Structure of the Presentation 1. Brief Historical Overview 2. Present and Future Trends 3. Historical Experience of Power Shifts 4. Positive and Negative.
Apr 01, 2015
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Structure of the Presentation
1. Brief Historical Overview2. Present and Future Trends3. Historical Experience of Power Shifts4. Positive and Negative Impact for the
World 5. Frictions6. What Has to be Done?7. What are some of the Longer term
implications?
1. Brief Historical Overview Both are Millennial Civilizations Were Largest Economies of World for
First Three Quarters of Last Two Millennia
Both Missed the Industrial Revolution Fell behind Rising European Powers Major Regime Change in 1950s Are becoming major world players
Economically Politically In education and R&D
2.The Present and Future Trends
The Present China has already become second largest
economy in world India is tenth largest
By extrapolation of current trends China will be as big as U.S. in 5 years in PPP
terms, in 10 years in nominal terms India will surpass Japan in 2 years in PPP
terms to become third largest economy, in 10 years it will surpass Germany to be fourth largest economy in nominal terms
Historical and Projected Growth in Purchasing Power
Parity
0
10
20
30
40
50
60
70
80
90
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
EastWestNorth
GDP for BRIC and Top 4 Developed Economies in PPP
0
5000
10000
15000
20000
25000
30000
GD
P in
Cu
rre
nt
Inte
rna
tio
na
l Do
llar
(bill
ion
s)
Brazil
China
India
Russia
Germany
Japan
United Kingdom
United States
IMF forecaste from 2010-2015.
2016E-2020E based on IMF average growth rate from 2011-2015
Historical Growth and Projections in Current US$
0
10
20
30
40
50
60
70
80
90
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
EastWestNorth
GDP for BRIC and Top 4 Developed Economies in Current US$
-3000
2000
7000
12000
17000
22000
27000
GD
P in
Cu
rre
nt
US$
(B
illio
ns) Brazil
China
India
Russia
Germany
Japan
United Kingdom
United States
China Currency Appreciates by 20%
China Currency Appreciates by 40%*IMF forecaste from 2010-2015.
*2016E-2020E based on IMF average growth rate from 2011-2015
*Currency appreciation is expected to reach 20%/40% by 2020E, and
3. Historical Experience of Power Shifts is not Encouraging
Rise of new powers lead to frictions over Wealth (trade and resources) Power Security
These tend to degenerate into Trade Wars Resource Wars Cold Wars Conventional Wars
Rise and Fall of Powers Over TimeShare of Global GDP as a % of World Total 1990 PPP
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
0 1000 1500 1600 1700 1820 1870 1913 1950 1973 1998
Axis
Titl
e
France
Germany
Italy
UnitedKingdom
United States
WesternEurope
Japan
China
India
Former USSR
Na
po
leo
nic
W
ars
WWI
WWII
Cold WarColonial Expansion European Powers
China SWOT
StrengthsStrong and capable governmentLarge, growing unsaturated marketLarge skilled labor forceRapid increase in educational attainmentVery high savings rateRapidly increasing technological capabilitiesStrong manufactured goods exporterStrong military
WeaknessesNatural resource poorRising income and regional inequalityRapid deterioration of the environmentPoor rule of lawReal estate bubbleLimited English ability constrain IT enabled service exports
OpportunitiesLarge investments in green technology may make it a market leaderDevelopment of strong service economy built on knowledge rather than natural resources
ThreatsGlobal warming threatens drought and rising sea levelsRisk of global protectionist backlash to its strong export orientationRisk of pushback from established powers to its rapid rise
India SWOT
StrengthsIncreasing savings rateStrong rule of law on paper (but not so much in practice)Core of English speaking technical workforceStrong information enabled service exportYoung and growing labor force will give demography dividend if can be productively employed
WeaknessesWeak coalition governments with limited capacity to implement changeCorruptionNatural Resource poorWeak physical infrastructureVery low educational attainmentWeak militaryWeak and over bloated governmentRelatively weak technological capabilities
OpportunitiesStrong potential to build on exports of information enabled servicesStrong need to strengthen education and develop stronger economic social system
ThreatsUnstable neighborhoodGlobal warming threatens drought and rising sea levelsRisk of spreading Naxalite insurgence because benefits of growth have not trickled down to rural populationRisk of water war with China
4. Five Positive Impacts
Growing Markets Lower Prices of Goods and Services
for Importers Higher prices for natural resource
and commodity exporters Lower interest rates for world Financial flows and investments in
