DAWN 13

th
October 2010

CHINA INDIA ECONOMIC DETENTE


IN SPITE of the current slowdown in economic growth, Pakistan, by my count, is among the
28th largest economy in the world.
Among the worlds major emerging economies it is the only one that borders the two that are
the fastest growing. It has China and India as its immediate neighbors, the two economies in
the new economic world that are reshaping the global system.
The large Asian economies will play important roles on the stage of the new world economy.
Because of the size and structure of their populations they will also profoundly influence the
global economy system. What is important from Pakistans perspective is that China and India
are learning to work together. There is a developing economic detente between them. It
therefore matters for Pakistan how well these two mega-economies proceed on the economic
front.
It would be wise for Pakistani planners that in the strategy they develop to revive a sick
economy and to set it on the road to recovery, they explicitly factor in the countrys economic
relations with China and India. Ultimately the aim of policymakers should be to have the
Pakistani economy grow at the rates that are expected of China and India. But for these
ambitions to realize, Pakistan must look to these two countries for opportunities.

In the last few months the Indians have decided to shed their pride and have begun to take
some steps to draw benefit from Chinas rise rather than resent it or to aggressively compete
with it.

1. INDIAS 1
ST
REASON FOR SUCESS - The Indian economic success has relied on
developing the levels of skills of a small segment of the population in order to provide
services to the developed world that the latter cannot produce on its own because of
demographic constraints it now faces. With the exception of the United States and
United Kingdom all other developed economies have or soon will have declining
populations.
The two exceptions to this unprecedented demographic transition are the consequence of
more generous policies towards immigration. The pool of the migrants that have already been
formed in America and Britain have higher rate of fertility than the indigenous populations.
They will continue to have slight increases in their populations until the middle of this century.
Ultimately they too will begin to see first aging and then declines in their populations.

2. OPTIONS AVAILABLE FOR DEVELOPED COUNTRIES - What are the options available to
these old industrial economies to see the pattern of their consumption and its level
survive and their economies to retain some dynamism? The answer lies in relying on
the demographic profiles of the developing world where the populations are still
young and are likely to increase for several more decades.

Shahid Javed Burki
3. INDIAS 2
nd
REASON FOR SUCCESS - The large size of the Indian population was not the
only reason for Indias success in using demography to its advantage. It was able to
make a great success of first its IT industry and subsequently of health services and
entertainment industry because of the ability to use English on the part of large
segments of its population. But in order to retain the extraordinary rates of growth in
the output of these sectors, the Indians know that they must diversify their markets.

4. INDIAN FOCUS ON THE EMERGING ECOs - They have decided to shift their focus to
countries other than the industrial world. The rethinking includes the recognition that
it must extend its development model to include outsourcing not only to the
developed world but also to the large emerging economies that dont have the skills
the Indians were able to develop.

In this context, New Delhi has decided to focus on China, a country that also has more than a
billion people.
a) China does not have a population that is comfortable with English, the lingua
franca of the service sector.
b) Also, its pursuit of one-child policy to curb the rate of growth of population is also
expected to introduce demographic constraints long before India faces that
situation.

5. INDIAs POPULATION COMPOSITION AND MANDARIN
About 60% of Indias 1.2 billion are under the age of 25 and its population is still
increasing at a rate of 1.4%, more than twice that of Chinas 0.6% rate. But for India bringing
China into the circle of its economic influence means equipping its population with working
knowledge of Mandarin, Chinas official language.

Without knowledge of Mandarin it is difficult to penetrate the Chinese economy. This has been
recognized by most countries that want to trade with China and benefit from its extraordinary
economic rise and size. To teach Mandarin to their citizens, they have looked to China for help
and the Chinese have responded with some enthusiasm.

There are now 260,000 people worldwide who are enrolled in Confucius centers the Chinese
have established in many countries across the globe. However, according to a report in a recent
issue of the Financial Times, India has viewed Confucius centers with suspicion and kept them
out of its main centers of learning. That is now changing under the influence of Kapul Sibal,
the Countrys dynamic education minister.

6. THE MINISTER IS NOW ENCOURAGING INSTITUTIONS - of higher learning to set up
departments of Chinese studies which, along with teaching Chinese history, economy
and business practices, will also have the interested students learn Mandarin. To quote
once again from the English newspaper, Mr. Sibal has gained reputation for dynamism
in a department that has been slow to respond to the enormous challenge of
providing Indias millions with suitable skills to ensure Indias much touted
demographic dividend does not turn it to be a curse.

Much the same can be said about Pakistan. Is it doing anything imaginative to take advantage
of its even greater demographic dividend and even greater opportunities that lie just across the
border in China? The answer, unfortunately, is not a great deal.

In late 2008 soon after he took over as Pakistans president, Mr Asif Ali Zardari, I told him that
focus on China should be based on a well thought-out strategy. One of the steps I then
proposed was to establish an institute of China studies in Islamabad. Such an institute should
provide instruction in Chinese history, its economy, and its evolving relations with the outside
world. The institution should also teach Mandarin.
The president reacted enthusiastically but I dont believe anything has been done. Without
proper planning and execution, the ambition to benefit from Chinas remarkable rise will
remain a dream.