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Dancing with Giants: China, India, and the Global Economy

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January 2007 - This book, edited by L. Alan Winters and Shahid Yusuf, contains six essays and an introduction that explore whether continued rapid growth through 2020 is feasible in China and India, whether there are any hints about the form it will take, and how any such expansion will impinge on other countries.

The contributors analyze the Giants’ impact on global markets, systems, and commons rather than via their bilateral links with other countries.

Three chapters focus on the Giants’ interactions with other countries via the evolution of their industrial capability, their international trade, and the international financial system. Others consider possible constraints and influences on their growth, while the final chapter looks at energy and emissions.

Contributors include: Shubham Chaudhuri, Betina Dimaranan, Elena Ianchovichina, Philip Keefer, Philip R. Lane, Will Martin, Kaoru Nabeshima, Dwight Perkins, Martin Ravallion, Sergio L. Schmukler, Zmarak Shalizi, L. Alan Winters, and Shahid Yusuf.

Dancing with Giants is produced by the World Bank's Development Research Group with support from its East Asia and Pacific and South Asia Regions, and the Institute of Policy Studies (IPS), Singapore.

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Red arrow for right menu barKey findings
ArrowFeature story
ArrowOverview/introduction (English)
ArrowOverview/introduction (Chinese)
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Key Findings

Red Arrow

China and India will become major players in the world economy, but certainly not the only ones.

Red ArrowWith annual growth at 15.1 percent over 1995-2004, China provided almost 9 percent of the increase in world exports of goods and services (second only to the United States), and 8 percent of the increase in imports (also second to the US). Both exports and imports are dominated by manufactures. India, accounted for about 2 percent in the growth of world exports and imports over the period 1995-2004, and its most dynamic export sector is information technology (IT)-enabled services. However, India’s manufacturing exports are starting to grow strongly, particularly in the textiles and clothing as well as the pharmaceuticals sectors.
Red ArrowWith their growing incomes, the rise of the Giants offers most countries opportunities to gain economically. Many will face strong adjustment pressure in manufacturing, however, especially if, as seems possible, the Giants’ technical advance is biased towards their current export sectors. For a few countries (i.e, the Philippines, Singapore, Thailand, other South Asian countries besides India) these pressures could outweigh the benefits of larger markets in, and cheaper imports from, the Giants and slightly curtail their growth rates.
Red ArrowThe Giants will contribute to the increase in world commodity and energy prices, but they are not the principal cause of higher oil prices. Although the Giants generated nearly half the oil use increase this century, their combined share of world oil consumption was still just 10.8 percent in 2003.
Red ArrowIndia’s and China’s emissions of CO2 will grow strongly if economic growth is not accompanied by steps to enhance energy efficiency. A one-time opportunity exists for achieving this if their ambitious current and future investment plans aim for appropriate standards. Doing so will not be unduly costly or curtail growth significantly.
Red ArrowThe Giants will become larger players in the world financial system as they grow and liberalize. They are likely to reduce the rates at which they are accumulating reserve assets and China may well reduce its current account surplus.
Red ArrowGrowing inequality could, especially in China, constrain growth potential since it implies a waste of talent and opportunity and makes efficiency-enhancing reform more difficult. Both Giants are aiming to address inequalities, however, and constraints are certainly not inevitable.
Red Arrow

Likewise, both Giants face challenges, but not insurmountable ones, in maintaining governance outcomes conducive to growth. Despite their very different institutions, both Giants have provided reasonable property rights and investment climates over the past decade or more.



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