China’s growth rate and India’s pace

Most experts as of 2021 believe that China will overtake the US to become the largest economy by the mid-2030s. China had been experiencing double-digit economic growth for decades and no country had seen fast pace of growth like China. China’s size also increased from 20 percent to 76 percent of the American economy between 2006 and 2021.

This all changed in 2022-23 when the US quickly overtook by China’s slow growth, currency devaluation and a strong US economy.

China’s population is declining, its economy is highly cashized and its property sector has failed despite accounting for 30 percent of its GDP. Apart from these things, multinational companies have stopped investing in China and trade measures are being taken against Chinese goods across the world.

The fact is that even today, despite all the progress, China’s size is not more than one-fifth of America in terms of per capita GDP. Against all odds, China still has possibilities.

China’s population is aging but it still has the world’s largest labor force.

With 30 per cent share in global manufacturing capacity and 20 per cent share in manufactured goods exports, China remains the world’s manufacturing powerhouse. Now it is also not true that China’s exports are dependent on multinational companies.

China also has the potential for innovation. China has taken the lead in many future technologies, such as electric vehicles, renewable energy, 5G and high-speed trains. He is offering world class products.

Chinese products are seen in the market globally but they come via Thailand, Turkey, Vietnam and other countries. China’s exports are not going to stop due to trade barriers.

Apart from this, when we talk about multinational companies like Apple taking their manufacturing plants out of China, remember that even if Apple takes 25 percent of iPhone production to India, the remaining 75 percent will remain in China. The manufacturing ecology in China is difficult to emulate.

China’s growth may slow down in the coming decade, it may never overtake America in GDP, but it will probably remain the world’s second largest economy. It will also be a world leader in many technologies. It will be a country that no one can ignore. Be it multinational companies or global allocators. Even today, China’s position in the emerging market index is twice that of India.

Another interesting thought is how much time it will take for India to catch up with China. Today India’s size in terms of GDP is 20 percent of China’s. China was in a similar situation to America in 2006. It took 15 years of extraordinary growth, a strong currency and America’s weak performance to reach the level of 76 percent of America’s GDP.

We will have to perform a similar miracle to match China. Have we as a country taken appropriate steps to increase productivity and improve ease of doing business so that we can achieve China-like growth?