The fixation on headline GDP overlooks deeper issues shaping the China growth debate. That is because the Chinese economy is in the midst of an extraordinary structural transformation – with a manufacturing-led producer model giving way to an increasingly powerful services-led consumer model.
It was only a few decades ago that globalisation was held by many, even by some critics, to be an inevitable, unstoppable force. “Rejecting globalisation,” the American journalist George Packer has written, “was like rejecting the sunrise.” Globalisation could take place in services, capital and ideas, making it a notoriously imprecise term; but what it meant most often was making it cheaper to trade across borders – something that seemed to many at the time to be an unquestionable good.
The I.M.F. has a complex definition of “advanced,” but a common thread is that all the nations have a per-capita income of at least around $15,000. Since Poland completed the transition from Communism to democracy in 1991, its economy has been growing at an average annual rate of 4 percent and, remarkably, has not suffered a single year of negative growth. In those 25 years, Poland’s average income has risen to near $13,000, from $2,300, and it is now on pace to pass the $15,000 mark by the turn of this decade.
…The version of China that Trump continues to rail against is increasingly out-of-sync with the China that exists today. Its economy, much as other developed economies have already done, has begun transitioning towards a post-industrial economy. The manufacturing boom that powered China’s economic rise over the last two decades has started to draw to a close—and making goods is getting more expensive relative to other economies.
Lockheed Martin is offering to move its entire production line for the iconic fighter plane from Texas to India. That would be a second-best option for all involved. From a U.S. perspective, the optimal outcome would be to acquire India as an F-16 customer while continuing to produce the plane in Texas and keeping the associated jobs at home. From an Indian perspective, the best outcome would be the development of an indigenous fighter aircraft to avoid reliance on anyone else’s technology.
On the whole, rapid economic expansion in India is a good thing for China as China’s consumer market matures, but Chinese manufacturers will inevitably face increased competition from Indian firms at the same time. As labor costs climb in China, Vietnam has become an emerging manufacturing nation, but China doesn’t need to panic. However, manufacturing development in a large country like India means more pressure on China. The increasing competitiveness from India’s manufacturing sector is a issue of strategic importance and deserves more attention.
China’s transition is opening space for other countries to move into low-cost manufacturing, where China until recently dominated. Deloitte predicts that the economies of Malaysia, India, Thailand, Indonesia, and Vietnam, the “Mighty Five” or MITI-V, will inherit China’s crown for such products. The consensus among industry and regional experts interviewed for this article is that India in particular will be the next top hub for low-cost manufacturing.
As he leaves office, Obama’s enormous economic accomplishments are tempered with the recognition of foregone opportunities. Disappointment among certain segments of the population has fueled the politics of anger and social divisions that go well beyond what would be expected and warranted based on actual economic performance.
India’s celebrated position as the world’s fastest-growing large economy conceals a dangerous weakness: Too few people seem to want to invest in the country. Even going by the government’s growth figures, private investment is shrinking at an increasing pace — by 1.9 percent between January and March, and by 3.1 percent between April and June.
From China’s standpoint it probably doesn’t make much difference who wins the White House. Both Clinton and Trump have committed to bringing American manufacturing jobs home from China while offering no concrete, workable policies for doing so.
