Nov 8, 2017 in Economics

Thesis Chindia

“Chindia” was a term coined by Jairam Ramesh, Minister of State for Commerce in the Indian Government. (Sheth, 2011)

Basically, ChIndia as a name is used to depict the instantaneous rise of both India and China and its effect on Asia and the rest of the world. It means the union of India and China as far as economic growth and development is concerned to set the utmost prospective for worlds economic growth for the coming 50 years. The cooperation between those two countries had a link already in the ancient times. This is rated back when Buddhism was taken from India to China. Numerous writings of Chinese travelers prove that claim. Nevertheless, during post-colonial times there was tremendous antagonism between both countries which was ignited by the politics of the day. (Ramesh, Making Sense of Chindia, 2005). Most economist and analyst worldwide compare China and India as complementary. While China is heavily strong in the industrial sector, India on the other hand is the leader in the IT and software sector.

Over the last thirty years, China and India has inevitably emerged leading to an establishment of a strong force to rank as the next leading world economic power in coming years. Occupied by over 40% of the world population, taking the role of the industrial/manufacturing and back office of the globe, Chindia has taken the focal point of world’s global attention, as main producer, supplier and major consumer.  China by way of its enormous industrial factories, acts as main workshop in the world, whereas India on the other hand, and with its rapid growing IT and outsourcing sector is turning out to be the worlds-back office. These two roles played by the two countries are complimentary despite the fact that both are competing for the same resources. By instituting the name “Chindia”, the Indian MP Ramesh attempted to give a descriptive phenomenon of the two combined economic giants. Fueled heavily by enormous population about a third of the world’s population, cheap labor, huge domestic markets,  and governments in pursuit of investment friendly policies worldwide, both China and India are projecting their influence virtually in all aspects of the 21st century world economy.

China global supremacy of becoming the second largest GDP nation was realized in year 2010, after outshining Japan ten years prior than expected. Recent estimates shows that soon the U.S. will be overtaken by China to become the largest world economy by 2020. With India and China being in the forefront, 50% of world’s gross domestic product (GDP) will be accounted by Asia. Having overtaken Germany in 2010, China has already attained the position of being the largest global exporter. In 2010, China rated the highest sales in automotive market records of about 18 million unit sales of new vehicles compared to about 12 million U.S. unit sales in the same year. It has also emerged to be the largest market for mobile phones with an estimate of 800 million of Chinese population having cell phones.

The growth of India has also surpassed projections. It has taken position as the largest in cell phone market, the largest producer of motorized scooters and the most prominent manufacturer of small automobiles. Join those accomplishments with India as the highest ranking global provider of IT services and a surging economic power. China and India are in a state of economic revolution and transformations inexperienced since 18th and 19th centuries’ industrial revolution that converted the world. “Chindia” a combination of China and India embodies a promising and exceptional investing opportunity in two global surging economies with strong influence in the world market.

The rapid rise of these two economic giants has fostered healthy competition between China and India. As their robust economies merge, the two nations still find grounds for which to co-operate. Increasingly, regional, political, economical, and leaders of world business point out that relation with Sino-India are currently at their paramount and is becoming better as days go by. The degree to which India and China can expand and strengthen their co-operation will be the main determinant of the potential economic growth of Chindia in the next 50 years.

Today we are writing of the year 2011 and the expression “Chindia” is getting more and more relevant for our society due to the extreme growth of economy in India and China. The perception of United States towards the emergence of India and China is an imperative aspect in the forthcoming evolution of regional security and relationship between ChIndia and U.S. That is the reason why U.S. is concerned about that rise since U.S. is aware of the huge economic potential of those countries. There are many economic factors which indicate that Chindia is on the best way to become the leading economic power in the world in a few years to come. Most economic analysts perceive China to be robust in infrastructure and manufacturing whereas India’s strength is perceived to be in information technology and services. The strength of China is in physical markets while that of India is in financial markets. Based on these factors, and detail analysis of key indicators of economic growth such as GDP, GNP, Inflation, Deflation, Balance of Payments and CPI, this paper attempts to analyze them and go more into detail in order to make sure that the claim of “Chindia” becoming the next world economic power is adequate.

When combined together, the Indian and Chinese economy will be four fold as large compared with that of U.S., an advancement which will restore the historical Asian domain before the rise of Europe in 16th century and nothing will remain the same (Evans-Pritchard, 2011). With an approximated share of above 20 percent of world’s GDP, Chindia has already been ranked as the world’s second-largest economy and highly projected to overtake the USA in the near future. The strong economy of Chindia is capable of enabling it to experience 6 to 8 percent Cagr steered by increased investment, more subcontracts of manufacturing and services and consumer liberation.

Primary, tremendous source of natural resources will be needed by the two countries, since not only are they service and manufacturing centers globally, but they are also vast in terms of expansion of internal consumer markets. This dire need for industrial and natural resources such as copper, aluminum, bauxite, steel, iron, gas and oil will remain for a long time.  High rate of consumption will be a key growth driver especially considering that 40% of global youth population lives in Chindia. In normal terms, Chindia’s GDP will prospectively attain 6.3 trillion US dollars by year 2020. Chindia’s growth is projected to not only affect the prices and demand of various commodities in a sustainable and long term manner, but will also probably change the political stability and socioeconomic atmosphere in the world.

As stated earlier India and China are occupied by an estimated 38% of the world population, this has one of the main demographic drivers of Chindia economy. However, China’s population is rapidly aging owing to its low growth rate and one child plan with over two generations of its implementation, will have an effect on domestic growth of their economy.  These will result to a demographic drag on the Chinese economy. It’s also estimated that by the year 2015, a third of China’s population will be over 50 years of age. India on the other hand has an estimated 1.1 billion population and a considerably high fertility rate compared to China. In the coming years, India is expected to reap highly from the benefits of a young, large and rapidly growing workforce. Future projections indicate that as of the year 2015, 58% of India’s population will be below the age of 29 years, further projections show that by mid-century, the number of people is projected to rise to 1.6 billion and an estimated 220 million workforce in comparison to China.

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