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Where do China and India go from here?

August 25, 2011

Sometimes reports that reiterate and drive the same point home after a while, make a lot more sense especially when viewed in context to a constantly changing global scenario. The fact that India’s trade deficit with China is growing, and that it fails to check the flood of chinese goods into India, as well as the fact that in the coming years due to a demographic advantage, India is expected to prosper over China due to its ability to be more entrepreneurial, innovative and inventive than its neighbor is known. However as Libya falls, and the US economy is downgraded, as gold prices soar and investment houses seek parking space in developing nations, we find ourselves asking ok, so what next? As the two fastest growing economies, as nations the rest of the world is banking on to keep them afloat, how do we react to the present times? Inchin Closer suggest three moves both India and China should take over the medium to long-term to keep economic volatility low – 

  • develop new engines of growth to sustain existing dynamism over the medium term – Innovate, experiment and invest in research & development. Increase the employability of science and technology engineers and foster better financial vehicles. Develop infrastructure to support the engines of growth, and maintain a robust regulatory environment.
  • rebalance economies in favour of greater domestic and regional demand over the coming decade – As the Asian century takes hold, Chinese and Indian consumers will buy more, demand better quality goods and shift the balance of trade more evenly. Larger populations with ever increasing pockets means this shift is already taking place. Now its time for domestic polices and regional trade agreements to be put in place.
  • reduce their exposure to short-term capital flows – Hot money or short term capital flows seek to erode value over a long period of time. Both China and India as natural safe and lucrative havens are being used to park a majority of the world’s wealth, measures need to be put in place to avoid accepting increased short term capital.
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