China and India poised to conquer the world

Or so claims a former head of the World Bank, whose credentials are rather impressive. It’s coming sooner than any of us imagine, and it will shake our world at its very foundations.

Western nations must prepare for a future dominated by China and India, whose rapid economic rise will soon fundamentally alter the balance of power, former World Bank chief James Wolfensohn has warned.

Wealthy countries were failing to understand the impact of the invevitable growth of the two Asian powerhouses, Wolfensohn said in the 2006 Wallace Wurth Memorial Lecture at the University of New South Wales at the weekend.

“It’s a world that is going to be in the hands of these countries which we now call developing,” said Australian-born Wolfensohn, who held the top job at the global development bank for a decade until last year.

Rich nations needed to try to capitalise on the inevitable emergence of what would become the engine of the world’s economic activity before it was too late, he said.

“Most people in the rich countries don’t really look at what’s happening in these large developing countries,” said Wolfensohn, who is now chairman of Citigroup International Advisory Board and his own investment and advisory firm.

Within 25 years, the combined gross domestic products of China and India would exceed those of the Group of Seven wealthy nations, he said.

“This is not a trivial advance, this is a monumental advance.”

So many conflicting opinions. Can countries of such immense poverty and seemingly insurmountable environmental woes really make it to the top in a mere 20 years or so? I’ve had my doubts, but recently I am more inclined to think that yes, they can, thanks to the savvy foreign policiy deals being brokered by their leaders, ensuring they’ll have the energy and resources required to keep the cylinders humming. Yes, a lot of people will be left behind and the inequalities will be unconscionable. But the New World Order (and not the one prophesied by Bush I) looms imminent, and those who aren’t taking steps now to prepare for it can’t say they weren’t warned.

And now, let me get back to studying my Chinese.

Update: I want to urge everyone to take a look at that old story I linked to in this post in light of Wolfensohn’s claims. It raises an extremely important question: How can two gentlemen with such rich experience come to such vastly different conclusions about China’s future? One of them actually lived and worked in China for decades and speaks fluent Mandarin. (Maybe Wolfensohn does too, I don’t know.) But the difference in the conclusions they reach is nothing short of astounding, and begs the question, will one of them be proven “right,” or will reality ultimately show that the situation wasn’t nearly as black and white as either suggested? (Whoever answers correctly gets a free Peking Duck tote bag as soon as we know the answer, probably in about a quarter of a century from now.)

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Richard Burger is the author of Behind the Red Door: Sex in China, an exploration of China's sexual revolution and its clash with traditional Chinese values.

The Discussion: 24 Comments

My Political Science professor made this prediction months ago based on the Power Transition Theory; China by 2025 and India by 2050.

If the empirical evidence that supports the Power Transition Theory continues to hold true with China and India as it has with other rising powers, it looks like the world is in for a rather bumpy ride for the next 50 years or more.

November 28, 2006 @ 12:41 am | Comment

With visions of a tote bag, I am going to venture out on a limb and say both Pomfret and Wolfensohn are right, but Pomfret far more than Wolfensohn. China’s economy is going to continue to grow, but that in no way means that it is not a country without deep problems and that those problems are going to be extremely difficult to solve. Wolfensohn seems only to be looking at China’s ten year economic past and using that to draw a line into the future. On the other hand, Pomfret is examining a China he knows and seeing it for what it really is and for what it needs to do. I do not think any of us really know where China will be in 25 years (or if you really will give out the tote bag then) but I think it is fair to say that it will take far longer than that for China to become a truly great country again, economic growth notwithstanding.

November 28, 2006 @ 12:45 am | Comment

Two nonnegative takes on the future of China, from two seasoned “China hands”:

http://www.sais-jhu.edu/yoc/

(scroll down, listen to the episode from Ambassador Freeman)

http://www.middlebury.edu/administration/rcfia/archives/

(scroll down, Andrew Nathan’s remarks (Oct. 2nd) on Resilient Authoritarianism)

I’m eager to hear your comments.

November 28, 2006 @ 3:36 am | Comment

I tend to believe both of them are wrong.

November 28, 2006 @ 5:28 am | Comment

I am under the general assumption that as long as the Chinese government doesn’t go nuts or go through another revolution, those targets are easily within reach.

