Old geographies, new orders -- China, India and the future of Asia

[Developereo]

Similar per capita is not required, even 1/3rd of it will give both the countries an economy equal in size of the US. And we are talking about only the size of economies, not about global military or political influence.

The claim in the OP is about per-capita being equal.

 

[FaujHistorian]

I am talking about the size of economy and per-capita GDP.

As for Eurozone, the troubles are mostly concentrated in the problem economies. Germany would arguably be better off by itself, but it benefits from the EU because the DM would be higher than the Euro, hurting German exports.

Whether these economies will weather the storm and rise back to previous prominence remains to be seen but, given their past performance and national characteristics (hard work, focus, determination), I would not start betting against them just yet,

ultimately those natoins/organizations who work the hardest at the lowest global prices, win.

Most Europeans and US and UK have priced themselves out.

So this century belongs to China and India and S Korea and Japan and Taiwan

Pakistan can be easily in there too

if we quit following Arabist and Islamist hate with us.

 

[Providence]

I am talking about the size of economy and per-capita GDP.

As for Eurozone, the troubles are mostly concentrated in the problem economies. Germany would arguably be better off by itself, but it benefits from the EU because the DM would be higher than the Euro, hurting German exports.

Whether these economies will weather the storm and rise back to previous prominence remains to be seen but, given their past performance and national characteristics (hard work, focus, determination), I would not start betting against them just yet,

I am not contesting how stretched the claims of India or China are but merely highlighting, the per capita earning maybe high for eurozone but the fundamental problem in the economy are real and they are not just "first world problems" which you are alluding to as per my understanding

So as a sovereign wealth fund manager I WILL NOT invest in eurozone for my expected return levels but maybe just a fraction to diversify my downside risk.

 

[dray]

The claim in the OP is about per-capita being equal.

That won't happen anytime soon, but who knows what the future holds! Who knew that British empire would be reduced to an island in flat 15 years, or mighty Romans will become a non-entity.

 

[Developereo]

ultimately those natoins/organizations who work the hardest at the lowest global prices, win.

Most Europeans and US and UK have priced themselves out.

People still pay a premium for quality, be it Japanese, German or American.

It is true that the up and comers are closing the quality gap, and it will surely affect the economics.

It will be interesting to see when the quality gap gets significantly narrower than the cost gap.

I am not contesting how stretched the claims of India or China are but merely highlighting, the per capita earning maybe high for eurozone but the fundamental problem in the economy are real and they are not just "first world problems" which you are alluding to as per my understanding

So as a sovereign wealth fund manager I WILL NOT invest in eurozone for my expected return levels but maybe just a fraction to diversify my downside risk.

There is no doubt that, from a percent ROI, the developing countries provide a better option, but that advantage will get narrower as the gap closes with the developed world. How fast will the gap close, and to what extent, is up for debate.

 

[Providence]

Similar per capita is not required, even 1/3rd of it will give both the countries an economy equal in size of the US. And we are talking about only the size of economies, not about global military or political influence.

Only true to a certain level. Of course in your countries, you guys may not like to spend as much as we do per capita but it does magnify the role of central govt in your economy since most people would be effectively looking to them for the guidance always. They would bring with them their characteristic inflexibility which any central bank is known for.

SO the debt market in your country can never be as flexible as we have here even with similar economy sizes.

Thus, corporations based in US will still have an edge over "your" corporations even with equal economy sizes.

There is a bigger point than just having economy of size 'n' trillions. Hope I made it clear.

 

[Developereo]

That won't happen anytime soon, but who knows what the future holds! Who knew that British empire would be reduced to an island in flat 15 years, or mighty Romans will become a non-entity.

The thing with a knowledge and technology based economy is that disruptive technologies can completely wreak havoc.

It is entirely possible that India or China could come up with the next quantum leap which would catapult them into the economic stratosphere faster than anyone could have projected.

Anything is possible, of course, and no one can predict the future.

We have to look at the existing ecosystem supportive of innovation and enterprise. Countries which have a mature ecosystem, with a demonstrated track record of delivery, are more likely to mass produce the next disruptive technology.

 

[Foggy_Bottom]

It's a personal comment about me?
I have no idea what you are talking about. You will have to be more explicit.

