A sense of where India stands

The stunning victory of Donald Trump has sharpened focus on America’s relationship with its only peer competitor, China.

Eight years ago, Trump had identified China as America’s primary threat and had acted to curb its economic rise. He did this by attempting to deny China market access to the US, through tariffs. This worked to some extent, and his successor, Joe Biden, continued the tariffs.

Mexico became the US’s largest trading partner this year, eclipsing China, which had held that position for a decade. Of course much of Mexico’s exports to the US were initially from China, so it is unclear what the actual damage to China has been.

Biden also took the next step towards trying to handicap China’s growth by denying it access to the most advanced microchips and the machinery used to design them. This was explained as a move aimed at China’s military capability, but the real reason is economic. China has responded by starting its own development of these goods, and experts estimate it is only a few years behind and will at some point catch up.

China is by far the global leader in electric vehicles and clean energy including solar panels. Meaning its products are priced competitively and often better than what is made in Europe and the US. Tesla owner Elon Musk says the cars produced by his China plant are the best the company makes. But even Chinese brands are thought to have caught up with the best the world has to offer and at a lower price.

America is stuck with what they call gas cars and trucks, which are powered by petrol and are a sunset industry. The only way for American giants Ford and General Motors to survive, if not compete, today is to block Chinese cars through tariffs and other barriers.

This will most likely not continue for much longer, for two reasons. The first is consumer interest: denying people cheaper alternatives for strategic reasons is not going to be popular. And the other, of course, is the fact that electric vehicles are the future and even if not mandated they will replace those running on petrol/diesel.

At US$18 trillion, China is now two-thirds the size of the US economy (US$26 trillion) and equal to the economy of the entire European Union. In the next 10 years, China will come close to equalling the US. No other nation has done that or come close. Before it collapsed, the Soviet Union was a fourth the size of the US economy. But that was a very different time, and the Russians never had the dominance of China in key sectors. China is the world’s largest manufacturer and makes a third of all goods.

This has happened even after Chinese wages have grown multiple times in the past decade and a half. For several years now, it has not been cheap labour that has powered Chinese exports.

China’s growth has slowed since Covid, but a slow China is still formidable. It is growing at twice the rate of the United States and, based on the latest numbers out on 29 November, at the same rate as India, though it has an economy five times larger.

It will not be easy for the United States to stop it from rising further and, given the pace at which China has boomed, the moment of reckoning will be upon us perhaps inside of this decade itself.

This is the primary question and the main issue in geopolitics today: what can the US do to stop China from catching up? If not much, then what happens to the world once China is equal to the US and then soon, the largest power on earth?

For one, America and its allies will be less capable of doing what they have done across the world over the past few decades. China claims it is non-interventionist, and perhaps it will turn out to be that way, but then again China has never before been the dominant power in a connected world.

For us Indians, unfortunately, though we are the world’s largest nation, our role here is limited. We are onlookers because we have not managed to do what China has done. In 1990, India and China were at level, with their economies the same size in per capita GDP (in fact, according to World Bank data, India was marginally ahead). Three-and-a-half decades of ‘liberalisation’ and a decade under the genius of Modi has not produced any shift. China’s per person GDP was US$7,600 in 2014 and ours was US$1,559; a decade later, they are at $12,614 and we at $2,400.

In any case, we no longer have the ambition to rival China, except in rhetoric. Across the landscape of geopolitics, there is as much reference to India as there might be to, say, the UK or France — both spent powers and neither especially relevant in a meaningful sense. India is similar. This is a shame for a nation with so much potential and for which there had been so much hope only a few years ago.

We are happy fighting amongst ourselves and digging up disputes from centuries ago as a substitute for real development. The present and the future can wait while we settle past scores.