China’s rise as a global economic powerhouse was fueled by foreign investment, technological know-how, and cheap labor. This led to the relocation of manufacturing bases from countries like the United States to China, resulting in the loss of millions of manufacturing jobs. The country experienced rapid development, lifting hundreds of millions of people out of poverty and creating a new wealthy class.
However, this era of China’s economic growth is coming to an end. Observers like Gordon Chang have long predicted this decline. The COVID-19 pandemic and the Chinese Communist Party’s mishandling of it have only accelerated this downfall. Years of economic distortions, reliance on foreign capital and technology, and internal corruption have caught up with China.
The trust in China as a trading partner has eroded, and countries are looking to de-risk from their dependence on China. Big companies like Apple are leaving China, signaling a shift in global capital flows. China’s real estate crisis and an aging population with declining numbers are further contributing to its economic woes.
As a result, countries like India and Vietnam are emerging as beneficiaries of China’s economic meltdown. India, in particular, is well-positioned to become the next big development story. With its growing population, educated workforce, Western-facing culture, and established sectors like technology and automobile, India offers a more favorable business climate than China.
Global capital is already flowing into India’s computer and automobile industries. While India’s economy is not yet comparable to China’s, its growth potential is promising. A survey of American executives revealed that 61 percent would move their production to India if the infrastructure was in place. Although India faces challenges with its infrastructure, rising incomes and a more open market make it an attractive destination for businesses.
India has been implementing structural reforms and digital transformation to improve its economic and investment climate. Its online economy has seen significant growth due to low data tariffs and widespread adoption of Unified Payment Interface (UPI). These factors, coupled with the country’s commitment to business-friendly policies, position India as a long-term competitor to China.
While the Chinese Communist Party warns against de-risking and de-sinicization, it fails to acknowledge its own policy failures. China’s middle class is shrinking, its population is declining, and its economy is faltering. These issues are a result of the CCP’s mismanagement rather than efforts to de-risk from China.
In conclusion, China’s economic decline presents an opportunity for countries like India to attract jobs and investments. India’s favorable business climate, growing domestic demand, and ongoing reforms make it an appealing alternative to China. As global capital flows out of China, India stands to benefit and become the next big development story.
