CHINA DIARY - INDIA CHINA AND THE WORLD ECONOMY 2009

I am sharing the views from a good Indian  friend who works for a large MNC in Being. He is in the automotive industry there and earlier worked in the same sector in India. My friend travels a lot across China and his views reflect his observations 

The theories of decoupling of Asia from the western world which were doing the rounds have come to a naught. The impact has been across varying in degree. Korean and Taiwanese economies besides HK took a huge beating owing to huge dependence of the overall economy on exports. Indonesia got affected with oil prices going down and the ensuing bust in commodity prices owing to perceived drop in demand for coal and thereby mining industry. Thailand has had a political imbroglio compounding the overall economic investment climate besides the export dependence contributing to the slowdown. Malaysia which seemed to be standing up and not slowing has started shaking now. So it is all over.

 

China which is supposed to emerge as a saviour … is showing strong policy drive by huge internal consumption stimulus in spite of the huge challenge of loss of jobs and contraction in the export sector. The scale and size of the stimulus package is stupendous. The confidence and sure footedness resolve of the government is likely to sail them through. When the President or the Premier here says that they would achieve 8% then they would!!

 

Another interesting trend that I see in China is that the runaway labor cost increases which one witnessed in the last 5 year are correcting which means that the labor rates are dropping with the workforce getting redeployed and absorbed after taking salary and wage cuts è all this would lead to another wave of cost efficiency making China weather this and become even more competitive. This holds good for india too but not to the same scale.

 

In India I have heard that there are new startup which owing to downsizing in the IT sector are able to hire talent easily now. Do we see an emergence of a new entrepreneurial wave in the near future?

 

I feel at the end of all this China would surge ahead further and even India would emerge stronger. Though it would be more painful for China (over 50% dependence on exports as compared to 20% of India).