Wednesday, 13 March 2013

Globalisation and the 'Emerging Giants' - China and India and a New World Order? Lecture by Sumit Roy

ed: We are delighted to host some wonderful papers by Sumit Roy on our website, with his permission!   

This research acknowledges the support of the FP7 large-scale integrated research 
project GR:EEN - Global Re-ordering: Evolution through European Networks  
European Commission Project Number: 266809 

 Lectures & Seminars Series 


Globalisation is an historical process. Its contemporary phase is marked by 
compression of the world, a blurring of national borders, and interlocking of 
states driven by new information and communication technology and rapid 
transportation. This is underscored by a shift in emphasis from state to non 
state market led policies and the creation of a ‘new space’ which coexists with 
the nation state. A major challenge is grappling with the relationship between 
nations and globalization and its outcome for the domestic and the 
international economy. In this context the focus of this seminar is on the 
nature of integration of two major developing nations-China and India-coined 
the ‘Emerging Giants’-into a changing world. This unfolds their mounting 
economic prowess and their strategic ties- with each other, with nations in 
Asia and  beyond, and with international institutions. This is underpinned by 
measures in both to induce structural transformation. Insights emerge into 
their ushering in a new world order. 

Full Lecture 

Globalisation is an historical process. It envisages ‘a world without borders.’ 
This is underscored by removal of economic barriers (trade, finance and 
migration), interlocking of  nations, and compression of the world through 
information and communication technology and rapid transportation. It unfolds 
a shift from the state to the market with the emergence of ‘a new space’ which 
coexists with nation states desiring to integrate into the process while 
pursuing national sovereignty. The emphasis in the future is expected to be on 
the global level and on global institutions.    

In this frame this paper explores a major challenge-the political economy of 
the relationship between globalisation and China and India-coined the 
‘Emerging Giants’ (EG)-and their strategic vision to reshape national and 
global destinies underscored by structural transformation. This marks a 
resurgence of their historical powers through bolstering strategic ties with 
nations and institutions. This could pave the way for a new world order. 

The EG dominate the world’s population (about 40%). It exercised major hold 
on the world economy in the 18th and  the 19th century. Indeed, in 1700 their 
share of world income was 45.7 %: China’s being 23.1%  and India’s being  
22.6%. However, this started declining in  the 20th century: from 16.4% in 
1913 to 8.7% in 1950 but then rose to 12.59%  (average between 1985 and 
1995)  and 16.88% (between 1995 and 2003). Forecasts suggest that the EG 
will once again regain their grip and control over 40% of world GDP by 2025- 
30. Hence, the two nations can be seen as the ‘re-emerging’ powers. This 
arouses expectations of their reshaping the nature of development and 
security though this may be mingled with new anxieties and uncertainties. 

The mounting significance of the EG is mirrored in their high growth rate in 
recent years. This is underscored by their ‘opening up’  in the frame of  
different ‘models’ of development-‘centralized’ (China) and ‘mixed’ (India) 
economy. This is encapsulated in China’s recent rate of growth of over 9% 
and India’s of over 8% and EG trade as a % of global GDP rising from 1.1%  
in 1990 to 3.6% in 2004. The exposure of their domestic economy to external 
forces  is  marked by trade as a % of  domestic GDP  being about 40% in 
China and about 30% in India and  the hope that  FDI, though currently 
modest, will rise fast in the near future.  On this basis,  including FDI, China 
has been more dynamic than India. However, both need to confront a major 
challenge-poverty. China has made major strides compared with India. 
Approximately 8%  of  its population are under ‘the poverty line’ in contrast to 
India’s 28%. Indeed, China has been ahead of India in terms of meeting basic 
needs-nutrition, health, and education, but both face mounting inter-sectoral, 
inter-regional and inter-group inequalities. Amartya Sen, the Nobel economist, 
recently emphasized  that growth is necessary but it is critical to lift poverty on 
all fronts. Certainly, India and China can learn from each other’s experience. 
‘Public policy,’ according to Sen, has to support the goal of poverty alleviation 
(New York Review of Books, 2011).  This, however, requires uncovering the 
nature of  ‘public policy.’ This is intrinsically tied to the character of the state 
and its capacity to cater for diverse and often conflicting interests. eg. the rural 
and the urban poor, including the landless and small peasants and the urban 
marginal, as well as the middle and the large landowners, small, middle and 
large industrialists (domestic and foreign), and  bureaucrats and professionals. 
Hence, the struggle between different socio-economic groups to influence the 
state is inseparable from  ‘public policy’ and  its  implications for growth and  

