China and India: Twin Engines of World Economy
2016/08/23

On August 20, 2016, Indian Newspaper Mint published the article "China and India: Twin Engines of World Economy" of Mr Cheng Guangzhong, the Minister Counselor of Chinese embassy. The full text is as follows:

China and India: Twin Engines of World Economy

The world economic growth has considerably slowed down in last few years, and "Black Swan" events have aggravated the plight of world economy further. The US economy grew slower than the forecast for the first two quarters of this year, and its estimated rate of growth is likely to be around 1.5% for the whole year. No wonder Chinese and Indian economies are drawing close attention of global community. However, some experts are worried that an untoward "Black Swan" might occur in China, damaging its development and even the entire world.

China is still the main engine driving the world economic growth. During the first half of this year, China's economy grew at the rate of 6.7%, reaching 34 trillion RMB. 717 million new jobs were created in urban areas, CPI rose to 2.1% and the per capita income rose by 6.5% nationwide. Economic structure continued to improve, where the contribution of the service sector to the economy reached 59.8% and contribution by domestic demand reached 110.4%. Transformation of the economic development pattern also achieved progress. Fiscal and financial reforms as well as the reform of state-owned enterprises marked steady progress, and innovation started playing a stronger role in the economic growth. Although the non-performing loan ratio of commercial banks rose to 1.81%, but the overall financial system remained stable with no systemic financial risk. Overall debt ratio of central and local governments stood around 40%, which is quite low when compared with that of the developed countries. The fiscal deficit rate was only 3%, still under the internationally recognized safety limit. The process of de-capacity has already begun in iron and steel, and coal industries. The aim is to reduce the production of 45 million tons of crude steel and 2.5 million tons of coal this year. Production of crude steel and coal will be reduced by 100 to 150 million tons and 500 to 800 million tons respectively in next five years. The process of de-capacity is mainly aimed at improving the economic structure and energy structure of Chinese economy, so that 1.3 billion Chinese people could lead a healthier life in cleaner and greener environment. China is fully capable of achieving 6.5-7 percent growth target this year, and its contribution to world economic growth will remain around 25%. The new round of economic reforms, rapid urbanization, technological progress, improvement in quality of labor and deepening of international economic cooperation will support China's medium-to-high speed economic growth in the long run.

However, owing to the large size of Chinese economy and some structural, cyclical and external factors, upward momentum and downward pressure of the Chinese economy are still pressing against each other. In such a scenario transformation and upgradation of China's economic development pattern require more time. China faces many difficulties in the task of promoting economic restructuring and upgrading, and even more difficulties in fulfilling the responsibility of boosting world economic growth.

The good news, nonetheless, is that this year India is still the third largest engine pulling the world economy forward. Prime Minister Modi has focused on economic reforms and economic development since taking office, and launched many encouraging plans such as "Make in India", "Smart City" and "Startup India". Prime Minister Modi has travelled far and wide within India and visited various countries around the world, he is perceived as actively promoting economic cooperation between India and rest of the world. Business environment in India has also witnessed improvement, and foreign investments have increased significantly; infrastructure construction has gained momentum, fiscal consolidation has strengthened, and inflation has come down. India, like China few decades ago, is seeing setting up of industrial parks one after another, construction of new skyscrapers every day, and a continuous forward extension of rails and roads. India has remained the fastest-growing major economy in the world for last two years. On the back of great monsoon, this year is going to be a bumper year for Indian people. Timely monsoon and bumper crops would help India achieve 8% GDP growth as hoped by finance minister Arun Jaitly. It would increase India's GDP by nearly 180 billion USD, which may be only about 100 billion USD less than the increment of the US economy. It hardly deserves mention that India has firmly taken over the role of the third engine in driving the world economic growth.

During a meeting, Jayant Prasad, Director General of Institute for Defence Studies and Analyses, told Liu Jinsong, Charge d'Affaires of Chinese Embassy, that"our confidence in the future of China's economy is just like that in our own economic outlook." In present era of profound economic globalization our big world has turned into a small global village where the fate of every country is so closely intertwined with each other that no one can go alone. Chinese economy and Indian economy are highly complementary to each other as reflected through increasing number of cooperation projects and broad cooperation space. India's upward economy is actually helpful in easing the downward pressure on China's economy. Only if China and India help each other and forge ahead, can they bring hope to themselves in a very depressed world economy and illuminate the world as well. It is always better to have more engines than only one to power the world economic growth. May the world economy get better as soon as possible, because Chinese and Indian economies can be better only if the world economy is better.

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