Yes it was a personal comment about you ONLY in terms of your demeanor.

Question- Do you see the Chinese and Indian posters here, yeah. What do you think are their top concerns, as citizens?
My view: It is country first! and what works best for their country. They are not running around arguing over another land far away, rather they are thinking about home- and what will help their country moving forward. You have much to learn from these two countries. Do it soon or forever be stuck in a rut.

 

[Developereo]

Yes it was a personal comment about you ONLY in terms of your demeanor.

Question- Do you see the Chinese and Indian posters here, yeah. What do you think are their top concerns, as citizens?
My view:
It is country first! and what works best for their country. They are not running around arguing over over another land far away, rather they are thinking about home- and what will help their country moving forward. You have much to learn from these two countries. Do it soon or forever be stuck in a rut.

I have no time to waste on your petty tantrums just because, like many others on this forum, I don't believe your silly claim of being ex-State Dept.

I am not obsessed with Zionism. The fact that YOU, not I, brought up the subject in an unrelated thread spells clearly who is obsessed with what. I respond to questions on any topic, including Zionism, when someone -- in this case YOU -- asks me about it.

Like I wrote above, I will not let you derail this thread with your obsessions. I will not reply unless your comment relates to this topic.

 

[Foggy_Bottom]

I have no time to waste on your petty tantrums just because, like many others on this forum, I don't believe your silly claim of being ex-State Dept.

I am not obsessed with Zionism. The fact that YOU, not I, brought up the subject in an unrelated thread spells clearly who is obsessed with what. I respond to questions on any topic, including Zionism, when someone -- in this case YOU -- asks me about it.

Like I wrote above, I will not let you derail this thread with your obsessions. I will not reply unless your comment relates to this topic.

Who do you think you are convincing here with that diatribe above?

Have a nice day.

 

[dray]

Only true to a certain level. Of course in your countries, you guys may not like to spend as much as we do per capita but it does magnify the role of central govt in your economy since most people would be effectively looking to them for the guidance always. They would bring with them their characteristic inflexibility which any central bank is known for.

SO the debt market in your country can never be as flexible as we have here even with similar economy sizes.

Thus, corporations based in US will still have an edge over "your" corporations even with equal economy sizes.

There is a bigger point than just having economy of size 'n' trillions. Hope I made it clear.

True now, but it is very difficult to predict how things would be if you strech the timeline to the end of this century. So I would not predict anything in absolute terms, it is just that these two countries have potential because of the higher human resources that are also likely to improve in quality over the time.

 

[asquare]

I was just skimming through the Central bank reports of India and Vietnam and Brazil etc. The singular focus on inflation i would say has hurt the economy more badly and ways you guys don't even think and don't even discuss.

Lets consider the policy of using high interest rates as one stop shop for tackling economy woes.

Effect 1 : High interest rates will/are affecting negatively the cash flows of the huge infrastructure projects taken up during the global boom era of pre 2009.

Effect 2 : It has also been detrimental to present investment in economy which could have led to increased outputs in future.

Fact1 : Not only has the production capacity utilisation fallen from ~85% to around 75% in India but industrial investment has literally nosedived in both Brazil and India.

Fact2 : The NPA assets have also risen mostly in steel & infra sector more than agriculture.

We had a similar debate going on during the Reagan era as well in 80s. Although our economies are different but you guys should think out of the box for a start.

(This is most important and surprisingly been missing in the discourse)

Effect 3 :
Because of high cost of borrowing, the firms are tightening their working capitals in a big way. Like reducing inventory levels and reducing the no of shifts in factories etc thereby reducing the factory outputs.

Now, everyone will also agree that in most emerging countries, a significant portion of durable expense is debt funded. Eg Almost 100% of your car is on loan(credit), or say 70% of bikes are on loan, even AC/washing machines etc are on loan say 50% . The high rates therefore killing the consumption levels and people are now delaying their plans to purchase them more and more into future.

How most economists interpret the situation ? This is a momentary pause and everything will again function like a well oiled machine when interest rate drops ? -

This can't be any further from truth. What I will say is the economy in a manner of speaking would have effectively regressed or contracted. And reason is, the economy not only has to prop up the investment levels but demand which had vanished, also has to prop up. Basically your starting point after "the pause" is not where you had stopped before the turmoil but couple of steps behind where you were.