The EG, moreover, were able to withstand the financial crisis (2008), coined 
the ‘Great Recession’ which adversely hit most nations. The EG could revive 
their pre-crisis rate of growth with optimism on pursuing this in the future. 
However, more recently, from early 2011 onwards, there is anxiety of a 
‘second recession’  stemming from a financial crisis re-surfacing  in US and 
Europe –exemplified by a rise in their debts, a fall in the rate of growth, and a 
rise in unemployment. This in turn could adversely affect the world economy. 
In this respect, despite their  aspirations the EG  need to tackle poverty and 
inequality. China is forecast to be the second largest economy in the world by 
2016 and India the third largest by 2035.  By 2050  total production in China is 
expected to be 60% larger than in USA with India matching the latter. But low 
per capita income, poverty and inequality in the EG are likely to bedevil the 
Asian nations. 

The crisis (2008) highlighted the critical role of the EG in not only being able to 
sustain their growth but also being pivotal in supporting recovery of the world. 
Indeed, they are seen as the engines of growth in the future. China, with 
reserves of about $ 3 trillion, has been under pressure, especially from the 
USA, to curb imbalances between debtors (developed countries) and creditors 
in the world. The need to revalue the Yuan has been emphasized on the 
premise that it is overvalued. This has enabled China to boost its exports 
while curbing imports from developed countries. There has been a call for her 
to re-focus on stimulating domestic demand compared to the previous 
emphasis on exports. This could lead to an increase in her imports and hence 
the exports of developed countries. Indeed, China is seen as a possible 
‘saviour’ of the recent (2011) financial crisis in Europe and US. But it has 
challenged such notions. Its politicians have firmly asserted that as these 
regions are responsible for the problems they should  resolve them.   

The crisis (2008) made it abundantly clear that the mounting economic 
prowess of the EG has to be accompanied by matching political influence. 
This should mirror the gradual shift in the balance of world power. This has to 
go beyond simple technical reform such as marginally increasing the quota of 
the EG in the Bretton Woods institutions.  This is likely to create new 
opportunities and challenges. The existing powers are unlikely to voluntarily 
curb their own hold over world affairs.      

The strategic vision of the EG  has galvanized their urge to reshape national 
and global destinies. This has rested on remoulding their economic, political 
and military relationships on several fronts-with each other, with other nations 
in Asia and beyond, and with international institutions.   

First, the  urge to curb ‘old’ (pre-1990) and ‘new’ (post 1990) tensions 
between China and India  –the division based on the era before and after 
economic liberalization measures in India which  intensified such measures 
from 1990 onwards. Essentially, the ‘old’ tensions stemmed from inter China- 
India rivalries and suspicions, rooted in military and territorial disputes while 
the  ‘new’ ones were due to rivalries and competition in the world markets. 
Both nations have been increasing their expenditure on defence in spite of the 
financial crisis ie. China ( $ 95 billion) and India ( $ 32 billion).  This could 
worsen tension and insecurity in Asia with adverse effects on the rest of the 
world. At the same time dialogue and diplomatic exchange between China 
and India have underscored long term targets to boost trade and investment 
while minimizing potential historical threats to security. Indeed, at the bilateral 
meeting between China and India in April 2011, both agreed on a trade target 
of $ 100 billion by 2015, and, China pledged to reduce the trade imbalance 
between the two nations which has been tilted against India.  

