By Shahzad Masood Roomi
Why China is not in panic over a declining growth rate when India has surpassed it this year as fastest developing economy with more growth rate? Media debate, particularly in India, suggests that India is finally there where it is going to overtake China as fastest growing economy. But, what does this news tells us in real terms about the balance of two economies?
First of all, this is a misconception often caused by considering GDP growth with actual size of GDP. Chinese GDP size is 3 times the Indian GDP size. China now accounts for more than 15% of the global economic output, nearly triple what it was a decade ago. It will take India at least 3 decades before catching up to Chinese GDP size and that too if Chinese economy suffers a severe setback which is not going to happen not in foreseeable future and there are multiple reasons for that.
Secondly, China enjoys a massive trade surplus. It export goods worth much more than what it imports. So, naturally there is no reason to panic. This is the most simplistic answer.
But the wide-spread economic overtures made by China, away from home, are the real reason why the Beijing is calm. The most important of these came fore recently, when IMF gave acceptance to Chinese currency as global foreign reserve currency along with US Dollar, EU Euro, UK Pound and Japanese Yen. This development is going to play a critical role in future dynamics of world economics as now it is believed that China will bring more liberalization and transparency in its economic affairs which intrun will further help China to pitch herself as credible economy.
As per BBC, the IMF chief said the Yuan has met all existing criteria for becoming a global foreign reserve currency. The decision will take affect till October 2016. According to IMF chief, this is "an important milestone in the integration of the Chinese economy into the global financial system." Inclusion of Yuan in IMF's SDR basket will pave the way for Chinese economic growth abroad as well.
We have already talked about the huge news of IMF accepting Yuan as global foreign reserve currency. This is going to change the global economic order. Countries, who previously were dependent on US or Western foreign reserve currency will now have the an Asian alternative for maintaining their foreign exchange reserves.
When the US and almost all the noticeable powers of Europe have indulged themselves in never-ending wars in Middle East, China is quietly expanding her geo-economic outreach. China has opened a new era of China-Africa cooperation and common development during the recent visit of President Xi to South Africa where he and heads of state and government and representatives from about 50 African nations, adopted a declaration and an action plan for cooperation in the next three years. To implement this cooperation, China and African nations would be focusing on implementing 10 major cooperation plans covering the areas of industrialization, agricultural modernization, infrastructure, financial services, green development, trade and investment facilitation, poverty reduction, public health, people to people exchanges, and peace and security. Despite the fact that Indian economy has grown more (7.4%) than that of China's (7.0%) but it is still far behind than the Indian government's target of 8.5%. Indian economy will not grow with that rate even in 2017-18.
It is obvious from this analysis that China is not in any kind of pressure as far as her economic competition with India is concerned. Though China will have to open up its economy more in order to get it integrated with rest of the world, there certainly are signs that China is about to transform its geoeconomic strength into far reaching geopolitical strength which in return would play key role in expansion of Chinese economic outreach to other parts of the world opening new venues for Chinese investments.
It is obvious from this analysis that China is not in any kind of pressure as far as her economic competition with India is concerned. Though China will have to open up its economy more in order to get it integrated with rest of the world, there certainly are signs that China is about to transform its geoeconomic strength into far reaching geopolitical strength which in return would play key role in expansion of Chinese economic outreach to other parts of the world opening new venues for Chinese investments.