the rest of the world
Contribution to Global Growth
Five Negative Impacts Tremendous competitive pressure on
other countries producing manufactured goods and services they export
Increase in price on natural resources and commodities
Downward pressure on wages Rapid technological catch-up through
copying and imitation, plus now large domestic innovation effort, and purchasing of high tech companies
Negative environmental impact, including global warming
5. Frictions
1. Trade2. Resources3. CO24. Geopolitical
5.1 Trade Frictions Both countries, but particularly China have
rapidly expanded exports Export expansion is putting strong pressure on
manufacturing (China) and services (India) jobs around the world
Politically charged in context of high unemployment in developed countries
Additional frictions arguments about currency manipulation by China intellectual property piracy using access to domestic market to extract technology purchases of national resource and high technology
companies
China’s Exports Surpassed US in 2006 and Germany in 2009
©cjd
Share of Total Global Merchandise Exports 1980-2009
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%19
80
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
% o
f Glo
bal t
otal
China
India
Germany
Japan
France
Italy
United Kingdom
United States
Change in China’s Market Share in World (Four Global
Markets by SITC Categories 6-8)
Developed Developed Asia Developing Asia Other Developing1995 2009 %
change
1995 2009 % chang
e
1995 2009 % chang
e
1995 2009 %change
6: Manufactured goods classified by material
2.0 9.9 390.5 15.9 27.5 73.4 4.2 12.8 207.6 2.0 14.5638.0
7: Machinery and transport equipment
1.8 14.2 680.2 8.5 32.8 283.5 1.3 17.3 1216.7 1.1 17.01498.2
8: Miscellaneous manuf. articles
11.3 27.5 143.2 41.0 52.6 28.4 5.0 17.4 249.8 4.2 25.3497.5
Total for All STIC Imports from China
2.9 10.4 258.6 13.4 23.6 76.1 2.3 10.9 356.1 1.4 11.7730.0
Global Trade Imbalances Continue
Ten Largest Tertiary Student Populations 2007
Country Number Enrolled % of World Enrollments*
China 25,346 16.8
US 17,759 11.8
India 12,853 8.5
Russian 9,370 6.2
Brazil 5,273 3.5
Japan 4,033 2.7
Indonesia 3,755 2.5
S. Korea 3,209 2.1
Iran 2,829 1.9
Ukraine 2,819 1.9
The R&D Input Landscape
5.2 Resource Frictions Both countries are resource poor on per capita
basis (except for coal) Put pressure on global resources, (energy in
particular) Access to resources is national security issue
for these countries and raises frictions with rest of world
For example, China relationship with rogue regimes because it needs their resources
China building blue water navy to secure access petroleum shipped through Malacca Straits
China claim to islands in South China seas,
Ecological Footprint of Ten Largest Users of Environment
2007
WWF 2008
Biocapacity vs Ecological Footprint-2007
U.S. China Europe India Russia Japan Brazil
% of World Ecological Footprint
13.71 16.32 15.60 5.82 3.47 3.32 3.06
% of World Biocapacity
10.03 10.02 10.96 4.85 6.74 0.64 14.25
Net Position as % of World Biocapacity
-10.54 -14.47 -12.49 -3.88 1.54 -4.35 9.66
5.3 CO2 Emissions Frictions
China became larger CO2 emitter in 2008, and largest energy user this year
India is still far behind, but within 20 years will be in similar position
By 2035 emissions from China, US, India will be as large as total emissions by world in 1990 while world needs to reduce emissions 50% those levels to avoid global warming
Both countries argue that problem is due to prior emissions by now developed countries and that they are too poor on per capita basis to incur higher costs of curbing emissions
US has refused to commit to reducing its own emissions unless China and India also commit—therefore world is caught in deadlock over C02 emissions
Additional risk that US will impose border tax on carbon content of imports from China and India which would exacerbate trade frictions
5.4 Geopolitical China’s successful authoritarian cum socialist
economy model is gaining adherents Has performed remarkably well for 30 years, plus
much less affected by crisis Offers an alternative to Washington Consensus
development model for other developing countries Concerns about security in access to natural
resources leads it to Trade with natural resource rich rogue regimes Strengthen its military capability to ensure supply of
natural resources and project military power to defend its interests
Increasing Frictions Trade & Environment
China and rest of world
India and rest of world
Between China and India
Trade WarSubsumes: -exchange rate -global imbalances -FDI
-Intellectual piracy
Friction because of China’s exchange rate undervaluation and large trade surpluses.
