The giant Chinese rock tossed into the Asian production pool this decade is about to be followed by another from India. Given time it is likely to be of similarly large import. The first rock profoundly changed Australia, setting up huge economic waves that swamped some (including many manufacturers) while others surfed to prosperity (miners and tax collectors). Watch out for the second rock.
On the surface Australia now appears hooked on swapping rocks for Chinese boxes. True, but fairly glib and deceptive all the same. The content of these boxes is normally not Chinese at all and many of our rocks (particularly coal) go elsewhere in Asia.
What is different this decade is a revamp of Asian production, with bits and pieces made everywhere being finished off in the Middle Kingdom. China is still largely an assembler, not a manufacturer. Those who do these sums reckon only about 25 cents in every dollar in the boxes is in fact Chinese. The majority comes from elsewhere, especially Japan, Taiwan and Korea
Having been inside India with a manufacturing executive, I suggest everyone take a deep breath before deciding that India will rock the manufacturing world. It’s growing, and will have some impact. The author points to the Golden Quadrilateral roads, and road construction is underway on secondary routes as well. Big improvements are coming. But: India has not taken adequate steps to provide electrical power for all this industrialization. The parliamentary system is in chronic gridlock. Decisions about power plants should have been made a decade or more ago, and now the situation is approaching critical. The Marxists, whose coalition with Congress runs the central government, are actively trying to derail the India-US nuclear agreements because they don’t like the US, ignoring the fact that India desperately needs power, and clean power at that. Air quality is already horrible. China has fueled much of its growth without regard to air quality as people in its big industrial cities can testify. In a moderate-sized city in Maharashtra state, the Indian economic powerhouse, I suffered power outages lasting four hours daily on an unpredictable schedule. In outlying areas it’s much worse. Some agricultural areas get power only 2-3 hours per day. You can’t run a manufacturing business without power. The big corporations run generators on diesel fuel, but small suppliers can’t afford that. An economy that does not empower, literally, small entrepreneurs is not going to be the economic miracle everyone talks about.
Plus, wage rates are rising rapidly and soon India won’t be such a low-cost country for educated workers.
Is this any different than what Tom Friedman said in his best-selling book a few years ago?