Three Shocks of Globalization Could Hurt China and Help India by Arvind Subramanian and Josh Felman
The 2008 global financial crisis, the COVID-19 pandemic and Russia’s invasion of Ukraine clouded China’s economic outlook while brightening India’s. But, to minimize their risks and maximize their opportunities, both countries will need to reassess their current national policies and governance.
PROVIDENCE – Over the past decade and a half, financial, health and geopolitical shocks have shaken global trade. The 2008 global financial crisis devastated the banks that financed much of world trade, then triggered a secular decline in economic growth. In 2020, the COVID-19 pandemic shut down factories and disrupted global supply chains. And now Russia‘s invasion of Ukraine has disrupted food and energy supplies, threatening to divide the world along geopolitical lines.
Some argue that these three shocks could even lead to the death of globalization. But the reality is likely to be more complex: the disruptions are likely to transform the global trading system rather than shrink it, with the impact varying by country. Significantly, China will likely lose, while India might even win.
Beginning in the early 1990s, developing countries advanced as a group for nearly two decades, rapidly catching up with the living standards of rich countries. This convergence has been facilitated by hyper-globalization, in which trade liberalization and the steep decline in transport and communication costs have rapidly increased opportunities for the developing world. China and India have benefited enormously, leading to the largest reductions in poverty the world has ever seen.
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