On China’s Relative Economic Decline

Source: This post on China’s Relative Economic Decline has been created based on the article “C Raja Mohan writes: India’s new possibilities amid China’s relative economic decline” published in “Indian Express” on 31^st January 2024.

UPSC Syllabus Topic: GS Paper 2 International Relations – Effect of policies and politics of developed and developing countries on India’s interests.

On China’s Relative Economic Decline, The article discusses the reasons for the relative economic decline of China. It highlights its consequences on the world, especially India.

Background:

Experts have recently highlighted the irreversible decline of China’s share of the global GDP. They believe that China has peaked economically. However, many don’t agree with the notion and point to the strengths of the Chinese economy and growing technological and military power.

What are The Reasons for The Relative Economic Decline of China?

China’s share in the world’s GDP rose from about 2% in 1990 to about 18.4% in 2021. It is now down to 17%. This is due to several factors such as:

1. Demographic decline. For instance, China’s share of the world’s working-age population has been falling for a decade and is about 19% and will come down to 10% in 30 years.
2. Chinese government’s anti-market interventions.
3. High levels of debt.
4. Declining worker productivity.

What Might Be The Consequences of China’s Relative Economic Decline?

Two important immediate implications for the world order stand out.

1) Unlikely Bipolar World: The growing gap between USA and China (due to the unlikelihood of China overtaking US GDP) means that a bipolar or G2 world is unlikely.

2) Multipolar Asia: Until recently, the notion of a China-centred Asia seemed inevitable. China’s relative decline now suggests that Asia has other alternatives. The faster economic growth in India, Indonesia, Vietnam and the Philippines suggests that a “multipolar Asia” is possible.

3) China-US Relations: China and the US could soften its stance towards the US due to their delicate geopolitical situations.

4) China-India Relations: India can steadily reduce the economic gap with China in this case. This will help it cope with Chinese power more confidently if it continues to build on its national capabilities and strengthens the Quad and other regional coalitions.

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What are The Lessons for India from This Issue?

One, USA is not declining and fading away, despite multiple challenges.

Second, there are limits to China’s rise.

Third, the growth of China’s Asian neighbours has made the region more internally balanced.

Four, if India can build on its strengths, and avoid China’s mistakes, it can thrive amid the unfolding power shift.

Question for practice:

What are the reasons for the relative economic decline of China? What might be the consequences of China’s slowdown on global geopolitics and India?