For example, for a GDP equivalent to the US, China only needs per capital income of around 6000. I mean the government could be corrupt, inefficient and endur thousands of local protests and still achieve this target.

My general view is that as long as you have a stable safe environment where you can do business, the economy will develop.

November 28, 2006 @ 6:46 am | Comment

We heard similar nonsense about Japan 20
years ago! Remember? and what happened!??
China and India rapid economic growth is entirely dependent on continuous foreign investments and export to foreign markets.
If that stop for any reason, then China and India will be in deep shit.
Besides, both of them, especially China are
confronting severe invironmental problems and
growing unrest.

November 28, 2006 @ 7:45 am | Comment

I agree with Atexan. Neither China nor India will be the “country of the future”, simply because that’s never happened. As a country grows economically, it loses it’s ability to attract foreign investment, and is forced to feed itself. The vast majority of growth in China is a result of foreign direct investment, and once firms believe they’re not getting a good return on their investment, they’ll turn to Southeast asia, Central Asia (thanks to Borat, I bet Kazakhstan could be the country of the future) or wherever seems viable. China and India in the meantime will be left with a better off populace, but just another couple of big countries along with countless others. Besides, it’s hard to say whether the political reforms in China in the next 25 years may actually set off a series of independence movements. So China could be the countries of the future!

November 28, 2006 @ 8:48 am | Comment

What makes you think money is going to go elsewhere out of China? For even the not-so-desirable but job generating low-cost manufacturing, there is still has while to go in China as infrastructure spreads westward and transportation cost goes down. As wage rise in the coastal areas, factories are just going to be relocated inland to capitalize on more favorable conditions.

Also, just because China is currently in a investment-led growth mode doesn’t mean the emphasis can’t shift to consumption. If China can manage 10% growth with little inflation, encouraging more consumption is not beyond the capability of the government.

China is not gonna stop exporting as long as stupid American keep on mortgaging their country to buy more.

November 28, 2006 @ 9:15 am | Comment

I think the real question posted here is: Does “the West” have faith in itself in confronting the continuous rapid transformation of China and India. So the test is not merely on China and India, but the will of the developed countries; is it really going to be positive engagement? Or, how would we like to view China and India’s rapid development as, doomed ambitious schemes to world domination or visionary pragmatism to modernisation? Perhaps it’s actually complicated for them, as it is for us, fearing to share and collaborate in jealousey?

November 28, 2006 @ 10:08 am | Comment

This is just more of the same old tired rhetoric that we always hear about China. The statements are too vague and they don’t take into account anything but a projected rise in GDP, as if this single figure exists in a vacuum. I don’t doubt that both China and India will acheive great advances, but I don’t believe Wolfensohn that the world will be in the hands of these two countries.

November 28, 2006 @ 12:00 pm | Comment

First of all, anyone who doubts that the “world will be in the hands” of China and India needs to get their head out of the sand.

China and India together account for a large amount of revenue. If you want to compare the threat of Japan taking over the world some years ago, don’t forget to look where Japan has ranked on the Current Account Balance.

Numero Uno.

China will/has passed Japan.

USA debt is $ 8,630,746,782,011.39 as of my posting time. Each citizens share is 28,77.24 based upon the approximate population of the USA being 300,333,181.
As of September 29, 2006 the debt increases 2 Billion dollars per DAY.

GDP has little or nothing to do with the growing power China….

Do the math.

Money talks, and bullshit walks. China has enough foreign reserves to destroy the USA without firing a single shot.

http://brillig.com/debt_clock/

November 28, 2006 @ 2:35 pm | Comment

Also, China ownes more debt than there is US currency in circulation….

November 28, 2006 @ 2:39 pm | Comment

I lean with the Admiral. The Japan analogy doesn’t apply. I’m reading Niall Ferguson’s great new history book War of the World, and he makes it clear (at least to my satisfaction) that the West is in a period of decline that sees no limit, while the deck is heavily stacked in China’s favor. For so many decades America lived off the fat of the land, but alas, all good things must come to an end, and the malaise and sense of insecurity felt by so many Americans today is just the beginning, as we witness the things we once took for granted being taken away one by one. China’s got the cash and, through the brutal intelligence and skill of its leaders, the resources required to grow ever stronger.

