Leveraging China’s Economic Crisis: Opportunities for India’s Growth

Ira Singh
Khabar Khabaron Ki,20 Dec’23

As China navigates through economic challenges, nations across the globe are assessing the potential implications and opportunities that arise amidst this turmoil. India, as a prominent regional power, stands poised to explore avenues for growth and development amid China’s economic crisis.Defaults by Chinese borrowers have hit a record high post-pandemic, with 8.54 million individuals blacklisted from economic activities.This surge, up from 5.7 million in 2020, represents about 1% of China’s working-age adults. Concurrently, China faces deflationary pressures, with consumer prices falling rapidly in November. The World Bank predicts China’s economic slowdown in 2024, marking a departure from its previous status as a global growth driver. Meanwhile, India, perceived as China’s replacement, must focus on consistent growth through manufacturing and exports.After online payment platforms like Alipay and WeChat replaced cash as the most used payment method in China, many stores refused cash payments, and some defaulters said it had become difficult for them to even buy food. Record unemployment has worsened the situation.

China has recorded it’s first ever quarterly deficit in foreign direct investment (FDI), according to balance of payments data, underscoring capital outflow pressure and Beijing’s challenge in wooing overseas companies in the wake of a ‘de-risking’ move to by Western governments. Direct investment liabilities- a broad measure of FDI that includes foreign companies retained earnings in China-were a deficit of $11.8 billion during the July-September period, according to estimates.That’s the first quarterly shortfall since China’s foreign exchange regulator began compiling the data in 1998, which could be linked to the impact of ‘de-risking’ by Western countries from China ,as well as China’s interest rate disadvantage. India can offer itself as an alternative to foreign investors by calibrating its policies, believe experts.

Though China aims to transition to a high-technology economy instead of a mass producer of goods , it’s easier said than done.

Overall FDI into India may have declined but there are reasons to be optimistic with the country seeing interest in greenfield investments amid the first-ever decline posted by China.An official reportedly stated that the United Nations Conference on Trade and Development (UNCTAD)has told the finance ministry that India is among the top three in greenfield FDI announcements as per its findings.This suggests that India may be pulling in fresh global capacity expansion as part of supply chain diversification.India expects these translate into higher investment flows by 2024, said official.

Moreover, Walmart, the world’s biggest retailer,is importing more goods to the US from India and reducing its reliance on China as it looks to cut costs and diversify its supply chain.The world’s largest retailer shipped one quarter of its US imports from India between January and August this year, according to estimates.Last month,it was reportedly stated that Asia-Pacific growth engine is expected to shift from China to South and Southeast Asia.Now whether India can become the next big global manufacturing hub , remains to be a paramount test.. believe economic experts.

India stands at a critical juncture and is set to become world’s third-largest economy by 2030,with an estimated 7% GDP growth in tha fiscal year 2026-27,presents an opportunity to transform its economic landscape amidst China’s economic challenges. Currently,India is the fifth largest, behind US, China, Germany and Japan.Strategic policymaking, fostering innovation, attracting investments, and enhancing global trade partnerships are key avenues through which India can capitalize on the situation and emerge as a robust economic force in the post-China economic crisis era.As the global economic landscape continues to evolve, India’s proactive measures and strategic initiatives will play a pivotal role in determining its growth trajectory and influence on the world stage.