Concern about China buying natural resources and technology firms.
Extensive complaints about Chinese IP piracy.
Not as likely as China since it has trade deficits.
Like China, although Indian state-owned firms are not as active.
Fewer complaints about IP piracy than with China.
Compete in many product areas. May have divergingposition s in Doha trade
Some competition
May become more problematic as they compete more in trade.
Resource Wars Possibly over energy and resources, such as over islands in East and South China Seas.
Possibly over energy in general, and water with neighbors, including China.
Yes, especially over water from Himalayan Glaciers that feed main rivers in Asia
Climate ChangeNot controlling emissions will lead to global warming
Risk of geo-engineering attempts with unknown consequences if mitigation efforts fail
China argues that it’s unfair to make it pay for CO2 since problem was created by earlier emissions of now-developed countries.
China may go for geo-engineering if it begins to experience negative consequences of climate change.
Same argument as China, plus the fact that it is smaller emitter and a poorer country.
India may go for geo-engineering if begins to suffer costs of climate change.
Perhaps, because China is already above global average per capita energy consumption and CO2 emissions, while India will be below global averages even up to 2035.
Increasing Frictions-Geopolitical/Security
China and rest of world
India and rest of world
Between China and India
Geopolitical Competition and Ideological WarNote this is also over human rights, nuclear nonproliferation, and form of government.
Yes with respect to Western democracies and Japan.
Not so likely with Western democracies and Japan because India’s democratic government and market-oriented system are more consistent with those countries.
Yes because of different ideologies combined with frictions on borders, water, and possibly trade.
Security ConflictsCyber warfare Military Conflict Hegemonic War
Many current cyber attacks are traced to China.
Possibly over Taiwan or other neighbors in South China Seas. China’s support of N. Korea is also a potential problem. Perhaps with U.S. in long term.
India potentially has great capability in this area, but there is little evidence that it is active. Possibly with Pakistan because of old rivalries and unstable region.
Less likely since India is ideologically closer to existing powers and not considered as big a security threat as much-larger China.
Possible if frictions between them increase.
Limited to border frictions in short run.
Hegemonic war between them unlikely until both become dominant powers.
Global Governance System Was set up after WW II led by U.S. Is having trouble dealing with issues it was
supposed to cover Trade (GATT/WTO) Global financial imbalances (IMF/WB) Security (UN/Security Council)
Does not address major new issues Climate change Cyber security Terrorism with weapons of mass destruction
U.S. which has de facto been main provider of global public goods (open trading and financial system, security, technology, education) is overextended and fiscally constrained
Other countries are not stepping in to provide these global public goods
7. What has to be done?
Have growing friction points which the international governance architecture is not addressing
Represent old power structures-need to be rebalanced Do not cover some of critical global issues such as
International financial system and its regulation Environment, both from resource use as well as global
warming Developing effective new institutional architecture
will take time and will be messy Main countries/blocks have to do more at their
own domestic level to manage problems to keep them from becoming worse
Integrated Global
Economic System
Fractured Global
Economic System
Environmentally Sustainable
System
Environmentally Unsustainable
System
1. Current unsustainable stateMoving toward protectionism, new financial crisis, insufficient technology cooperation, resource conflicts, negative effects of climate change, growing inequality.
4. Desirable state: Requires cooperation on trade, finance, technology, environment, security, increased aid for poor countries, and more sustainable development strategies.
2. Most likely, but undesirable stateProtectionism and regional trade/economic blocks, negative impacts of climate change. Likely to spiral into military confrontations over resources, exacerbated by disruptions from climate change.
3. Alternative undesirable state:Protectionism slows global growth, increases poverty, ad hoc geo-engineering solution to climate change with unknown results.
Alternative Scenarios
Key Tasks Developing better rules for viability of global system
Very difficult to do through fully representative global forums Start with agreements among main powers
Rebalancing Trade deficit countries Trade surplus countries
Reducing CO2 US China India EU and Japan
But these things are difficult to do for political economy reasons
Involved painful restructuring Require strong vision and leadership Also require greater awareness among population at large of what
is at stake
7. Longer Term Issues Essentially issue of accommodating
large rapidly growing new entrants Challenges
Competitiveness and economic adjustment challenge (large global rebalancing of relative wages)
Addressing increasing global inequality Finding more sustainable development
models Dealing with geopolitical competition
Changing Shares of Global Population
Related Documents
