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The Rise of Chindia and Its Impacts on Europe’s Values and Growth

The economic crisis has created a further push for the rise of China and India as global political and economic players. The emergence of the two Asian giants and the progressive transition to a multipolar international system poses challenges and creates possibilities to the Western world in general and to Europe in particular.

In light of these developments, the Ideas Factory organised a debate with other young professionals on ‘The Rise of Chindia and its Impacts on Europe’s Values and Growth’ on Thursday 12 July 2012, from 18.00 to 20.00 at the EPC Conference Room, Résidence Palace, 4th floor, Rue de la Loi 155, 1040 Brussels.

The discussion was kicked off by Ms Gauri Khandekar, Researcher and Head of the Agora Asia-Europe Programme at the Brussels Office of the Fundación para las Relaciones Internacionales y el Diálogo Exterior (FRIDE) and by Mr Josef Janning, Director of Studies at the European Policy Centre (EPC).

Facts about the rise of Chindia:
• While India is a large market, with a big demand for luxury goods, it is, at the same time, a largely poor country.
• India is facing slowing GDP growth and high government debt and fiscal deficit. Furthermore, it is a consumption-based economy, facing important developmental challenges – need for major economic and political reforms.
• When looking at foreign policy, China and India have very different priorities. While India sees China as an important trading partner and source of financing, China does not manifest the same preoccupation with India.
• Geopolitically, China and India are not really partners, and therefore we cannot really speak of the rise of ‘Chindia’.
• The two countries see themselves as returning, and not rising, powers. Moreover, they are non-status quo powers, both wanting to challenge the current order, even if not by the use of aggressive policies.

Implications for Europe’s Values and Growth:
• There are two realities that prevail in India: the emerging market with skyscrapers and the very poor. A too simplistic perspective will keep Europe from grasping the impact this can have on its own trajectory of growth.
• In China we have seen an enormous potential unfolding, as it managed to translate its untapped and underutilised labour force into high productivity. However, there is a risk of a hard landing of the Chinese economy as some weaknesses are looming: over half of the total work force and investment concentrated in state owned factories, massive investment into infrastructure which is not being used, approaching a real estate bubble, legitimacy of the party depends on continued high growth which is unlikely.
• Asia is increasingly becoming the place where growth has shifting, but it is also a place for instability. Therefore, Europe should devise a strategy that consciously takes this into consideration.
• China and India are asking for more rights in multilateral organisations, which leads to people envisaging a shift in the balance of powers away from Western states. However, these requests may also be interpreted as leading to a more balanced global order and the West should not have anything to worry about.
• Europe should be aware of the realities these two countries are currently facing and that an interest for a multipolar order is enshrined into their vision of the world. Therefore, the paradigm should shift from creating rules in the West and exporting them to creating the rules in partnership with these countries, in order to create a fairer and more balanced global order.
• The EU should try to identify complementarities between itself and these countries and build on them (areas like climate change, global governance, security).
• The EU should adopt a strategy based on respect.

Questions to ponder:
• Can the vision that China and India have of the world be made compatible with EU’s own vision in the long term?

• How far can we get in negotiations with countries like China, where political leaders harness ambiguities in laws as a means for retaining control?

• What would be the effects of a ‘hard landing’ of the Chinese economy on the EU?


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