The changing global economic landscape: the emergence of China, India & Central Asia

“At some point the dollar’s dominant role will be put into question… I predict in
20 or 25 years one of the world’s great capital markets will be China-based”
– Kenneth Courtis, former vice-chairman of Goldman Sachs, Asia
China’s economic and commercial emergence is viewed generally as the main force behind a predicted global economic and political shift also embracing India, the world’s second most populous country, and Central Asia. But the road ahead is fraught with problems, including areas of instability in Asia.
“As long ago as the end of the 19th century the United States was already concerned about trade relations with China,” Richard Holbrooke, a former US ambassador to the United Nations and assistant secretary of state, said
“Many of us were predicting in the 1960s and 1970s that the 21st century would be the century of China. But none of us foresaw the collapse of the Soviet Union and the emergence of fundamentalist Islam… these have fundamentally changed the landscape,” he added.
Outstanding questions include the viability of international and regional organisations to handle challenges, such as Iran’s nuclear programme, and the pace of changes. Holbrooke said some Asian institutions were 20 to 30 years behind similar Western institutions and inadequate to deal with challenges in the region.
Armen Sarkissian, director of the Eurasia Programme at the Judge Institute of Management at Cambridge University, UK, and a former Armenian prime minister, said new ideas were needed worldwide to deal with major risks, such as threats of international terrorism.
“You have to create something different that will stop this… It is a new world of quantum risks. You have to understand and then react,” he said.
On the session’s general theme, Vyacheslav Kuznetsov, director of Russia’s Institute of Social and Political Research, said already there was an impression in Russia that there had been some sort of intellectual shift from Europe towards Asia. “This is a strong phenomenon," he said.
Kenneth Courtis, former vice chairman of Goldman Sachs Asia, Japan, said: “At some point the dollar’s dominant role will be put into question… I predict in 20 or 25 years one of the world’s great capital markets will be China-based.”
Courtis said he believed the dynamics underlying China’s economic boom were powerful. “China is largely driven from the supply side… Every day it is more and more open to the world economy,” he said.
At the same time, with few exceptions, growth rates in developed economies will tend lower. But in Asia and Central Asia economies are likely to remain strong in the next 25 years. “This is where global growth is going to be. It is going to shape fundamentally how we look at things strategically,” Courtis added.
“The rush of technology is accelerating all of the trends. We are in the initial phase of a global upturn, a boom if you like, in commodities across a very broad space. This will have huge geographic, commercial, economic and cultural implications,” he added.
Panellists saw major opportunities for land-locked Central Asian countries, such as Kazakhstan, to profit from pending changes.
Holbrooke said: “Kazakhstan has an enormous opportunity to benefit from the rise of Asia… a bridge between East and West with a progressive society.”
But, in a reference to the proximity of Kazakhstan to Afghanistan, Iraq and Iran, he said: “What Russia does is very important… Asia is not stable. Some of most explosive things in the world are near where we sit.”
Askar Yelemesov, vice-minister of finance in Kazakhstan, which borders Russia and China and is in relatively close proximity to India, said: “We are one of only three countries in the former Soviet Union that avoided any ethnic unrest. The biggest challenge faced by the country is to develop its healthcare and education systems. I agree we face a great opportunity.”
Sarkissian agreed that Kazakhstan had a great opportunity to be successful but said sooner or later an end to easy oil would come. “Kazakhstan has created fallback positions…. The whole environment must be very creative and innovative. Kazakhstan has to add to the top level of industrial products. It has to create its own IBMs or Exxon-Mobils.”
One industrial company that has gone for Kazakhstan in a big way is India’s international Mittal Steel Group. It has more than 50,000 employees in the country, more than anywhere else.
“We came here in 1995. We thought that in about 10 to 15 years this country was going to be a centre of activity,” said Nawal Kishore Choudhary, Mittal Steel Temirtau’s director-general.
“When we started we were hardly producing two million tonnes (annually) and now it is 4.2 million tonnes. We supply the total Asian market from Kazakhstan. The stability of the Kazakh administration gave the stability necessary for us to grow… We want to build more and more capacity. Iran is an important market for us and relations between Kazakhstan and Iran have been stable.”
While the world looks towards China to see what might develop, the panel appeared united on that country’s upward mobility.
Sarkissian said China has “strong strategic visionary leadership and the luxury of long-term strategic planning at the helm.”
But a caveat was sounded by Holbrooke, who said while China was going to become an ever-increasing part of the world structure, the Chinese had some unsolved dilemmas, including Vietnam and backlashes to social and economic reforms which would affect equality.
“We must not forget that it will not be a smooth ride,” he said.