China Loses, India Gains

News from behind the Great Wall of China tells us that the communist nation is now on the verge of tumbling down. Unbelievable as it is, the social media was also sharing footage of a military coup. The world is dying to know what is happening there since what happens on that side of the Great Wall has a direct effect on what happens on this side of the Great Wall. There is no big dispute that 'something mysterious’ has happened.

China, like any other communist country, has never been open about itself. So it is impossible to know directly or officially from them if something has happened, let alone what has happened. Rumors were rife that President Xi Jinping, who ruled China in a totalitarian environment, had been ousted through a military coup or a political coup. Anyway, Xi Jinping has started appearing in public as if nothing has happened.

Although China has many attributes such as the world's first place in population, an economic power that challenges even the United States, the world's largest foreign exchange reserves (three trillion dollars), the upper hand in international export and import, and a totalitarian government giving no freedom to its citizens, there are rumors that judging by the stench, something has gone wrong in Beijing.

The most pessimistic news coming from China, where there is no democracy, civil liberties or transparency, is mainly from the financial sector. What is going on in China is something that even the citizens of that country generally have no idea about. However, no government can hide the financial crisis of a nation for long, no matter how much it tries. The world's leading economic monitoring agencies, such as Japan's Nomura, indicate that China is now facing such crises.

Economic agencies point out that for the first time in the last 40 years, China's economy is growing at a lower rate than that of the United States. This is vouchsafed by the fact that China has cut the interest rate on loans given to banks by China's central bank and the loan rates charged by banks to customers.

Moreover, China's gross domestic product (GDP) growth was recorded at just 0.4 per cent in the quarter that ended in June 2022. This is the lowest growth rate in the post-Covid period.

At the same time, India's growth rate was close to 14 per cent, according to the figures of the Central Statistics Department. According to the International Monitoring Fund, if China goes this way, the total growth of this financial year will be limited to 2.50 per cent.

It is concluded that one of the main reasons for China's economic stagnation is that 25 per cent of the GDP comes from its real estate sector. Large-scale borrowing and repayment defaults by large real estate companies have hampered the banks' operations. As a result, the Chinese central bank introduced restrictions, but housing activity suffered a setback.

As the houses were not allocated on time to those who had booked the houses by taking housing loans, they defaulted on the repayments. Banks' buying and selling became more difficult after months of interruptions.

China's exports have also been affected by the worsening relations between the United States and China over the Taiwan issue and international issues including the Russia-Ukraine war. The export sector contributed 26 per cent to China's national income. It has fallen to four per cent in the June (2022) quarter. The lack of rapprochement with India has also fueled the decline in exports. Undoubtedly, the slowdown in China, the world's second-largest economy, has affected international markets as well. This is evidenced by the sudden drop in crude oil yields in the global market. There is also a consolation that rising oil prices have benefited developing nations like India.

China's economic recession began to emerge after the Covid period. The strict restrictions imposed at the time of the outbreak of Covid also hit them in the financial field. As the origin of the disease was kept a secret and severe social restrictions were imposed on the people, domestic production growth began to stagnate. People's income streams have been shut down as the professional trades of daily life have collapsed. The reality is that it did not take long for the individual's liabilities to become those of the credit institutions and eventually the nation’s. International financial agencies observe that China is wallowing in debt.

India had also started showing signs of economic recession during the Covid period, but India overcame the situation very quickly. The Real Estate Regulation Act drawn to clean up the real estate sector, amendments to the pauper law and measures to promote digital payments have strengthened the Indian economy even during the Covid era. India has also evolved into a superpower in Consumer Electronics Sector, the IT export sector, construction, automobiles and pharmaceuticals. Even though many countries are in debt after covid, it is no small thing that India has foreign exchange reserves of over 570 billion dollars. The China Plus One Policy which is now being followed by the developed countries is also in favour of India. But India still has a long way to go, especially in terms of poverty alleviation.

* (The writer is Chairman of The World Hindu Parliament and former President of Fokana)