Happened to attend a book preview by author Prof Arvind Subramanian on Eclipse – China Dominating the World, Economically. No doubt the imagery in the book seemed laced with poetic flavor; and till the book can be read through, its central plank of Index of Dominance can’t be scrutinised. Nevertheless, the author is to be complimented on courage in throwing a scenario as extrapolated from fairly conservative assumptions, a scenario that Chinese dominance is imminent, large in magnitude, and can be reined only be multi-lateralism of an open economy on part of rest of the world.
Accepting contours of his thesis, three holes need to be addressed:
1. In 1973, as per author’s graphing, China was nowhere there, and suddenly, as a consequence of few years of work in 1980s, it shone up on radar in early 1990s. So what prevents surprise actors to overshadow the world by 2030 or 2050, could be India, Israel, Brazil, Turkey, Sweden, …
2. There seems to be a halo focus on size, which no doubt Chinese economy possesses. But what about productivity per capita, where China is far lower on world grid. Barbie Doll retails for $9.99, of which China’s share is merely $ One (60 cents for labor, 40 for raw material) – this is a gross deleveraging of its assets. So when China asserts for a bigger share in $9.99, what bargaining chip would it have; and why would rest of world surrender, rather than shift to Vietnam or Argentina or Kenya. On Value Chain too, China ain’t Innovation driven – can there be dominance without being tech savvy?
3. Rough neighborhood and trust deficit much of world has with China (but for few nouveau cultivated African countries and far-off Venezuela), would allow China to dominate? Its RMB faces the daunting challenge of non-acceptability.