Second, the EG have also been actively enhancing their relationships in Asia 
and beyond– with  South East Asia and the Pacific (eg. Thailand, Malaysia, 
Burma, Japan), developing (eg. Africa) and developed (eg. US, Europe) 
regions.  This unfolds the EG building on their past links with developing 
regions through bi-lateral and institutional exchange in Asia (SAARC, ASEAN 
and APEC) and in Africa (AU). This has aroused frictions as China exercises 
more power in S.E. Asia while India has greater influence in South Asia. 
Moreover, the triangular relationship-China, India and US-impinges on such 
exchange. Both China and India have been vying for the support of the US in 
their regional policies in Asia. But at the same time they do not wish US to be 
dominant in the region. The latter may see India as a balancing force in Asia 
in the context of  China’s mounting power. 

The EG relationship with developing regions outside Asia-exemplified by 
those with Africa- are of increasing importance. This has been growing since 
the early 1990’s  driven by the desire to accelerate industrialization through 
access to scarce raw materials (eg. energy) and new markets. This has been 
galvanized by a shift in the EG policies from politics and ideology, reminiscent 
of the Cold War, to economic development in the Post Cold War era. The 
scope of this ushering in economic diversification and development in Africa is 
dependent on the extent to which the relationship is a balanced one. Again, 
rivalries and competition between China and India over access to resources 
(especially energy) and markets have surfaced. African nations and 
institutions have to devise appropriate and timely policy responses to 
maximize their own goals. ‘South-South cooperation’ with the EG could 
enable Africa, and other developing regions, to break away from dependence 
on developed nations.   This is exemplified by BRICS (Brazil, Russia, India, 
China and South Africa) which could form a pressure group to emphasise 
policies which  favour developing regions. Developed regions, of course, may 
respond by re-thinking and reshaping their economic and political strategies 
with developing regions to protect and enhance their  own interests. 

Third, the EG could be pivotal in reshaping global policies through 
international institutions. They could confront the key challenge plaguing 
developing nations-inadequate voice in financial, economic, climate change 
and peace keeping. This impinges on initiating genuine ‘global governance’ 
through drastic reform of the institutions-IMF, World Bank, the WTO and UN, 
and embracing the more recent G 20 ( comprising developed and rising 
developing nations). This should encapsulate the aspirations of nation states 
and non state actors-local and community based institutions and social 
movements. These may work with, against, or beyond the state  through cross 
border cooperation.  India, supported by China and developing nations, could 
enhance its role in this process by satisfying its long cherished desire to get a 
seat on the UN Security Council. The financial crisis, certainly, has intensified 
the urgency of ensuring that policies of international institutions mirror the 
wishes of the EG.  Of course re-configuration of the global political economy 
may arouse new political, military and security anxieties between and within 
the existing (eg. US)  powers and the EG.  Institutions such as BRICS (Brazil, 
Russia, India, China and South Africa) could be supportive in reforming 
international institutions. However, this is questioned by sceptics. The 
separate and often conflicting pursuits of the individual members may reign 

It is essential to unravel the forces driving the mounting power of the EG and 
their capacity to sustain their growth momentum. This rests on structural 
transformation of their economy though based on different political economy 
‘models.’ This uncovers a shift from a ‘closed’ agricultural to an ‘open’ 
industrial and technological society using market forces to usher in domestic 
and external liberalization. This encapsulates curbs on state intervention with 
the price mechanism  guiding production, distribution and consumption.  

A grasp of the pre-liberalisation era  captures the conditions which either 
eased or thwarted subsequent measures. The Chinese pre-liberalisation era  
saw the establishment of a firm basis for executing reform-a high savings level 
with significant capital formation, investment in infrastructure, health care, 
literacy and primary health care, and the virtual elimination of landlessness. In 
contrast, the Indian pre-reform era was marked by landlessness, high levels of 
poverty and inequality, and relatively low levels of growth (4%-5%). 

