EconVue Spotlight | Is Winter Coming to the India-China Relationship?

There has been much discussion about China’s GDP surpassing the US. Less attention has been paid to forecasts that India will become not only the most populous nation in the world by 2025, but that by 2050 the size of the Indian economy will also surpass the United States.

Indian Prime Minister Narendra Modi has enacted a slew of economic reforms since he came to power in 2014. Inflation seemingly under control, last week India's central bank cut interest rates by 25 bps. Manufacturing has slowed, likely a result of dislocations caused by the GST and currency reform.  Is India about to enter a sustained period of slower growth? Is Modi's government pursuing a two-track policy with China, with trade on the front burner and border disputes simmering on the back burner? What could go wrong, and what could go right with Modi's innovative economic reforms?

We've asked EconVue contributor Deepak Lalwani in London to share his views. Register to ask questions and comment on his panel. Links to his research can be found below.

Trade between China and India has increased significantly (nearly 500% over the last ten years) but in 1962 the two countries were at war. Tensions are again escalating and for the same reasons--territorial disputes in the Himalayas. China’s Ministry of Foreign Affairs released a paper and held a press conference last week, outlining their claims that India has violated its territory. Chinese media attention has reached a fever pitch.

In contrast to the North Korea impasse, both sides have differing views on the status quo, increasing the chances that escalation will continue. Politics is not the only area of disagreement; India’s trade deficit with China has increased and India has launched investigations into a bevy of Chinese products. This is a space worth watching. Ironically, the coming of winter could be a good thing. It will make border conflict in an extremely remote corner of the world nearly impossible to conduct. 

STORIES IN OUR SPOTLIGHT

India-China

A Forgotten War in the Himalayas
Jeff M. Smith 9/14/2012 YaleGlobal Online

Historical perspective: The US aided India in its 1962 war with China, taking firm stance on disputed border

India says talks on with China on Doklam standoff
Elizabeth Roche 8/5/2017 Livemint

How Long Can China and India Avoid War in the Himalayas?
Sameer Lalwani, Yun Sun, Liv Dowling 8/2/2017 Foreign Policy

India-China standoff: As war of words heightens, a look at trade between two countries in 10 charts
Kishor Kadam 8/5/2017 First Post

Is A China-Centric World Inevitable?
Saran 7/20/2017 India international Centre

China, and Chinese history, from an Indian perspective. 

Fosun's India plans catch wrong kind of attention
Joyce Ho and Yasufumi Tsuge 8/2/2017 Nikkei Asian Review

India 

India lowers interest rate after economic slowdown
Amy Kazmin 8/2/2017 FT

India coal growth has slowed significantly since 2015
Ashish Fernandes 8/2/2017 EnergyDesk Greenpeace

Is Abenomics too late to the Modinomics party?
William Pesek 8/4/2017 Livemint

Desi GPS NavIC Comes Closer To Becoming Operational, ISRO And CSIR-NPL To Sign MoU
Vishwa Mohan 8/4/2017 India Times

China

China's macroeconomic balancing act
Yiping Huang, Yan Shen and Quizi Fu 7/23/2017 East Asia Forum

China remains the only major emerging market economy that has not experienced a serious financial crisis.

Winter is Coming for Chinese Mega Deals, But Chinese FDI Isn’t Going Away
Joy Dantong Ma 7/21/2017 Macro Polo

A Brief Glimpse Into the Lives of Chinese Bitcoin Miners
Jamie Redman 7/17/2017 Bitcoin.com

U.S.

What Recovery? The Case for Continued Expansionary Policy at the Fed
J.W. Mason 7/25/2017 Roosevelt Institute

Linking demand & productivity.

Chart of the day: US oil production is rising and could hit a new all-time record high by early next year
Mark J. Perry 7/20/2017 AEI

What 'Flash Boys' Brad Katsuyama thinks is killing Wall Street trade
MarketWatch 7/24/2017 Video

Do you know how Michigan regulates jobs?
Mackinac Center for Public Policy 2017

A house painter and a pilot require the same number of hours  of training in Michigan. Ancient regulations are a drag on labor & occupational mobility across US.

