Tuesday, August 25, 2009

Decoupling China - what are the odds?

To take Piyush forward on the decoupling debate, the developed world seems to be awe-inspiringly looking forward to some miracle in China and at the same time debating whether it wants to let the reins of control go to the Oriental East. Piyush argues in his post that the emerging markets are more coupled today than ever before. The question - What will it take China to change the geo-political balance? Is the great dollar reserve that went all the length of the Great Wall finally shrinking up? If there indeed was an opportunity for China, what would it do for the Indo-China bilateral relations?
To answer some of these, let me put forth the following propositions (can be contested) - China is a large exporter to the US, but does not have influence over the rest of the world. China's manufactures are not strategic...they may be filling up Walmart's but still remain in control only of low value add products. China has been suggesting a shake up of its over $2 trillion reserves..but is worried about the impact this would have on its export competitiveness.
What is in this changing environment for Indo-China relations? Coming to the bigger concerns of India's role in ASEAN, UN and other bodies, China's relative rise to the top will dwarf the already weak claims of India. What do we need to do to prove that we are part of the decoupling brigade?
Another way to look at the China option is to evaluate the political response. Is China really going to be the next big economic change post recession? What does China have to do to gain its place in the world.
(The post I have referred to above is by Piyush on the decoupling debate. You can read it at http://discuss-international-finance.blogspot.com/)

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