China, India GDP set to Overtake the Great Seven in Less than Three Decades SYDNEY (AFP) - Western nations must prepare for a future dominated by China and India, whose rapid economic rise will soon fundamentally alter the balance of power, former World Bank chief James Wolfensohn has warned. Wealthy countries were failing to understand the impact of the invevitable growth of the two Asian powerhouses, Wolfensohn said in the 2006 Wallace Wurth Memorial Lecture at the University of New South Wales at the weekend. "It's a world that is going to be in the hands of these countries which we now call developing," said Australian-born Wolfensohn, who held the top job at the global development bank for a decade until last year. Rich nations needed to try to capitalise on the inevitable emergence of what would become the engine of the world's economic activity before it was too late, he said. "Most people in the rich countries don't really look at what's happening in these large developing countries," said Wolfensohn, who is now chairman of Citigroup International Advisory Board and his own investment and advisory firm. Within 25 years, the combined gross domestic products of China and India would exceed those of the Group of Seven wealthy nations, he said. "This is not a trivial advance, this is a monumental advance." Wolfensohn said that somewhere between 2030 and 2040, China would become the largest economy in the world, leaving the United States behind. By 2050, China's current two trillion US dollar GDP was set to balloon to 48.6 trillion, while that of India, whose economy weighs in at under a trillion dollars, would hit 27 trillion, he said, citing projections by investment bank Goldman Sachs. In comparison, the US's 13 trillion dollar income would expand to only 37 trillion -- 10 trillion behind China. "You will have in the growth of these countries a 22 times growth between now and the year 2050 and the current rich countries will grow maybe 2.5 times." In light of these forecasts, it was clear that Western nations and Australia were not investing enough in educating the next generation to be able to take advantage of the coming realignment, he said. "The fact that not enough of our young people are preparing themselves with knowledge, experience, residence and language to deal certainly with China, although India has the benefit of an English language, it does seem to me that it presents a formidable challenge." Wolfensohn pointed to both China's and India's recent substantial investments in Africa as an example of how the two emerging giants were exercising their increasing clout on the global stage. "Within the last two weeks the world has been put on notice that Africa is no longer the basket case that everybody had historically thought it was but is now front and centre in terms of development by India and China." The phenomenal rally by the two countries was a return to form rather than a novelty, he said, as they together had accounted for 50 percent of global GDP from the 1500s until the industrial revolution reduced that to between five and seven percent.
I don't doubt that China and India will one day catch up to America. However, I'm not sure these projections take into account the society changes that will occur once their economies become more robust. Sooner or later, these economies will be hindered with increasing employment rights that would hinder these growths.
Well, I would think that Goldman Sachs would take into account things like health care and other drivers that give the U.S. a disadvantage (such as a litigious society). But all things considered, It would be surprising if China and India DO NOT surpass the U.S. just by sure numbers. Both of those populations are triple the U.S. population...so in order to generate the same standard of living, they would need to generate three times the GDP. The U.S. will always be an economic power....but our days as king of the hill will probably end in our lifetimes. To think that America would forever be on top...well, the sun sets on every empire.... The question will be, how do we maintain our relevance on the world stage? Clearly we must be innovators - starting with our education system. But being number three in the world ain't so bad.
Yeah, the GDP per capita is a different matter. But with that in mind, those emplyment rights imply a higher standard of living for the employees. There isn't a high percentage of Indians and Chinese who own decent cars. Should they become THE central markets, their growth could be unimaginable.
When both of these countries get rid of rampant government corruption they will start to be closer to America in terms of fiscal dominance. Right now India is about 20 years behind America, and China is about 15 years behind America. Getting closer each day though.
India can't keep its electricity going all day in most cities, and it ain't going to get any easier. And as many resources as China can find in Africa - clean water and unpolluted air aren't among them. That's just an example though. Both these countries face tremendous structural barriers going forward, not the least of which is demographic, the same bottom heavy demography which makes them forces today are tomorrow's top heavy problem.
I'm more familiar with China than India. No doubt in my mind we are in the Chinese century. They definitely have serious hurdles to overcome to maintain high growth; so do we. There could be some huge setbacks along the way but China will emerge and exercise their political and economic muscle accordingly. The U.S. can do nothing about it. In addition to addressing our own huge internal problems, the U.S. would be smart by striking a close relationship with India. China and the U.S. are destined to be strategic rivals (this is one truth the Bush Admin got right). So are India and China. India also represents a bulwark against Islamic extremism. Slowly but surely over the next decade our ties will grow and people in this country will appreciate India more. Anybody that thinks China's growth is overhyped has no idea what they are talking about. Some people have trouble imagining things being much different from what they are now. Putting your head in a bag for a period of time doesn't mean the world around you won't change. If you haven't noticed the changes with China the last 15 years, your head has been in a bag. You are free to keep it there.
I think its pretty obvious that the PRC (or a united China) and India will overtake the US, Japan, and Europe to become the lead economies of the World. Per capita GDP might not reach Western levels but just in terms of sheer size they will. The problem with a lot of these discussions that they are too often seen as adversarial, US vs PRC, but even if the PRC becomes the lead market that might not be a bad thing for the US and Americans can still greatly benefit from a powerful Chinese economy. We live in a time of interdependent economies and its only getting more so. A powerful Chinese economy doesn't mean a weak US one.
What is interesting to me, as someone who spent a lot of time in India years ago, but admittedly have only been to Hong Kong, and has long retained an interest in both countries, is that India has what will, IMO, keep bringing us closer together during the coming decades... the fact that English is the language of the educated. Unlike China, where the bulk of the populace speak the same tongue, India has dozens of languages, and hundreds of dialects spoken by huge numbers of people in different regions. The common denominator is the use of English in higher education, so they can speak to one another. It's similar, in a way, to the use of English around the world among the educated in diverse fields. Right now, China is by far the larger trading partner with the US, but it is India where outsourcing of jobs and factories from this nation is bringing the two countries closer together. The fact that it is a democracy, even if flawed by rampant corruption, doesn't hurt. I think longterm trends will favor India over China in relations with the United States. Having said that, I would love for my two kids to learn to speak Chinese. D&D. It's Where We're At.
...not only that, a powerful Chinese economy for all intents and purposes requires an equally strong or stronger US one in order to buy its products.
Exactly, its not a "if one goes up, the other must go down" situation, they rely on each other so much that they must go forward together.
Why do people keep believing that Economics is a zero-sum game? Strong Chinese and Indian economies help everyone, including the US.
Great! 2 billion robot workers toiling at poverty level so that robber barons can make untold billions and control corrupt governments, avoiding the taxes needed to build an adequate infrastrucuture and the controls needed to protect the enviroment. Totalitarianism AND unfettered Capitalism, now there's a recipe for disaster. What's the minimum wage there? How are the health insurnce programs? Because whatever they have is what you are going to get in the world of Free Trade. If the G8 countries want to compete, maybe the best thing they can do is foment a socialist revolution inside those socialist countries. ( yes, I realize India is a democracy, and no, really don't know what the **** is going on there)
I'm trying to get two of my nephews to learn Chinese but it's a hard sell. IMO, there is no doubt the long term trends favor a closer relationship with India. In fact, I can't see any way around both countries embracing each other going forward. The nuclear agreement with India should send a strong message about U.S. intentions towards them.