World

A round-up of money trends in the main nations
Tim Congdon July 2017 Institute of International Monetary Research Video

UK-based Inst. of Int'l Monetary Research says despite BIS, China's debt not a problem.

Money Supply Growth Falls Again, Dropping To 105-Month Low
Ryan McMaken 7/21/2017 SeekingAlpha

Putin passes law that will ban VPNs in Russia
Catherine Shu 7/31/2017 TechCrunch

VPN's are being banned in Russia too, not just in China. Remember when we thought that the Internet would end censorship and overcome control of information flows?

11 facts about world population you might not know
Alex Gray 7/4/2017  World Economic Forum

Global population growth is wildly uneven. Africa has the healthiest demographic profile for economic growth.

TEPCO chair: Treated water must be released into sea
Asahi Shimbun 7/14/2017 

I'm sticking with Atlantic salmon. Radioactive Fukushima plant water "must be released into sea."

Manufacturing & Supply Chains

Subsiding Headwinds from the Strong Dollar: Evidence from Producer Prices along the Supply Chain
George A. Kahn and Nicholas Sly 7/13/2017 Fed Reserve Bank of Kansas City

A weaker dollar is easing inflation headwinds along the supply chain.

Measuring and analyzing the impact of GVCs on economic development
Brookings 7/10/2017 

The impact of Global Value Chains on economic development- especially China.

Manufacturing innovation key to EM break out growth
Louis Kuijs 7/21/2017 FT

FinTech

Bitcoin: Fake Asset or Security?
R. Christopher Whalen 7/26/2017 Institutional Risk Analyst

Initial Coin Offerings: A new capital market takes wing, but not without controversy
John Kingston, Eric Turner, Thomas Zakrzewski and James Rilett 7/17/2017 S&P Global 

Cybersecurity’s Next Frontier: 80+ Companies Using Artificial Intelligence To Secure The Future In One Infographic
CBInsights Research Briefs 6/9/2017

Cybersecurity is the next utility. 

ECONVUE RESEARCH 

Recent Happenings in India
Deepak Lalwani

Solar tariffs tumbled to a new low in May when SBK Cleantech bid Rs. 2.4 per unit for building a solar park in Rajasthan. Solar power companies bid for the right to build projects on a land set aside by the government for solar projects. The companies awarded the projects are leased land at a nominal price – in return for the company selling power at the lowest price per kilowatt hour. Despite tariffs going lower overseas investors searching for higher yields are keen on such dollar bond issues. PM Modi’s commitment to dramatically raise renewable energy output gives important comfort to investors.

July 7 India Report
Deepak Lalwani (Subscription content)

India has long maintained a non-aligned status and for several decades, under Arab pressure, kept its distance. However, India now sees a mutually beneficially relationship with Israel across several fronts.

Data Round-Up: Vehicle Sales Continue to Underwhelm
Michael Lewis (Subscription content)

FMI’s review of July Vehicle Sales. One driver of the recent retrenchment appears to be reduced fleet sales to car rental agencies. GM et al call this a strategic decision to focus on higher-margin products but, mathematically, the demand for new fleet vehicles is down as well

FOMC: Shrinkage Should Start in September
Michael Lewis (Subscription content)

FMI's commentary on today’s FOMC post-meeting. No surprises. As universally expected, the FOMC left the funds target rate unchanged today after raising rates in March and June.

IMF: The Global Economic Recovery is on Solid Ground
Karim Pakravan

The IMF’s message in its latest global economic forecasts (World Economic Outlook, 7/24/2017) is broadly unchanged from its April version. The global economic recovery is gaining momentum and broadening in 2017, after a two-year slowdown. Global output is expected to grow by respectively 3.5% and 3.6% this year and next.  

FinTech Investment Soars
Collin Canright

Financial technology startups are on pace to see funding  reach a record as insurance, wealth management, lending and blockchain-related companies attract new dollars,” reports Bloomberg. Technology research firm CBInsights, New York, shows in its Q2 2017 Global FinTech report that FinTech firms have raised some $8 billion in the first half of this year in 496 deals globally.