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Can India and China save the world’s economy?

Discussion in 'Pakistan Economy' started by Neo, Jan 30, 2008.

  1. Neo

    Neo RETIRED

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    Can India and China save the world’s economy?


    SHANGHAI: With fears mounting of a global economic slowdown, some analysts predict developing giants China and India, with their booming growth, will help lessen the impact.

    Stock market turmoil this week triggered by fears of a US recession in the wake of a massive mortgage crisis has ignited debate over whether Asia’s two rising economic stars are strong enough to power the world economy.

    This directly challenges the 20th-century economic adage that when the US economy sneezes the rest of the world catches a cold.

    “What is occurring is the rise of other economies to balance out those of the US — and that has to be a good thing,” said Chris Devonshire, a business consultant specialising on China and India trade.

    “The US has problems but these will be offset against markets elsewhere. The new world order is working,” he told AFP.

    China saw scorching expansion of 11.4 percent last year, closely followed by India’s 9.4 percent, and the prospects for both economies remain strong.

    “We expect China and India to support regional growth in the event of a significant slowdown in the US,” said ING Barings Asia economist Prakash Sakpal.

    Such a shakeup is significant because jobs and livelihoods are at stake, but also because, as financier George Soros wrote in the Financial Times, it could signal a major shift in economic power.

    “The current financial crisis is less likely to cause a global recession than a radical realignment of the global economy, with a relative decline of the US and the rise of China and other countries in the developing world.”

    But Zhang Ming, an economist at the Chinese Academy of Social Sciences, dismisses the notion that the Chinese and Indian economies are independent of US consumption.

    “If you want to look at who is going to be the motor of global growth then you have to look at who provides the biggest market for the world’s production of goods,” said Zhang.

    “In the short run America is still strongest. China still has a long way to go.”

    China, whose $3.4-trillion economy is about one-third derived from exports, could easily face economic difficulties if it were to lose the 2.5 growth percentage points garnered from trade, said Stephen Green, a Standard Chartered economist.

    However, Indian exports represent only about 17 percent of its $1.1 trillion gross domestic product, allowing it greater resiliency in the face of a US recession, analysts said.

    “Our economy is geared to domestic demand. We are insulated so that even if there is a US recession it will not have such a direct impact on the Indian economy,” said Federation of Chambers of Commerce and Industry economic adviser Anjun Roy.

    But given that India’s share of world trade in 2006 stood at 1.5 percent, it is not in a position to boost the world economy, Roy said, citing official statistics.

    According to data published by the World Trade Organisation, China’s merchandise exports last year totalled 8 percent of the world total, while imports stood at 6.4 percent. No cumulative figure was provided.

    However, Stephen Roach, a leading economist as head of investment bank Morgan Stanley in Asia, said this week that the idea China and India could power the world economy on their own could “turn out to be a fantasy.”

    Roach, who is forecasting a US recession, also argued in a recent note that when the US consumer is in trouble this has great consequences for the world economy.

    He calculated that the American consumer spent a combined $9.5 trillion last year while Chinese only laid out one trillion dollars and Indians $650 billion.

    “It is almost mathematically impossible for China and India to offset a pullback in American consumption,” he said. afp


    Daily Times - Leading News Resource of Pakistan
     
  2. never

    never FULL MEMBER

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    where does india come in to this
    is every one mad,
    or going mad.

    some bloke said that the us is falling behind china, (in terms of industrial production) where india. if any one is falling behind india it would me the majority of the countrries population having no access to sanitation and a single meal.
     
  3. Bushroda

    Bushroda SENIOR MEMBER

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    Heartburn :flame::flame:
    Heartburn :flame:

     
  4. Neo

    Neo RETIRED

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    India, China not immune to slowdown: IMF


    Thursday, February 14, 2008

    NEW DELHI: India, China and other emerging economies are in the “perfect storm” of global financial risk sparked by the US credit crunch and should mull steps to avoid a sharp downturn, the IMF chief said Wednesday.

    International Monetary Fund director general Dominique Strauss-Kahn told a meeting of Indian economists that large fast-growing economies like India and China had not “decoupled” from poor growth prospects in the US and Europe.

    “The industrial and emerging economies are like two horses yoked together,” Strauss-Kahn told the Indian Council for Research on International Economic Research. “If one is tired, the other can take up more of the strain for a while. But if one stops in its tracks neither is going to get very far.”

    To combat the risks to global economic growth, Strauss-Khan called on emerging market countries to be ready to cut interest rates and spend more money, the same efforts the Washington-based fund has urged for industrial nations.

    “In economic policy, emerging economies could consider how they would respond to a downturn: how much scope there is for monetary easing in some countries; how much scope there is for fiscal stimulus in others,” he said, while cautioning that any extra spending should be temporary and accompanied by other policy measures like exchange rate flexibility.

