Some news from Australia-
SYDNEY (AFP) - 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."
Wolfensohn said that somewhere between 2030 and 2040, China would become the largest economy in the world, leaving the United States behind.
I agree with Wolfensohn in that China and India have the potential to be the most dominant world powers in another 30-50 years. Both countries , but China's in particular, are already making great strides as far as GDP growth.
There are however several potential problems that could cause Wolfensohn and others(Read Nicholas Kristof and Sheryl WuDunn's excellent book 'Thunder in the East') predictions to be off the mark. They include-
1- Rising Nationalism in Asia. Here is one example that I blogged about some months back. While this conflict is all rather silly and unlikely to start a war, there are potential danger spots like the Kashmir dispute between India and Pakistan, or The China-Japan dispute over the Senkaku/Diaoyu Islands. Most strategic experts would rate a Pakistan-India dispute as the one with the greatest potential to go nuclear. Such a conflict would be catastrophic but the potential for one can also be possible brake on economic growth in India. What investor wants to risk money in a part of the world with that level of danger?
2- Pollution. China's industrialization has come with few safeguards for the surrounding enviorment. Anyone who has travelled to this part of the world(And TFM has)knows just how polluted some parts of Asia are. Pollution of the air and water is a health hazard that could also dampen the region's potential growth.
3- Political stability. China is Communist in name only as the country practices more capitalism with every passing day. With growing economic freedom, the people of China are likely to want more political freedom also. The rulers in Beijing fear democracy and are likely to crack down on any threats to their power. All of this creates a high potential for instability and a potential damper on the country's growth.
India calls itself the world's largest democracy, but is reality a one-party state. One that has seen political assassination far too often.
Other factors that could hold back China or India include illiteracy, inefficient use of women in the economy, and health issues not related to pollution(AIDS is on the rise in this part of the world). China and India have great potential but many obstacles to overcome also before they become the world's dominant economic powers.
Linked to- Third World County, Right Wing Nation,