Hope I made the third effect sufficiently lucid.



ps. I am not sure how on topic the post was !

While I agree with your analysis partially, I think you've misunderstood, somewhat, the motivations behind the high interest rate, at least in India.

While the RBI's (Indian central bank) inflation mandate is important, it has a financial stability mandate as well (of course, no central bank discusses financial stability concerns as explicitly as inflation concerns). Focussing narrowly on the inflation mandate, consumer price index (CPI) inflation was at double digits last year and is expected to be at around 6% in January. I think the 6% figure is reasonable for a developing country like India. If 6% sustains up to March, we should see some monetary easing.

Coming to the more relevant part for this discussion, the financial stability aspect, the current RBI governor is a strong believer in leverage cycles i.e. like GDP, aggregate leverage expands and contracts; peaks of leverage represent the most pressing challenges to financial stability. High interest rates force bad projects (and the companies that run them) that were executed only because credit was cheap to shut down. Highly leveraged firms either have to find a way to deleverage (if they are good enough to attract investment) or they have to shut down. This has been seen in the case of the Jaiprakash Group, a huge infrastructure conglomerate, that seems to be on the verge of shutting down because they can't service their debt at these interest rate's. Theres a similar story at the largest real estate developer, DLF.

The underlying belief is that purging bad loans, by making them unaffordable for the borrower, will help to make growth more sustainable in the long run. It is an extremely conservative approach to monetary policy, but not one entirely without merit. The current governor was a U of Chicago professor who was a loud voice predicting impending doom in the pre-crisis years. I think some of the conservatism comes from that experience. Wether he is being too conservative is up for debate, essentially a growth vs long term stability debate. The Chinese have not been as conservative when it comes to the financial sector, what impact that'll will have on their banks is yet to be seen. I wouldn't put it past the Chinese to keep things stable without a hitch, the have a knack for making things work. We haven't displayed that sort of competence, so far.

To your last point, it is one that economists are aware of- it's called 'hysteresis'- the effects of depressed economic activity persist well in to the future. There is someone at every central bank calculating the impact of hysteresis effects on the economy. They'll have an estimate and will have weighed it against other factors. So it's not that they aren't aware of it, they might have assigned too small a weight to the issue of hysteresis, depending on your perspective.

 

[Providence]

True now, but it is very difficult to predict how things would be if you strech the timeline to the end of this century. So I would not predict anything in absolute terms, it is just that these two countries have potential because of the higher human resources that are also likely to improve in quality over the time.

You missed my point. All I am saying is (given an economy of equal size) even with reduced per capita income maybe your countrymen would be equally satisfied as ours.

But our capital and debt markets would still be superior to yours.

 

[Chinese-Dragon]

His problem is with India only, not China. You should know that already.

@Developereo also said the same thing about China a while back. We've had arguments over it.

But he is 100% correct. People tend to overestimate developing countries, and underestimate the sole superpower America. Despite basic facts and logic.

In terms of hard power, America will continue to dominate, both economically (due to the dollar hegemony and the combined economic power of the West) and militarily (no need to explain this one).

In terms of soft power, it is even more hopeless. No one can challenge America in terms of media domination, and the closest challengers (Japan/UK) are fully in the American camp anyway.

Developing countries are just that... developing countries.

 

[dray]

@Developereo also said the same thing about China a while back. We've had arguments over it.

But he is 100% correct. People tend to overestimate developing countries, and underestimate the sole superpower America. Despite basic facts and logic.

In terms of hard power, America will continue to dominate, both economically (due to the dollar hegemony and the combined economic power of the West) and militarily (no need to explain this one).

In terms of soft power, it is even more hopeless. No one can challenge America in terms of media domination, and the closest challengers (Japan/UK) are fully in the American camp anyway.

Developing countries are just that... developing countries.

I am more or less of the similar opinion, though I think China and later India will eventually catch up with USA in terms of total nominal GDP, our people can't remain poor forever, but US will remain the most influential country in the world for the foreseeable future for reasons mentioned by you.