Of course, history loves to play little tricks on historians like Ferguson, who was adamantly in favor of the Bush II Iraq War before he was adamantly against it. For all the things going for it economically, China’s problems remain staggering, literally inconceivable. I mean, people need water to drink and air to breathe, and no matter how rip-roaring its economy is, China’s headaches are monumental and life-threatening. China Law Blog, up top, was probably onto something when he said both Pomfret and Wolfensohn are right.

November 28, 2006 @ 8:14 pm | Comment

“China has enough foreign reserves to destroy the USA without firing a single shot.”

That’s true. But if they did try to destroy the US this way, who would buy all those T-shirts, TVs and everything else? Sucks to be chained to a drowning man.

@richard

I’m not sure I totally agree with you on the decline of the West. I can’t speak for Europe but one thing the US does better than anyone else is re-invent itself. We did it after the Civil War, during industrialization, mass immigration, 2 world wars, the cold war and Vietnam and Civil Rights. American loses in confidence form time to time but here our remarkebly short attention span works in our favor. Here. Our losses of confidence are very short compared to other countries and it’s not long before we quit something that doesn’t work for us and find or make something that does.

Is the US going to be able to regain/retain comprehensive supremecy in all matters economic and military. No. But we will change and adapt. Economically and socially, the US is an elephant that moves like cat. China is just an elephant.

November 28, 2006 @ 9:39 pm | Comment

Buddah, yes we have shown in the past an uncanny ability to think creatively and retain our mastery of the universe. But there were a series of phenomena that helped make that possible, such as both the first and second world wars, which left Europe and much of the rest of the earth in ashes, while America rose untouched (Pearl Harbor aside) and more powerful than ever before – this was key to our becoming king of the world. Then there was cheap oil, and our great status as an exporter. And we had the education system and the brains. And I can go on and on. And suddenly, the scenario has been flipped upside down. The dollar’s slide is, to my mind, unstoppable, and heaven knows what gold will be worth a few years from now. China and India and the Tigers have decimated our manufacturing capability. Then, the new meme in the late 90s was that we’d retain mastery by being the nation of services – high-level management and IT and other stuff that requires brilliance and experience. Only suddenly all the PhD’s in science/computers are coming from India (and Chinese, mainly outside of the Mainland, based on my personal experience). And right now, it is very hard to determine exactly what America’s value proposition is, while it’s relatively simple to describe China’s and India’s and Vietnam’s. This is a challenge along the lines of which we’ve never faced before, and it’s made all the more depressing by its tragic timing: how to recover when Bush has divided us in every way, bankrupted us and made half the nation crazed with the notion there’s a terrorist lurking under the bed waiting to slit our throats? Our international staus has never been lower, our debt never higher and our morale and spirit never so battered. I’m still a believer – America will prevail, but not in the way it did in the past, not in a way where we’re No. 1 in all categories. Those days are over.

November 28, 2006 @ 10:04 pm | Comment

China can’t use the cards they hold. It would destroy them. China is thoroughly thoroughly messed up, and despite being in several very good positions, China also has its back to the wall on several other fronts. China may own the US, but the US is also, currently, the biggest reason China is growing, maybe not in real terms, because much of china’s growth is one big speculative bubble, but what drives the bubble is US consumption. If you make America pay back the debt, the economy collapses, and so will China.

Or that’s what comes off the top of my head. I firmly believe china will have about 15 years of growth then level firmly off to 2% growth. China is not the future, but it will be in a prominent position in the future. It’s just too messed up over here.

I tend to think the Japan metaphor is not totally in-apt. Japan doesn’t have messy political strife, massive corruption and environmental problems, and still didn’t take over the world. why would china be able to do it with all its problems in tow? The US, with one of the most fertile croplands in the world, a good abundance of natural resources and so on still can’t keep its shit together. To think that China, of all places will be able to is laughable at best. I really love it here in Beijing, and I do believe that China will be really important, as it is now, but it isn’t going to be extremely different from now in the near future. Not without a disaster or a few more wars to destroy what’s left of the US politcal capital

November 29, 2006 @ 1:10 am | Comment

Only suddenly all the PhD’s in science/computers are coming from India….

That’s been the case for a very long time. And what happens? THese PhD’s are essentially a brain drain of India and China. Oh, and don’t forget about that en route to becoming a nuclear power, we accepted a whole bunch of European scientists in mid-century. It’s the same thing.

