In recent decades, both China and India have benefited strongly from industrialisation and grown to be few of the superpowers in the global market. China is the top manufacturer for various types of goods ranging from toys, textiles and shoes to high-tech machinery and consumer electronics. India, on the other hand, serves as the world’s renowned “back office” specialising in global outsourcing and software engineering. As both countries experience a heavy economic growth rate of more than 8% annually, there is no doubt that they will have a considerable amount of impact in other Asian economies that may be either positive or negative depending on their current situation. Their growth has also attracted the world’s daily concern and driven developed countries to their woes and anxiety. As they attempt to continue on their path of sustainable growth, however, they may face future unpredictability and uncertainties that will threaten their economic miracle. Unless these threats are removed, both China and India may not continue to be global industrial giants like how it is now.
A threat that is present before the eyes and may later affect the Chinese and Indian economy is currently pollution. Though both countries are prosperous experiencing huge economic growth in recent years, they paid a price of a heavily polluted environment. In China, for example, millions of factories and industries generate huge amount of pollution and the country now boasts five of the ten most polluted cities in the world. Despite some of their efforts to tidy up pollution in cities and industrial areas, the environmental problem is still deemed as serious and may inflict a negative impact onto the Beijing Olympics games later this year, which China had anticipated to contribute to its political and economic growth. Besides this, other ecology factors relating to climate and pollution in both India and China may also affect their production of food crops. Part of the population will also constantly suffer from air hazards and illnesses, further serving as a serious health issue.
Another uncertainty that may be a threat to both growing economies lies in their domestic and social issues. For China, its "one child" policy may have created a society with far fewer workers than necessary to care for a population that will be dramatically weighted toward the elderly in the coming decades. In order to maintain social cohesion, China may be forced to spend a greater percentage on caring for retirees than ever before. Other than this, the country also faces a huge gap in the standard of living between urban and rural areas. Though urban incomes in China have roughly tripled in the past decade, growth in rural incomes has lagged behind at two-thirds that rate. People living in these rural places will tend to seek job opportunities in the cities, and at the same time leaving behind the children and the elderly. Since agricultural activities are mostly carried out in rural areas, taking such action may further impact crop output and farm production in certain areas in China. Though this “rural-urban gap” problem also occurs in India as well, India’s true stumbling block in growth rests in its caste system. Though it has been long abolished, this caste system, in various forms, does continue to play a major role in Indian society and politics. Besides being a great barrier to social harmony among the people in the country, it also deprives many capable Indians of their jobs due to their caste status that are constantly being looked down by employers.
An important global issue that will negatively impact both China and India will be the U.S. recession. Since the U.S. has always been the biggest importer of overseas goods, especially from China, a scenario of the U.S. consumer limiting its budget would steadily slowdown the global market. With a sudden reduced merchandize export, further layoffs and social unrest will start to occur, thus derailing the growth of China’s economy. India will also suffer damages as well since it has always been a favorite outsourcing destination for the Americans. With the U.S. going into recession, IT companies in India will be hit hard. Another global issue that China will face as a threat is inflation and the pressure on the Yuan / Chinese currency. Though China has a relatively balanced foreign trade, its balance of payments surplus with the U.S. is enormous, approximately 250 billion dollars. The U.S. finances this deficit by issuing currency it recovers as a result of some purchase of public U.S. securities by China. China, meanwhile, has to issue currency in order to absorb the excess dollars, which poses the risk of an inflationary stampede. Expectations for a revaluation of the Yuan had provoked the inflow of an enormous mass of speculative capital into China. All in all, China faces enormous monetary pressures, with its inflationary effects and inevitability of a financial crisis.
Regardless of what uncertainties the future has in store for both China and India, their future growth would heavily impact the rest of the Asian economies. A case where there is continual rise in both of these superpowers’ industries may negatively affect other newly-industrialised countries such as Vietnam and Philippines when China and India become even more competitive in the global market and being able to attract more foreign investors. As these two countries become more innovative in the industries, similar industries in developed countries such as Japan will also face tough competition. For example, an Indian company, Tata Motors, which recently produced the world’s cheapest yet pretty efficient car, is now one of Toyota’s biggest rival in the motor industries. In a fierce competition such as this, India and China have a high potential of overcoming other Asian giants. However, if the growth of India and China comes to a eventual pause or slows down as predicted, more Asian economies may also face a slight negative impact. For example, a scenario where China’s economic growth cools off may result with a loss of a small amount of GDP percentage points for other countries due to certain economic linkages. While this may be a moderate impact, Asian countries emphasising more on the high-tech industries may also be able to take advantage of a situation where both India and China meet an increasing demand for sacred natural resources such as oil, with continuously rising prices. This will lead technologically advanced countries with innovative ideas and new inventions to develop fuel-efficient and alternative fuel-technologies that may sell out greatly to not only China and India but also other countries.
Overall, I feel that both China and India will be able to sustain as long as the following threats above are solved. In their current state, however, I feel that their economies will have gradual slow-down in their phenomenal growth. The heavy pollution and some domestic issues will probably worsen over the years as China and India increase its demand for coal, setting up of even more industries, the rising percentage of its population living in city areas and being more willing to spend. More countries going into recession along with the U.S. will also affect these two countries and the damage may be long-term.