K. Venkiteswaran

Expert dwells on the triangular ties

Fundamental features of their economies different

India’s growth pattern marked by openness to West

KOCHI: On bilateral economic issues, including trade and investment, tension might mount between China and the United States, whereas China and India, and the U.S. and India would find it easier to cooperate, according to David Daokui Li of the Centre for China in the World Economy (CCWE) of Tsinghua University.

He was making a presentation on “The Chindus Economic Triangular: China-India-U.S. Triangular Economic Relations in the Coming Decades” at the three-day international conference on ‘India-China-U.S. Triangle’ which concluded in Kochi on Wednesday.

He pointed out that the fundamental features of economies in the Chindus group were different. On issues of international collective decision-making, China and the U.S. might find it easier to collaborate than India and the US.

China’s features

China’s economic development is in effect the East Asian model, magnified and modified. It is marked by strong State power, high savings rate, high economic openness (trade, FDI) plus intrinsic closed society/politics. It also stands out by low social tolerance for inequality and is resource constrained.

By implication, China’s economy is marked by high investment, trade surplus, over-capacity of manufacturing and ideological incompatibility with the West. Tracing China’s growth challenges in the past three decades, Mr. Li pointed out its quest for economic modernisation was only half-way accomplished. Social tensions are mounting, and “social harmony” is the top priority, slowing down reforms.

India’s merits

India’s growth pattern is marked by intrinsic openness to the West (ideology, cultural, and basic institutions like democracy, rule of law). It has well educated labour force, tolerance for diversity, inequality and social instability. It has top-down growth (software, services) which results in local economic boom.

India’s growth challenges include maintaining high investment/GDP, involving the lower parts of the pyramid – a large and uneducated labour force and maintaining financial stability. India should also ponder on whether today’s macroeconomic situation is financially viable and also about reversal of capital flow.

Case of U.S.

The U.S. economy is characterised by solid fundamental institutions supporting market economy, cutting-edge R&D and higher education, culture and policies of immigration.

The growth challenges of that country include low savings rate with inertia which in turn results in trade deficits tending to persist, the quality and flexibility of unskilled labour, protectionism which hints at repeat of the US history. Another growth challenge is coping with likely changes of the world monetary system.

Trio’s trade issues

Touching upon trade issues among the three countries, Mr. Li said that China-U.S. trade ties would be marked by tensions due to lasting trade imbalance (caused by disparities in savings rate), whereas in the case of China and India, minor disputes will remain due to individual sectors’ concerns.

In the case of India-U.S. trade ties, it is likely that India might provoke protectionist reactions in the U.S. due to emerging service trade, the expert said in his presentation.