India and China Economic Rise Implications on Currency Markets and World Economies

Strong economies are emerging all over the world, but both China and India are still ahead because they are taking international markets by storm. Their rapid growth has pushed them into global markets and possibilities of development in their own regions. Nevertheless, these possibilities are rapidly turning into real development in both countries. The following paragraphs focus on the implications of economic rise in India and China.

India and China have joined into the global economic growth. They both have export-oriented sectors that are connected to information technology using the Internet while also participating in globalizing process that has enabled them to get new capital markets (Castillo 1). China is an international export for electronic goods while India is an international centre for ICT services. China exports cheap goods in large amounts and that is why its economy keeps growing. Both players have challenged countries like US and Europe the control of global trade.

India has achieved a steady impressive growth because in 2010. Its economy grew at a rate of 8.9% from 5 % in 1995, and currently, its growth per capita is more than to $2,534 (Cox and Alm 3). The country has become a home to exciting services economy as its service sector also focuses on outsourced jobs. Indian’s economy is currently connected with global markets because trade continues to increase.

According to Castillo, china is the second largest economy after the US. However, it leads in economy growth in the whole world with an estimated growth rate of 10% for around 30 years and its growth per capita is above $4,766. It has also been ranked as the largest exporter and takes the second position in imports in the world China’s growth began in 1978 when it generated major and steady growth in investment and living conditions. China’s trade surplus has expanded rapidly because of its double surplus and capital projects which has contributed to its foreign exchange reserve growth.

In this light, the US and European countries have had some issues about China’s Yuan for the last two years because they claim that the undervalued Yuan has created trade deficit, especially in the US and thus, they insist that Yuan should be revalued. These countries also say that they have experienced slow economic growth and high rates of unemployment (Cox and Alm 5).

However, Chinese authorities are unwilling to revalue it and insist that they have to improve their banking systems and other commercial institutions before revaluing the Yuan. The Chinese authorities fear losing their competitiveness because they are on the lead in exports. Other unfavorable economic impacts that China is likely to face include decrease in production profitability, unemployment and reduction in agriculture sector. Despite having been pressurized to revalue its Yuan, China still believes that its currency is an internal issue, and other countries should not intervene (Cara 1).

When Chinese authorities decide to revalue Yuan, it will appreciate but will have both positive and negative effects in the world economy. First, it will decrease China’s output which will also have a negative effect on its imports because of business differences in the world. The rise in its import prices will lead to rise in import prices especially from the US, and thus domestic prices will increase. Increase in domestic prices in other countries will lead to a reduction in real wealth and wages and a small percentage of interest rate and this will cause a negative effect on many countries.

In conclusion, India and China have devised new strategies such as opening new markets for trade investment and improving the private enterprises, which in turn has led to rapid economic growth. In essence, China’s increased economic growth will continue to increase its power and influence and is likely to overthrow America power over international trade.

Works Cited

Cara, Anna. China Inflation Rate at 5.1 Percent. Associated Press, 2011. Web.

Castillo, Adam. China and India’s Economic Rice. International Relations and Security Network, 2008. Web.

Cox, Michael and Richard Alm. “China and India: Two Paths to Economic Power.” Economic Letter 3.8(2008): 1-8. Federal Reserve Bank of Dallas, Print.

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