Declining China GDP: How Can It Benefit India?

Context: 

This editorial is based on the news “C Raja Mohan writes: India’s new possibilities amid China’s relative economic decline” which was published in the Indian Express. This article highlights that China’s relative economy is declining and presents an opportunity for India to take a lead.

Declining China GDP: Current Status

• Share in World GDP: China’s GDP share in the world’s GDP rose from about 2% in 1990  to about 18.4% in 2021 and is now down to 17%. 
  • It is estimated that China’s share will continue to decline because of demographic decline, anti-market interventions, high levels of debt and declining worker productivity . 
• Share in World’s Working-age Population: China’s share of the world’s working-age population has been falling for a decade and is about 19%. 
  • In the next three decades, it will likely come down to 10%.
• Declining China GDP share of the global GDP, Others Emerging: Several emerging markets like India, Indonesia, Mexico, Brazil, and Poland contributed to nearly half of the expansion of the global economy last year. 
  • The US has grown at an impressive rate and made up most of the other half. Last year, the US added $1.6 trillion to its GDP, about the size of the South Korean economy.

On Convention of China’s Overtake of US GDP

• Not Possible in Near Terms: Until recently, it was conventional wisdom that China would soon overtake the US GDP, which now looks not possible in the near term.
  • The latest data put the US economy in 2023 at $28 trillion and the Chinese at $18 trillion and the contribution by China is estimated to be declining further.
• Impact of Muscular Approach: China’s muscular approaches to its neighbors on territorial issues had opened up space for the US to revitalize its alliances and build new Asian partnerships. 
• Practical Outcome: America is regaining economic ground and is politically more confident.
  • The changing economic scenarios of China and the US means the World is unlikely to be a bipolar or the G2 world.

What’s For Asia?

• Earlier Belief of China-centered Asia: Until recently, the notion of a China-centered Asia seemed inevitable and China’s rise has been faster than most of its neighbors. It suggested that Asia must simply learn to live with China’s weight and accept a regional order dominated by it.
• Current Scenario: China’s relative decline suggests that Asia has other alternatives. The faster economic growth in India, Indonesia, Vietnam and the Philippines suggests that a “multipolar Asia” can be a real possibility. 
  • Although China will remain the most important economy in Asia.

Declining China GDP and How Can It Benefit India?

• Reduction of the Economic Gap: China’s slower growth and India’s economic acceleration will mean India can steadily reduce the economic gap with China. 
• Cope with Confidence: India can cope with the Chinese power more confidently if it continues to build on its national capabilities and strengthens the Quad and other regional coalitions.
• Time to Rethink: The time has come to rethink many of the assumptions in India about the global distribution of power and its consequences. 
• On US: The US is not about to decline and fade away. 
• On China: Although China’s rise has been impressive, the limits to its power are being observed. 
• On Balancing: The growth of China’s Asian neighbors has enhanced possibilities for a more internally balanced region. 

Conclusion

Declining China GDP is an opportunity for India that needs to catch up. India needs to stay calm, build on its strengths, and avoid the kind of nationalist hubris that has undermined China’s fortunes.