Growth 'elephants' China, India drive prosperity charge
(Agencies)
Updated: 2005-07-10 21:09

China and India, with combined populations of 2.3 billion, are the growth "elephants" driving world growth and they will lead a drive towards prosperity for decades to come, contributors to a Madrid forum on the world economy said this week.

An economic adviser to the Indian government between 1998 and 2001, Nand Kishore Singh, and businessman John L Chan who is the author of China Streetsmart, a guide to doing business with China, said that both countries would rise to the huge developmental challenges facing them.

"India is a picture of contradictions belying generalities of any kind," said Singh, who said that the multi-billion-dollar question was "can it contribute to global peace and security" or would it be "a drag on human society and a detractor from growth?"

Singh, noting the penchant of skilled Indian youth for information technology, fondly recalled a visit he once made to US software group Microsoft where he noticed the teeming presence of compatriot software personnel.

" Bill Gates said: 'So are you in the US or in Bangalore?' Almost every floor had piles of Indians."

Singh said that India, with growth averaging upwards of six percent in the past four years and given a medium-term prognosis of seven to eight percent, could rightly assert that "all economic engines are firing", with manufacturing growth topping eight pecent and services 11.0 percent.

A strong technological sector, coupled with deregulation, was bolstering the process in a country where a mushrooming middle class was snapping up gadgets such as mobile phones at a rate of 1.5 million units per month.

This was "the power of connectivity -- integrating the Indian economy into the mainstream," said Singh, who nonetheless warned that industry had to undergo a "cultural change" to wean itself off traditional reliance on state subsidies.

Since India's exploding population set to see the country surpass China's by 2050, Singh said that the demographic data were on Delhi's side.

"We have the advantage of 600 million people who are young. Now we have to convert the huge demographic opportunity which we have," said Singh, underlining the contrast with the greying societies of Europe and Japan.

But Singh acknowledged that exploding demographic and economic growth could not be given free rein without respect for environmental concerns.

"We want to be part of the world energy containment process without compromising our development," he explained, while confessing that much work remained to reduce poverty and illiteracy.

Chan said that China was in a similar situation amid continuing high growth which was fuelling an insatiable desire for energy and he argued that outside Asia, the country was generally not well understood.

To illustrate his theory of a misunderstood country, he alluded to a traditional story of five blind men told to touch an elephant on the trunk, ear, tail, tusk and legs, whereupon they identify a snake, a fan, a rope, a weapon and a tree trunk.

"None could understand the big picture.

"China is like an elephant walking out of the mist. This superpower has lumbered into our living rooms," He said. In the process it was ratcheting up its purchasing power parity and taking a 5.0-percent and rapidly rising share of world trade, said Chan.

Chan noted that global China-related trade had doubled from about 600 million dollars in the past two years and argued that the country would successfully vault issues such as a potential overheating of the construction and housing industries and the thorny issue of currency revaluation.

With the People's Bank of China last week having denied it was set to revalue the yuan amid US pressure to do so, Chan said he saw the issue as "political, not economic.

"I argue the stable yuan has benefited the whole Asian economy," he said, reflecting that when the US economy was motoring along around 1999-2000 "guess what? The yuan was pegged."

To bolster his argument Chan said that the yen was also effectively pegged from the late 1940s to the early 1970s which had been a factor that "allowed Japan to become the powerhouse it is today".

He said: "Stability is a good thing. There is no way China is going to let the yuan float freely."

Like Singh, he stressed the importance of investing in youth, which has progressively been feeling the benefits of a country opening up to the world, both economically and educationally.

"The local talent base is on the up, as is literacy. And 600,000 students from mainland China have studied abroad since 1978."

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