived to be strong in services and information technology. China is stronger in physical markets while India is stronger in financial markets. Based on these factors, and detail analysis of key indicators of economic growth such as GDP, GNP, Inflation, Deflation, Balance of Payments and CPI, this paper attempts to analyze them and go more into detail in order to make sure that the claim of “Chindia” becoming the next world economic power is adequate.

The economies of China and India will together be four times as large as the United States, restoring the historic order of Asian dominance before Europe’s navies burst on the scene in the 16th century and nothing will remain the same (Evans-Pritchard, 2011). With an approximated share of above 20 percent of world’s GDP, Chindia has already been ranked as the world’s second-largest economy and highly projected to overtake the USA in the near future. The strong economy of Chindia is capable of enabling it to experience 6 to 8 percent Cagr steered by increased investment, more subcontracts of manufacturing and services and consumer liberation.

First, both nations will require enormous natural resources because not only are they manufacturing and service centers of the world they have own rapidly expanding domestic consumer markets as well. This demand for natural and industrial resources such as oil, gas, coal, copper, bauxite, aluminum, iron and steel will be for many years. High rate of consumption will be a key growth driver especially considering that 40% of global youth population lives in Chindia. In normal terms, Chindia’s GDP will prospectively attain 6.3 trillion US dollars by year 2020. Chindia’s growth is projected to not only affect the prices and demand of various commodities in a sustainable and long term manner, but will also probably change the political stability and socioeconomic atmosphere in the world.

As stated earlier India and China are occupied by an estimated 38% of the world population, this has one of the main demographic drivers of Chindia economy. However, China’s population is rapidly aging owing to its low growth rate and one child policy implemented over two generations will impact its domestic economic growth.  These will result to a demographic drag on the Chinese economy. It’s also estimated that by the year 2015, a third of China’s population will be over 50 years of age. India on the other hand has an estimated population of 1.1 billion people and a very high fertility rate compared to China. In the coming years, India is expected to reap highly from the benefits of a young, large and rapidly growing workforce. Future projections indicate that as of the year 2015, 58% of India’s population will be below the age of 29 years, further projections show that by mid-century, the population is expected to rise to 1.6 billion and an estimated 220 million workforce in comparison to China.

India is at present one tenth in size of China, it will experience accelerated growth in less than ten years with better infrastructure, political reforms and financial investments. India will refocus on manufacturing for global supply and also for its domestic demand. Unlike China, however, India's manufacturing will be selective and largely concentrated on high-end aerospace, military, space and consumer durables including automobiles and appliances. (Economist, 2006). Some economists claim that despite a return to trend growth in the fiscal year 2010-11, India is likely to experience a slow economic growth about 7-8% in the next two years.  India’s economic slowdown will be mainly attributed to uncertainties down financial investments, contractional macroeconomic policies employed by the government to fight the high inflation rate, and the base impact of strong agricultural rebound in FY2010-11. More foreign investment, friendly policy towards open foreign trade and improved infrastructure are the main requirements needed to accelerate India’s economic growth.  Luckily the government of India has taken various initiatives to mainly address foreign direct investment role in improvement of the infrastructure by allowing more foreign sectors to own selected sectors in their economy. As a result of increase commitment and initiatives by the government, India’s infrastructure is rapidly growing at a fascinating rate.

Nevertheless, India will begin to catch up with China as some experts suggest that its growth rate will eventually surpass that of China. Nevertheless, both nations with more than a billion people each will have enormous need for industrial, agricultural and other natural resources and raw materials. (Sheth, 2011).

This will result in rapid growth in bilateral trade as well as reciprocal foreign direct investment between China and Japan and China and South Korea. Without any doubt, the largest trading bloc will be Asia especially with free trade with India. This will require formation of a new currency comparable to the Euro; and it will become the dominant currency of the world similar to the rise of the dollar as a global currency after World War I. (Aaditya, 2011)

With annual growth forecasted at 8-10% for China and 8% for India in the foreseeable future, Chindia’s nominal GDP is projected to rise to 6.3 trillion US dollars by 2020, which is a 10.5% global share, an almost threefold increase from present levels. In terms of resources, Chindia is approximated to consume 45-50% of global natural resources a factor that will make it the largest exporter of manufactured commodities in the world, and will, according to Hong Kong-based investment group CLSA: 

• Make up 40% of the world’s total population

• Consume 50% of its natural resources

• Become the largest exporter of manufactured goods and services

It is estimated that 76% of total global spending on infrastructure will be accounted by Chindia in the next 10 years, after having spent approximately 3.5 trillion US dollars over the decade since 2007.  About 40% of world’s youth and 38% of global population reside in Chindia. It is estimated that Chindia will have added over 200 million people who are above the age bracket of 25 which is likely to translate to 40% of the total global population.