    He noted that some countries may not have much scope to ease monetary policy or increase spending, but said there needs to be a concerted global effort to boost the world economy. “I think that the trade links that bind emerging and industrial economies together are still tight - and perhaps are tighter than they seem from a casual examination of trade figures.”

    Last month, India’s central bank held key interest rates steady, saying the risk of higher inflation had increased despite global threats to economic growth and financial stability, while China has also warned that rising prices require tight monetary policy in 2008.

    On the other hand, the US government has prepared a $150-billion package to stimulate its flagging economy, while the Federal Reserve has slashed interest rates. But other G7 nations have shown less appetite for fiscal measures to boost domestic demand, particularly Japan which has huge national debts.

    India, China not immune to slowdown: IMF
     
  5. Python

    Python BANNED

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    i doubt india or china can survive any recession!!
    india caters to software needs while china supplies all manufactured goods!!
    Now Chinese won be able to dump their cheap products in usa!!

    and the way china have artifically devalued their currency proves that china is a hoax!!

    CHina is one of the reasons for the recession..By their forced undervalue currency,they have accumulated a large amount of revenue via trade,which hit US manufacturing!!

    so in the end china will also suffer!!

    China doesnt adhere to any law!and EU/USA dont need to target china !!

    it might have realized that they are the one responsible for sudden decline in us manufacturing as us gt used 2 using chinese cheap products!!and in the end ,usa doesnt have that money left to buy items !!

    china wll automatically appreciate yuan!!and if they dont,their forex reserevs ll become worth paper!!

    quick Appreciation of yuan will help dollar become competitive ,decrease trade deficit,gain investment!!and become stable!!!
     
  6. ashfaque

    ashfaque BANNED

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    There is no meaning shooting same statements from last 50 years. Any way in next 5 years going to be major change in manufacturing industry with in India, growth will be fuelled by massive investment plan in core sector by 2012, plan is to invest around $450 B.

    In the flat world no country is totally immune by global slowdown, so India and china. Still these countries have potential of growth, that will certainly rectify the slowdown.
     
  7. Janbaz

    Janbaz SENIOR MEMBER

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    US is already in a recession...........It takes the FED's months to analyze data and declare official results...but yes India and China may insulate a portion of the global economy with mass growth and huge respective demands,,,,,,,,,Other portions that can have a cumulative effect on edging out threats posed by American economic slowdowns are the Asian tiger economies like South Korea, Taiwan, Malaysia and Singapore..The world now is home to a much wider base of robust economies than before, which in my opinion an excellent thing.
     
  8. never

    never FULL MEMBER

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    so how can india help, honest how?
     
  9. ashfaque

    ashfaque BANNED

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  10. gpit

    gpit SENIOR MEMBER

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    Given the fact that China composes about 11% of world economy (PPP), and India more than 4%, I don't think China and India's economy are so pivotal as to "save" the world economy. They however will influence the world economy more than ever before.

    Anyone trying to avoid myopic mentality of sour-grape and being ridiculed by his own deeds/words by claiming that the world's 11% is a hoax meanwhile making the hoax their biggest trading partner to make himself a hoax, please refer to world bank quarterly report on China's economy http://siteresources.worldbank.org/CHINAEXTN/Resources/318949-1121421890573/cqu_09_07.pdf
     
  11. keeninterest

    keeninterest FULL MEMBER

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    the article highlights a very important point where in it talks about the internal consumptions of both india (650bilion dollars) nd china (1trillon dollars) and that pretty well answers the extent to which these 2 countries will play their part in saving the world economy. if u were to ask me, i would say negligible, if not less.

    if v were to c internal consumption as a ratio of total gdp then in india's case it stands at round 65-70% so the over all impact on india should not be worrysome, secondly the exports from india of late have been diversified to the EU, and thirldly and more importantly the investment as a % of gdp has been consistently increasing and fdi forms a very small part of this total investment, so seriously from india's point of view the probs arising out of a recession in US and their impact on india would not be much, though time could tell us a different story.
     
  12. mujahideen

    mujahideen SENIOR MEMBER

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    Dubai ruler fund shuns US; eyes India, China instead

    JEDDAH (Reuters) - Dubai International Capital, an investment agency owned by the ruler of Dubai, said it is holding off making additional investments in the United States because asset prices are likely to fall further.

    "The U.S. market is not yet attractive," Chief Executive Sameer al-Ansari told Reuters in Jeddah, Saudi Arabia, on the sidelines of an investment conference.

    "We will see more of a correction in the first half and then we will see some opportunities ... for the moment, more problems are yet to be disclosed," he said.

    "We are actively looking at Asia, namely India and China, especially in the manufacturing sector," Ansari said, declining to be more specific.

    (Reporting by Souhail Karam)
     
  13. never

    never FULL MEMBER

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    every time i stumble over this thread i have to laugh.

    wats indian worth, haha. one percent of the world economy or there abouts.
    im waiting for some red indian to tell me i have heart burn from a slum and he thinks hes in paradise.