Three Globalization Shocks Could Hurt China and Help India
The 2008 global financial crisis, the COVID-19 pandemic, and Russia’s invasion of Ukraine have dimmed China's economic prospects while brightening India's. But, to minimize their risks and maximize their opportunities, both countries will need to reassess their current domestic policies and governance.
PROVIDENCE – Over the past decade and a half, financial, health, and geopolitical shocks have pummeled world trade. The 2008 global financial crisis devastated the banks that financed much of the world’s commerce, and then triggered a secular decline in economic growth. In 2020, the COVID-19 pandemic closed factories and upended global supply chains. And now Russia’s invasion of Ukraine has disrupted food and energy supplies, threatening to divide the world along geopolitical lines.
Some argue that these three shocks might even lead to the death of globalization. But the reality is likely to be more complex: The disruptions will probably transform the global trading system rather than shrink it, with the impact varying across countries. Significantly, China will probably lose, while India might even gain.
Starting in the early 1990s, developing countries advanced as a group for almost two decades, rapidly catching up to rich countries’ standards of living. This convergence was facilitated by hyper-globalization, whereby trade liberalization and large declines in transport and communication costs swiftly increased opportunities for the developing world. China and India benefited enormously, leading to the largest reductions in poverty the world has ever seen.