By 2020, Chindia is also projected to accumulate banking and financial assets that are worth 20 trillion US dollars.

China’s growth driven by:                                                               India’s growth driven by:

• Foreign direct investment (FDI)                                • Consumption

• Exports                                                                    • Vibrant capital markets

• Large-scale manufacturing                                        • World-class IT and services sectors

• Economic Model: State Capitalism                                    • Economic Model: Private Enterprise

Contributors of Growth in India

Seduced by la dolce vita, hundreds of millions of new Chinese and Indian consumers are set to ignite an investment and spending boom. The rise of this huge middle class will feed a rapidly growing demand for household products and the raw materials used to make them (Stevenson, 2006).

By 2020, it is projected that Chindia will have:

  • One third of the world’s mobile subscribers and a $100 billion mobile handset market
  • A $480 billion packaged food market, equivalent to 1-1/2 times the present U.S. market
  • Bank loans valued at $9 trillion – twice the current GDP of Japan (Times, 2005)

What are the factors which indicate the rise of “Chindia” and becoming the next world economic power?

My claim is that Chindia has the potential to become the main player concerning the economy. That is why I have to analyze different sectors and see what the figures display at the moment, and how they are going to change in the future where I will have to forecast and try to prove my claim. The initial sectors of study are: Socio economic development, sustainable consumption and production, social inclusion, demographic changes, public health, climate change and energy, sustainable transport and global partnerships. Each of those sectors can be split up again in different fields. For example concerning the sector “Sustainable consumption and production” I will have to analyze the import and export figures for both countries and see what are the products and services they use/ provide. In identifying the products and services, I will research on their speculative conditions in future in order to hold strong grounds to claim that “Chindia” will sustain, lower or increase their market share. In the same time that would affect the GDP.

What data and how will it be collected to answer the research question?

The methodological part of the thesis is one of the most important ones due to the fact that it shows where and how the data will be collected.

Since my topic is about the economic potential of “Chindia”, I will have to absorb my information from different but reliable sources. In order to find the right sources I will have to spend a lot of time looking for them so I can be sure about the facts I claim. That is the reason why my data will be mostly secondary one because I will use the internet and already existing data to write my thesis. That is why research will be very important because I need reliable sources which are really showing the correct facts and figures in order to adequately prove my claim about “Chindia” becoming the next world economic power # 1.

I am aware of the fact that it is going to be hard because many people have different opinions but conducting a comprehensive analysis of the available data will reveal a clearer picture of the prevailing situation in Chindia, as well as its future projections.

First I will analyze the economic potential of each country and see how a “working-together” scenario would impact their economy and the rest of the world. I will try to get the latest figures and facts available on the “world wide web” so my thesis will be up to date. Additionally I will have a look and read some literature which means that I will search for books concerning this topic.

One of the main books which is going to help me to write my thesis is “Chindia Rising – How China and India will benefit your business” written by Prof. Jagdish Sheth. The author distills the implications of the growth of China and India through a wide ranging and thoughtful interpretation and its implications to global growth, prosperity, security and culture. With detailed analyses of companies, economic trends, and historical patterns, the noted business management scholar, Prof. Sheth convincingly suggests that the rise of China and India as 21st century global powers can be as beneficial to the world as was the rise of the US in the early 20th century.  

If I have the possibility to implement primary data as well, I will consider doing it if it is beneficial to my thesis. I would absorb my primary data from experts who are confronted day by day with this topic in order to have pure, exact and valuable information which would help me to give my thesis extra value and accuracy for my claim.

One of the persons I considered to contact is Prof. Jagdish Sheth who is a real expert in this field. I am going to contact him through e-mail and try to make a good picture of the University and myself in order to convince him to collaborate with me. I am aware of the fact that this will be a huge challenge, but if I am able to convince him for a small interview it will benefit my thesis in an extraordinary way.

Envisage problem or limitation

In order to make this thesis right I will need a lot of data which may not be readily available. Another problem is that the internet can be a very useful tool for information but it is sometimes very hard to find the right ones because the “world wide web” is filled with unreliable information and identifying which ones are useful and which not will be a very challenging aspect of my thesis project.

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