China has a complex network of trade partnerships with over 200 countries, regions, and territories, and it has a trade surplus with the majority of them, including the US and India, while having deficits with major Asian economies like Taiwan, Japan, and South Korea. These trade relationships are influenced by historical, geopolitical, and strategic factors.
India's adversarial relationship with China and its moves to block imports and investment from China could complicate its involvement in BRICS, as China seeks to expand the group and use it as a platform to challenge Western dominance.
India is positioning itself as an alternative to China in the global supply chain, aiming to become a major manufacturing hub and increase its role in the production of goods, as the world seeks solutions to supply chain disruptions caused by health crises and geopolitical events.
Indian Prime Minister Narendra Modi's exchange with Chinese President Xi Jinping at the BRICS summit in South Africa suggests a potential thawing of the financial relationship between the two countries, with India showing interest in a larger Chinese presence in its businesses and a softening of its screening policy for investments.
President Biden aims to offer alternative funding options to fast-growing economies in Africa, Latin America, and Asia at the G20 meeting in India, in an attempt to counter China's Belt and Road project, which has left many countries in debt.
India, along with the US and Europe, successfully countered China's global influence at the recent G20 summit, bolstering India's rising power and giving a boost to the US-led world order.
China's economy has entered deflation territory and the debt crisis has worsened, while India's economy is thriving with GDP growth expected to exceed 7% and unemployment rates at a 12-year low; it is predicted that India will surpass China in per capita income by 2044 due to factors such as female education expansion, labor force growth, and higher total factor productivity growth.
With the right reforms, India has the potential to become the next engine of global growth, benefiting from major economic re-alignments caused by China's slowdown and the US diversifying its supply chains. Major corporations are already investing in India, recognizing its potential. However, India needs to overcome challenges such as high tariffs, infrastructure improvements, and regional cooperation to fully realize its manufacturing potential and attract foreign investment.
China's top leadership is pressuring provincial authorities and state-owned enterprises to repay debt owed to private companies in an effort to address the issue of triangular debt, which is hampering economic growth; the campaign aims to ensure that state-owned enterprises take the lead in repaying debts.
India's inclusion in JPMorgan's emerging market debt index is expected to lead to billions of dollars of inflows into the country's economy, helping it finance its deficits and raise its standing in international financial markets.
China is willing to strengthen bilateral relations with India and implement the consensus reached by Narendra Modi and Xi Jinping, according to the Consul General of China in Kolkata, Zha Liyou, amid controversy over China's refusal to grant visas to three players from Arunachal Pradesh for the Asian Games.
China's local governments are accumulating more debt by spending billions to recapitalize struggling small banks, as these banks face default risks and poor governance, posing instability to the state-owned financial system and potentially impacting the credit supply for the real economy; however, there are concerns that local governments may not be able to support these smaller banks if they are already heavily indebted or if the banks' performance does not improve.
China's debt trap is beginning to backfire as countries struggle to repay their loans, forcing Beijing to prop up its debtors and issue emergency loans totaling over $230 billion; the country's own internal debts and lack of transparency in its Belt and Road investment initiative are contributing to the problem.
India's inclusion in JPMorgan's emerging market bond index signals major changes in the global capital markets, boosting capital inflows by $20-25 billion and improving liquidity for Indian assets and the rupee, ultimately attracting more investment. India's rise in the global economy will have significant consequences, positioning it as a nonaligned player and surpassing China in certain measures, while ongoing disputes with Pakistan and China continue to shape its geopolitical landscape.
India's economy needs to grow at a rate of 8% per year and focus on investment in traditional sectors in order to surpass China as the largest contributor to the global economy, according to Barclays.
Sri Lanka has reached a deal with China to restructure $4.2bn of debt, a key milestone in its efforts to recover from its worst financial crisis in decades and unlock the next tranche of a bailout.
India's recent economic gains are unlikely to surpass China as the world economy's main growth engine, according to HSBC Holdings Plc, as India currently has too few economic drivers and China's importance cannot be easily replaced; however, HSBC does expect India to make significant contributions to global demand for commodities, consumption, and capital goods.
China has instructed state-owned banks to restructure local government debt by offering longer-term loans at lower interest rates, as the country aims to reduce debt risks amid economic challenges caused by the property crisis and the COVID-19 pandemic.
China is using loans from its Belt and Road Initiative to promote the yuan internationally, increasing its share of global payments, although it still has a long way to go to challenge the dominance of the US dollar.
India has surpassed China as the world's most populous nation and the fastest-growing large economy, attracting global investors who are shifting their focus from China to India due to higher expected returns, driven by India's consumer boom and young workforce.
India is formulating a strategy to reduce its dependence on China for supply chains, with the Niti Aayog focusing on reducing the trade deficit and safeguarding against geopolitical risks, as countries worldwide explore alternatives to minimize vulnerabilities caused by the Covid-19 pandemic.
