China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

China and India – today and tomorrow

October 17, 2022

Presentation by Hubert Fromlet at the LNU conference “Baltic Sea Region and Emerging Market / China Day” in Kalmar, October 17, 2022

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Summary

China and India are the two largest countries in the world when it comes to population. Both countries currently have the same size in population, around 1.4 billion people. China still has a larger total GDP but India may be currently catching up somewhat. Both countries have common problems but also diverging challenges. Altogether, none of these two giant countries is able these days to function as a main driver of the global economy in the way China did after the eruption of the global financial and economic crisis (“subprime crisis”) almost 15 years ago when China for a number of years was standing for more than one third of global GDP growth.

Nationalism is still increasing

Both China and India have moved to more nationalism in the past years. For China, this fact is really visible during the currently ongoing 20th National Congress of the Communist Party of China (CPC; see Fromlet from September 2, https://blogg.lnu.se/china-research/).This convention will confirm the clearly strengthened power of CPC Chairman and President of China, Xi Jinping, with a lot of nationalist hymns and celebrations (https://www.chinadaily.com.cn/a/202210/16/WS634bb02aa310fd2b29e7cca1_3.html) – certainly more than India ever will be inclined to show domestically even if India’s Prime Minister Modi must be regarded as a convinced nationalist as well. But India is indeed interested in workable broad international relations all the same – also despite the presumable neutrality vis-à-vis Russia in the war against the Ukraine.

China on the other hand, seems to be more recognizable on Russia’s side during the ongoing war but will possibly look again at some point – as the main benefiter of globalization so far – for a better future image over the whole globe. In the forthcoming years, however, this cannot happen without a strategy change of the almighty CPC chairman and President of the People’s Republic of China.

At the same time, certain signs are showing that good or at least acceptable relations to the U.S. remain an important part of China’s foreign strategy. Sure, India’s democratic principles unite the U.S. and India more than it is the case between the U.S. and China. However, I found it quite interesting that an important Chinese voice very recently stressed the importance of Chinese-American relations (https://www.chinadaily.com.cn/a/202210/15/WS634a95eda310fd2b29e7ca98.html) – whatever this may mean.

Which country will be the winner in the longer run?

Some economic signals indicate that India may have escaped somewhat less damaged from the covid19-turmoil than China did with its rigid lockdown strategy which still is in place. Officially, the trend since the eruption of covid-19 pandemic  does not diverge substantially (GDP from Q4 in 2019 to Q2 in 2022: China: +8,8 %, India: +3.6 %, https://www.oecd.org/sdd/na/g20-gdp-growth-Q2-2022.pdf). But in Q2 this year, the Chinese drop of GDP was sharper than the Indian (-2.6 % compared to the previous quarter, for India this number was -1,4 %).

Altogether, one may conclude that no major difference between China and India can be found in their growth pattern from winter 2019 to summer 2022. But there is a catch: The quality of Chinese (GDP) statistics tends to be lower than in India.

Thus, the answer to the question about the economic winner in the long run remains uncertain. Considering all the structural problems in China (e.g. for institutions and their failures concerning transparency, corruption, supervision, bureaucracy, local government debt, corporate debt, non-competitive state-owned enterprises, etc.), one cannot predict that China still will have the lead 10-20 years from now. India suffers from similar challenges plus slow federal decision processes but is enjoying more Western sympathy points because of its democratic system.

 

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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Kinas Belt & Road Initiative (BRI) – vad vet vi egentligen om Kina?

October 6, 2022

BRI är ett enormt infrastrukturprojekt under några årtionden framöver med Kina som huvudaktör. Över 130 länder har hittills anslutit sig till BRI som ska skapa nya och moderna transportförbindelser mellan Asien (Kina) och Europa både på land och till sjöss – med planerade maritima avstickare även till Östafrika.

Nedan presenterar jag en nyligen publicerad artikel i ämnet (på svenska, Ekonomisk Debatt, 2022 nr 5, s 72-74 https://www.nationalekonomi.se/ed/4718).

Min artikel pekar bland annat på en del risker och oklarheter i det pågående BRI-projektet, vilket är synnerligen prestigefyllt för Kinas politiska ledning.

Read on! Enjoy!

Hubert Fromlet 

The foreign image of Russia and China

September 16, 2022

Most countries in the world care about their international image. But how do Russia and China think in this respect? 

Russia is looking for more international recognition

There is no easy answer to the question above. However, my feeling is that at least Russia currently is looking for better international participation and recognition. For this reason, the SCO conference – more exactly the conference of the Shanghai Cooperation Organization, a quite unknown regional Eurasian political, economic and security organization – in Samarkand/Uzbekistan this week served as an excellent occasion for Russia to meet a number of other countries,. Russia got the opportunity to show up internationally at a major meeting together with seven other Asian SCO-member countries (China, India, Tajikistan, Kazakhstan, Kyrgyzstan, Pakistan, and Uzbekistan and ten Observer States and Dialogue Partners).

The most important event during the SCO conference was without doubt the summit with Russia and China – i.e. the meeting of President Putin and President Xi Jinping. Certain experts even think that the enlarging cooperation between Russia and China – or in reality rather vice versa – in the longer run may lead to a visible empowerment of a changing political world order and, consequently, declining global influence of the U.S. and the EU. This is exactly what China and Russia finally want to achieve – with China as the stronger partner.

Altogether, we should not neglect that Russia may find ways that will lead to less international isolation both in the short and in the medium run. Russia certainly wants to get there, in my view particularly for economic and national development reasons.

China does not care about its international image when against the CP

It always strikes me when Western interpreters of China’s politics come to conclusions that are set in line with their own Western logic. However, Chinese logic is often unlike Western logic. My experience from many years of China observation is certainly that Chinese political decision-makers do not care about their domestic or international image when the political system at home or certain Chinese political objectives and decisions are questioned or attacked by other governments.

For example, the common Western view that China may improve its environment for pure image reasons in a more determined way than many observers in our part of the world believe, is simply naïve or incomplete. One should at least add that China’s fight for an improved environment only will be favored when such policy decisions are not counteracting even more important political priorities. China’s (foreign) image does not play a role in such a context.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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