Macroeconomics – Competition with China and India

The phenomenon of rapid sparing developing in mainland China and India is often discussed within the frameworks of is possible threat to the global realism economy. juvenile forums dedicated to financial issues, as well as the study increase of the numbers of papers in the scotch press (FT, Business Week etc.) especially since stock markets in China took a major hit end of February, show that China has g genius from being interesting to being important (Business Week, border 2007) also for investors and not only for economy. The prospective future seems to be at hand. There is nothing to nark about. However, historical European countries such as Germany and France ar not disposed to overoptimistic conclusions neither historically, nor politically. The general proportionality of risks and perspectives inclines towards favorable economic situation. However, the situation is not as optimistic as it seems to be.The US Treasury depository also considers that the countries shou ld double their efforts. It is necessary to continue the implementation of tax reforms, to favor the development of industries and formation of capture comprehend force market, and to make the heading policy more flexible. These remarks are obviously addressed to China and India. Besides, the U.S. government worries about Chinas military modernization program, economic dynamism, expanded diplomatic twine across Asia and increased global search for energy resources. So, what is going on? The answer might be quite simple. Last year the cosmea economic system faced a silent regeneration. For the first time in the history China and India became the subjects of the world economy.Twenty years ago the world had no slightest idea of the Chinese and Indian economies. The Chinas share in the worldwide gross domestic product exceeded no 1 per cent. It was actually lost in the categories standardised mistakes and omissions. However, in result of rapid economic growth (average 9% per year) China became the sixth largest national economy making the total of about 6% of the worlds GDP.Last year the industrial world could feel the hot breath of Chinese economic dragon. According to the absolute majority of analysts, the growth of Chinese domestic and foreign demand became iodin of the main factors contributing to cost increase for raw materials and semi-manufactured goods all over the world.China and India have watertight economy and almost no flexibility. Moreover, it is difficult to define the exact share of China and India in the world economy due to so-called controlled and non-marketable sector. The countries occupy a leading position by such indexes like the most favourable countries for initial investments, the most preferable offshore zones for location of the offshore enterprises and manufactures, and the most preferable zone for IT services attraction and utilization.Compared to other extensive markets of the developing countries, the entrepreneurs find C hina and India more winsome markets both in the short-term and the long-term perspectives, leaving such countries like Brazil, Mexico, and Poland far behind.The countries present devil completely different markets. Whereas China is known as the leading manufacturer and the most rapidly exploitation consumer goods market, India is the largest supplier of IT services and the leader in business processes outsourcing. Indias market is oriented towards the long-term perspective. The investors prefer China because of the market size, access to export opportunities, numerous initiatives countenance by the governments, moderate working expenses, neat infrastructure and favorable macroeconomic climate. The India aims the following well trained grind force, talented management personnel, the victory of the legislative authorities, transparency of business transactions, cultural similarities and favorable business climate. Since 2002, when Chinese Premier Zhu Rongji traveled to Indias p olitical, commercial and tech capitals, China and India started improving ties, not just for trade but for economic cooperation.What are the threats to the global economy?U1 China and India became the economic knot of the entire Asiatic region. Therefore, cost reduction of labor force on a global scale is one of the main threats to the global economy. In result, the products, where labor force is one of the main components of expenses will also become cheaper. Another way of putting it is that one shouldnt think to locate the routine labor intensive manufacture outside the country with hundreds one thousand million people satisfied with 1-2 dollars rate per hour. On contrary, the countries assigning a specialization to constancy involving high-skill jobs expect to get along benefit from the situation. The additional expenses are also expected by raw material exporters. Last, but not least, expanding ties between India and China would help the latter to benefit from Indias experi ence in the World clientele Organization to move from mass manufacturing of inexpensive goods to more sophisticated businesses.India and China are set to communicate even the strongest market forces in the world. The rapidly growing manufacturing units and consumer goods markets of China, and the strong IT services and BPO industry of India has seemed to be huge boosts to domestic the economies. Soon India would lead the IT industry market in the world and China would dominate the manufacturing industry in the World. Several global giants are actually setting up back-end offices and manufacturing hubs in these two Asian nations.The markets in India are growing at the rate of about 30 % every year, and about 44 % of the global outsourcing business is actually based in India. India has been able to dominate the global outsourcing business as it has several education institutions producing well-trained professionals. Besides, they are able to speak English and can effectively communi cate with their western sandwich counterparts. On the other hand, China is known for its labor-oriented workforce and infrastructure abilities that would be a suitable gain point for the manufacturing industry. Earlier, the strong markets of the world were actually ignoring the markets of India and China. However, considering the rapid growth, these markets cannot henceforth ignore India and China.These two counties still offer huge amount of opportunities, which until now have remained untapped. Today markets are growing in those areas where a grand proportion of the human population exists. Although, there may be several obstacles in the path of growth and development for the Indian and the Chinese markets, it does seem definite that these two countries would grow further. There would also be demand in the international market for cost-effective and skilled labor. Both, India and China have taken a lot risks, and for now at least, these risks are paying huge dividends (Money Wee k, 2005, ZD Net, 2007, & Schaaf, 2005).ReferencesSchaaf, J. (2005), Outsourcing to India Crouching tiger set to pounce, Online, Available station http//www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000192125.pdf, Accessed 2007, phratry 10.The Money Week (2005), Underground threats to the global economy, Online, Available site http//www.moneyweek.com/file/25075/underground-threats-to-the-global-economy.html, Accessed 2007, September 10.ZD Net (2007), China and India set to lead global innovation, Online, Available site http//news.zdnet.co.uk/emergingtech/0,1000000183,39287977,00.htm,Accessed 2007, September 10.U1Please do develop this conclusion.