The Slowing of Two Economic Giants
By PRANAB BARDHAN, NYT
KOLKATA, India — THE world’s two most populous countries are slowing down. To be sure, China’s output is expected to grow by 7.8 percent this year, and India’s by 5.6 percent — far superior to 2 percent for Japan, 1.7 percent for the United States, 0.9 percent for Britain and a shrinkage (negative 0.6 percent) in the troubled euro zone, the International Monetary Fund projected last week.
But there is no sequel in sight for the 10-percent-plus growth China and India posted in 2010. The West can no longer count on their continued expansion to lift its sagging economies. For 2.5 billion people, the consequences are more dire: in India, less money to strengthen the threadbare social safety net, and in China, possible political instability. What does the slowdown mean for these two giants, and which will come out ahead?
Let’s start with China, the bigger of the two economies. Talk of a global “Beijing consensus” — state-controlled capitalism as an alternative to the “Washington consensus” about how poor countries should develop — has largely disappeared. China’s new leaders are focused on problems at home: battling corruption, reining in the overheated housing market, scaling back the government’s outsize role in the economy, and cracking down on financial speculation.
China may be close to exhausting the possibilities of technological catch-up with the West, particularly in manufacturing. For China to move up the value chain, and become an advanced-manufacturing powerhouse like Germany, it must move beyond off-the-shelf technology and copying rival designs and reap gains from genuine innovation, which can come about only through research and development.
(More here.)
KOLKATA, India — THE world’s two most populous countries are slowing down. To be sure, China’s output is expected to grow by 7.8 percent this year, and India’s by 5.6 percent — far superior to 2 percent for Japan, 1.7 percent for the United States, 0.9 percent for Britain and a shrinkage (negative 0.6 percent) in the troubled euro zone, the International Monetary Fund projected last week.
But there is no sequel in sight for the 10-percent-plus growth China and India posted in 2010. The West can no longer count on their continued expansion to lift its sagging economies. For 2.5 billion people, the consequences are more dire: in India, less money to strengthen the threadbare social safety net, and in China, possible political instability. What does the slowdown mean for these two giants, and which will come out ahead?
Let’s start with China, the bigger of the two economies. Talk of a global “Beijing consensus” — state-controlled capitalism as an alternative to the “Washington consensus” about how poor countries should develop — has largely disappeared. China’s new leaders are focused on problems at home: battling corruption, reining in the overheated housing market, scaling back the government’s outsize role in the economy, and cracking down on financial speculation.
China may be close to exhausting the possibilities of technological catch-up with the West, particularly in manufacturing. For China to move up the value chain, and become an advanced-manufacturing powerhouse like Germany, it must move beyond off-the-shelf technology and copying rival designs and reap gains from genuine innovation, which can come about only through research and development.
(More here.)
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