I am troubled by this anxiety of losing the King of the world title. After all, our credible and effective role as the leader of the nations shouldn’t have been for that arrogance, yes? Wasn’t it the “King of the World” mentality that got us into so many troubles in the first place? Maybe we’ve been feeling so entiled to winning for a long time that we forgot that it’s ought to be about being good and humble.

I am generally convinced that China and India have no solid agenda of world domination but urgent need to modernise and improve their citizen’s coporeal lives; they know so very well that they have numerous structural problems in their societies waiting to be fixed. Their successful modern transformation will not be merely a technological one. That is, even the environmental and sanitary problems of CHina and India are in fact NOT a technological dependent one, but heavily cultural/legal. But how are we going to stop viewing and posturing ourselves like Rome? Are we stressed by the achieving and diligent Asian nations, seemingly aim to out compete us?

November 29, 2006 @ 4:04 am | Comment

Only suddenly all the PhD’s in science/computers are coming from India….

That’s been the case for a very long time. And what happens? THese PhD’s are essentially a brain drain of India and China. Oh, and don’t forget about that en route to becoming a nuclear power, we accepted a whole bunch of European scientists in mid-century. It’s the same thing.

I am troubled by this anxiety of losing the King of the world title. After all, our credible and effective role as the leader of the nations shouldn’t have been for that arrogance, yes? Wasn’t it the “King of the World” mentality that got us into so many troubles in the first place? Maybe we’ve been feeling so entiled to winning for a long time that we forgot that it’s ought to be about being good and humble.

I am generally convinced that China and India have no solid agenda of world domination but urgent need to modernise and improve their citizen’s coporeal lives; they know so very well that they have numerous structural problems in their societies waiting to be fixed. Their successful modern transformation will not be merely a technological one. That is, even the environmental and sanitary problems of CHina and India are in fact NOT a technological dependent one, but heavily cultural/legal. But how are we going to stop viewing and posturing ourselves like Rome? Are we stressed by the achieving and diligent Asian nations, seemingly aim to out compete us?

November 29, 2006 @ 4:05 am | Comment

Oops, don’t mean to reiterate like that! Sorry.

November 29, 2006 @ 4:06 am | Comment

James Wolfensohn overestimates China’s likely growth rate by a considerable degree and India’s by an even greater amount. To acheive that GDP, China needs around 7.5% GDP growth per year for the next 43 years. Projecting that far into the future is risky at best and it just doesn’t seem likely. I think a 5-6% is certainly possible. India maybe a 3-4%.

November 29, 2006 @ 8:18 am | Comment

I don’t know about you guys, but my bets are in Kazakhstan. High five!

November 29, 2006 @ 8:50 am | Comment

And what of Africa? Sooner or later there is going to be a leader able to make the various countries see that if they join together they will become a superpower. Africa has the resources and labor to accomplish this. All that is lacking is willpower.

“…poised to conquer the world.” Yawn. Basic chicken little argement. There will be world powers. And their influence will wax and wane. But there is not going to be any conquerer of the world. All the civilizations that have tried that have failed.

December 1, 2006 @ 5:21 am | Comment

As soon as Africa has the wealth, power and discipline of today’s China and India, we’ll write about how it’s poised to conquer the world. Don’t underestimate China’s influence – no one’s rushing to learn Swahili, but they are rushing to learn mandarin. Personally, I think that’s kind of silly (English isn’t going away as the world’s language), but there is reason – China is where the money and markets and the development are, now. Is its rise exaggerated? Sure. But it’s clout and its trade surpus are very real and I wouldn’t yawn at it. It is affecting the lives of millions of Americans now, today. Africa is having no such effect, at least not yet.

December 1, 2006 @ 8:13 am | Comment

Richard, the yawn was for the chicken little predictions about conquering the world. China and India are indeed powerful growing economies. But the noise over how they are taking over the world reminds me of the same predictions concerning Japan. I wonder if it is the same people making these new predictions. I remember various market analysts predicting how Japan would own most of the US in 10 to 15 years. That never happened either.

Only time will tell if China or India continue at their present pace or if internal issues will derail them. I agree with you that their rise is being exagerrated.

December 5, 2006 @ 1:19 am | Comment

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