iChongqing Title

China and India Can Propel Global Growth

By XINYI LI|Apr 17,2019

From ChinaDaily

Central bankers and finance ministers from across the world gathered in Washington for the International Monetary Fund and World Bank meetings April 12-14. One key finding highlighted in the IMF's World Economic 2019 Outlook projected a sharp decline in the growth rates of 70 percent of economies including  G7 economies, except Japan.


The first special train carrying cargo to India along the New International Land-Sea Trade Corridor sets off from Chongqing. [Photo/liangjiang.gov.cn]

However, this global deceleration is expected to fluctuate over the coming years. Global deceleration softened to 3.6 percent in 2018 and is estimated to slide further to 3.3 percent by the end of 2019, before stabilizing at 3.5 percent in 2020.

What is interesting in this projection is that China and India are expected to sustain growth rates of more than 6 percent and 7 percent, respectively. These projections will further strengthen their positions as engines of global growth and also enhance their share in global income. India's growth is projected to increase from 7.1 percent last year to 7.3 percent in 2019 and 7.5 percent in 2020. In contrast, China's growth is projected to decline from the current 6.6 percent last year to 6.3 present in 2019 and 6.1 percent in 2020.

Observers say that the global deceleration has been largely influenced by China's economic slowdown, which has contributed one-third of global growth for the past few years. In addition, the global slowdown has triggered a sharp decline in China's foreign trade. The slowdown has negatively impacted emerging economies such as Argentina, Iran, Turkey, Saudi Arabia, Venezuela, and even advanced economies such as Australia, Britain, Canada, Germany, and France.

China, nevertheless, continues to be seen as the main driver for global growth. This is because China's economy is four times larger at the market exchange rate and 2.5 times larger in purchasing power than that of India. This makes the nature of the two countries' economic engagement even more important as it has direct and deeper implications beyond their bilateral equations.

Therefore, before jumping to conclusions on India's expected absence from the second Belt and Road Forum for International Cooperation in Beijing, it is important to flag various extant as well as emerging contours in their expanding economic engagement.

At the most visible level, the last two years have seen an impressive rise in China-India trade, which exceeded $95 billion in 2018. China's investments in India have been increasing by leaps and bounds: from $668 million in 2016 to more than $3 billion in 2017 and $5.6 billion last year. So all is not lost if, for understandable reasons, India is absent at the coming Belt and Road Forum for International Cooperation.

Meanwhile, China's Belt and Road Initiative remains a work in progress.

In early 2018, President Xi Jinping introduced a new innovative mechanism called the"2+1 model" that provides equal BRI partnerships to Asia's second and third-largest economies, Japan and India. The offer was made to Indian Prime Minister Narendra Modi during the informal China-India summit in Wuhan in April 2018. A similar offer was extended to Japanese Prime Minister Shinzo Abe.

Last October, China and India successfully completed their first "2+1" joint training program for Afghan diplomats. Both sides continue to explore similar joint ventures in other South Asian countries. What's more, a similar partnership with Japan would inject added vitality into the Belt and Road Initiative in Southeast Asia.

The central problem remains the trade conflicts between the United States and China. The world's first and second-largest economies constitute a whopping 40 percent of the world economy, while India remains the world's sixth-largest economy.

Although the US administration has been equally whimsical in dealing with most countries including its friends and allies, and India, none of those economic tussles have had severe global implications.

The paradox is that a continued deceleration of the US economy will also hurt China, which holds US Treasuries worth $1.8 trillion. China's recent efforts to engage European nations seems instructive on how China and India should continue working toward innovative bilateral strategies.

What has worked for China's unprecedented rise in the past four decades might not work for the next 40 years. With the US falling prey to its periodic "isolationist" impulses, the IMF's World Economic 2019 Outlook is one more reminder that it is the time for China to shed the old and look for new strategies and partnerships in order to help build a community with a shared future for mankind.

The author is a professor at Jawaharlal Nehru University, New Delhi, and has just published a book, Corridors of Engagement (2019). 


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