The ideology of liberalization to place emphasis on the market was 
propagated by the ‘Washington Consensus.’ This was rooted in reducing the 
role of the state in the economy and emphasizing  the market to allocate 
resources set in the context of ‘opening up’ and removing  barriers to trade 
and investment. This influenced the EG. But they evolved their own versions 
under varying levels of domestic and external political pressures which 
supported or opposed liberalization. It emerged in China in 1978 (in the post 
Mao era) unleashing the use of markets in agriculture, industry and services, 
state owned sectors, and de-regulation of product prices.  

Liberalisation  surfaced much later in India- in the early 1990’s- to selectively 
use markets in the economy. The measures have been much more extensive 
in China than in India based on export led growth and foreign direct 
investment based on ‘strategic liberalisation’ which emphasized domestic 
priorities. However, in both the curbs on the state and reliance on the market 
has aroused controversy. This was due to exclusion of the poor and the 
marginalized and worsening of inter-regional inequality in spite of the 
professed benefits of the new approach.  

Liberalization in China has been applauded due to a marked withdrawal of the 
state in the economy and Maoist ‘centralised planning’ which were seen as 
shackles on development. At the same time it is alleged that political 
liberalization-exemplified by a lack of democracy and ‘human rights’-has yet to 
unfold in China. This requires balancing economic and political rights. India’s 
liberalization has been more gradual and protective set in a more ‘democratic’ 
system with diverse interests moulding policies. However, it too faces 
challenges including dissatisfaction of  groups  in particular regions and 
internal terrorism. Looking into the future it remains to be seen if  both nations 
will be able to retain their growth momentum and whether India will  be able to 
overtake China. 

In the aftermath of the ‘Great Recession’ of 2008 the debate on the role of the 
state versus the market and the extent to which an economy should be ‘open’ 
has re-surfaced in the EG and in the world economy.  There has been an 
onslaught on the limits of the market and the need to re-emphasise the state 
in structuring policies at the national and the international level and the pitfalls 
of rapidly ‘opening up’ economies. In fact state expenditure-fiscal and 
monetary-coupled with stringent regulations over financial transactions have 
been key factors in stimulating growth after the financial crisis.  This is 
illustrated by the use of ‘stimulus packages’  in the EG and developed 
countries to revive the economy, with the former  explicitly focusing on  
domestic rather than external demand. The crisis has led to fresh debates on 
the relevance of the ‘Washington Consensus’ and neo-liberal approaches and 
the scope of evolving a ‘Beijing’ or even a ‘Delhi Consensus.’ This impinges 
on a shift in the balance of power in the world. 

The future of the global political economy is intrinsically tied to the role of the 
rising powers. Hence, they are likely to occupy the centerpiece in the pursuit 
of development and security in the world. This could enable them to have a 
major influence in guiding national and global destinies. This  makes it 
essential to usher in genuine ‘global governance’ by revamping the role of the 
state and the market and  international institutions while encompassing non 
state actors -exemplified by social and community institutions and movements. 
No doubt the rise of the EG will induce opportunities and create tensions 
between themselves and with developed nations. China’s potential, in 
particular, as an economic, political and military power, is likely to be 
challenged by its neighbours and by dominant nations. The US, specially, may 
fear its diminishing role and hegemony in international affairs. This may 
frustrate the ambitions of the rising powers. In essence, the vision of  China 
and India ushering in a new world order  poses major challenges. These may 
unfold in unpredictable ways. 

* The researcher  is a Visiting Senior Research Fellow, School of lnternational 
Relations and Strategic Studies, Jadavpur University, Calcutta, India. This brief paper 
captures the themes he discussed in a seminar in the Department of Politics and 
International Studies, University of  Warwick, UK, on 10th October, 2011.  It draws on 
his ongoing research on China and India including  
seminars  at Chatham House, London (28th September and 27th July 2011) and  the 
Contemporary India  Study Centre, University of Aarhus, Denmark (20th September, 
2011), and lectures (over 2008-2011) at  the universities of Jadavpur and Calcutta  
(India), Manchester (UK), and the Nordic Africa Institute (Sweden). His research 
paper on globalization and China and India is available on His email is 

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