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How will growth in China and India affect the world economy?

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  • Betina Dimaranan
  • Elena Ianchovichina
  • Will Martin

Abstract

Although both China and India are labor-abundant and dependant on manufactures, their export mixes are very different. Only one product-refined petroleum-appears in the top 25 products for both countries, and services exports are roughly twice as important for India as for China, which is much better integrated into global production networks. Even assuming India also begins to integrate into global production chains and expands exports of manufactures, there seems to be opportunity for rapid growth in both countries. Accelerated growth through efficiency improvements in China and India, especially in their high-tech industries, will intensify competition in global markets leading to contraction of the manufacturing sectors in many countries. Improvement in the range and quality of exports from China and India has the potential to create substantial welfare benefits for the world, and for China and India, and to act as a powerful offset to the terms-of-trade losses otherwise associated with rapid export growth. However, without efforts to keep up with China and India, some countries may see further erosion of their export shares and high-tech manufacturing sectors.
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  • Betina Dimaranan & Elena Ianchovichina & Will Martin, 2009. "How will growth in China and India affect the world economy?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(3), pages 551-571, October.
    • Handle: RePEc:spr:weltar:v:145:y:2009:i:3:p:551-571
    DOI: 10.1007/s10290-009-0029-y
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    2. Keshab Raj Bhattarai, 2016. "Economic Growth and Development in India and SAARC Countries," EcoMod2016 9631, EcoMod.
    3. Tyers, Rod, 2015. "International effects of China's rise and transition: Neoclassical and Keynesian perspectives," Journal of Asian Economics, Elsevier, vol. 37(C), pages 1-19.
    4. Balázs Lengyel, 2010. "The Hungarian ICT sector - a comparative CEE perspective with special emphasis on structural change," EIIW Discussion paper disbei183, Universitätsbibliothek Wuppertal, University Library.
    5. Deb, Kaveri & Sengupta, Bodhisattva, 2016. "On Empirical Distribution of RCA Indices," MPRA Paper 74087, University Library of Munich, Germany.
    6. Isabelle Bensidoun & Françoise Lemoine & Deniz Ünal, 2009. "The integration of China and India into the world economy: a comparison," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(1), pages 131-155, June.
    7. Lionel Fontagné & David Laborde & Cristina Mitaritonna, 2008. "An Impact Study of the EU-ACP Economic Partnership Agreements (EPAs) in the Six ACP Regions," Working Papers 2008-04, CEPII research center.
    8. Paul Welfens & Jens Perret & Deniz Erdem, 2010. "Global economic sustainability indicator: analysis and policy options for the Copenhagen process," International Economics and Economic Policy, Springer, vol. 7(2), pages 153-185, August.
    9. Bhattacharyay, Biswa Nath & Mukhopadhyay, Kakali, 2015. "A comprehensive economic partnership between India and Japan: Impact, prospects and challenges," Journal of Asian Economics, Elsevier, vol. 39(C), pages 94-107.
    10. Adrian Wood & Jörg Mayer, 2011. "Has China de-industrialised other developing countries?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(2), pages 325-350, June.
    11. Monojit Chatterji & Sushil Mohan & Sayantan Ghosh Dastidar, 2014. "Relationship Between Trade Openness And Economic Growth Of India: A Time Series Analysis," Journal of Academic Research in Economics, Spiru Haret University, Faculty of Accounting and Financial Management Constanta, vol. 6(1 (March)), pages 45-69.
    12. Kaveri Deb & Bodhisattva Sengupta, 2017. "On Empirical Distribution of RCA Indices," IIM Kozhikode Society & Management Review, , vol. 6(1), pages 23-41, January.
    13. Kong Yam Tan & Tilak Abeysinghe & Khee Giap Tan, 2015. "Shifting Drivers of Growth: Policy Implications for ASEAN-5," Asian Economic Papers, MIT Press, vol. 14(1), pages 157-173, Winter/Sp.
    14. Przemyslaw Kowalski, 2008. "China and India - A Tale of Two Trade Integration Approaches," Trade Working Papers 22170, East Asian Bureau of Economic Research.
    15. Débora Bellucci Módolo & Celio Hiratuka, 2017. "The impact of Chinese competition on third markets: An analysis by region and technological category," Development Policy Review, Overseas Development Institute, vol. 35(6), pages 797-821, November.
    16. Françoise Lemoine & Deniz Ünal‐Kesenci, 2008. "Rise of China and India in International Trade: From Textiles to New Technology," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(5), pages 16-34, September.
    17. Gumilang, Howard & Mukhopadhyay, Kakali & Thomassin, Paul J., 2011. "Economic and environmental impacts of trade liberalization: The case of Indonesia," Economic Modelling, Elsevier, vol. 28(3), pages 1030-1041, May.
    18. Neha Gupta, 2016. "Domestic Value-added Growth is Vital," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 17(2), pages 271-294, September.
    19. Ianchovichina, Elena & Ivanic, Maros & Martin, Will, 2009. "Implications of the growth of China and India for the other Asian giant : Russia," Policy Research Working Paper Series 5075, The World Bank.

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    More about this item

    Keywords

    Export growth; Terms of trade; China; India; General equilibrium; F11; F12; F43; F47;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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