The center of economic power has now shifted from the West to the East, said academics speaking at a seminar held at the Kuwait Chamber of Commerce and Industry yesterday. Eisuke Sakakibara, Professor of Aoyama Gakuin University, said world economy has undergone a major structural change and is now currently in the transition period. “From the United States, Japan and Europe, right now the centers of growth are in China and India. We are in a transitional period. China is number two economically after it overtook Japan in 2010. India’s growth rate will be maintained. Although the Chinese economy is predicted to slowdown in the coming years, the truth is that China is going to surpass the US economy between 2020-2025,” he stated.
Sakakibara said the influence of China will expand to the rest of Asia, the Arab world and some African countries, while developed countries like the US, Japan and Europe will continue to gradually decline.
“Economic structure is changing, that is the fact. China and India have performed fairly well. China and India combined represent 45 percent of the entire production in the world. It is anticipated that the Chinese Gross Domestic Product (GDP)will surpass the United States between 2020-2025,” he predicted.
By 2027, China will be number one in terms of aggregate GDP and if the current pace is maintained China will become number one in terms of the aggregate amount of GDP earlier than predicted Sakakibara said.
According to Sakakibara, India has a relatively low GDP but the growth rate of its population is the highest in the world and it is a force to be reckoned with.
“The Chinese population will eventually decline. China now has a population of 1.3 billion. India has 1.2 billion. By 2050, the Chinese population will decline to below 1.3 billion. In contrast, India’s population by 2050, is expected to reach 1.7 billion. That is more than 400 million more than China’s population. Within 10 to 15 years, the Indian population will surpass China, so between 2020-2025 the population in India will exceed China. Therefore the GDP growth of India will surpass China,” he explained.
Sakakibara, Vice Minister of Finance for International Affairs in 1997, said right now the Chinese growth rate is at 8 to 9 percent while India is 8 to 10 percent.
“Chinese growth rate is anticipated to come down by 2050. In contrast, India will maintain the growth rate of seven to eight percent until 2050,” he added.
Having been in the transition period, Sakakibara warned anything could happen just like the depression that took place in 1929-30.
“We have to be very careful. Lots of things happened within the transition period. Think of the depression in 1929-30. It happened between the first World War and the second World War. The center of world economy shifted from Europe to the United States. In the 1920′s, the US economy was high powered, but it bubbled up and caused the depression,” he added.
“I am not predicting a depression to come, but the situation is similar,” he suggested.
“Now the Chinese economy is in the assessment period. Compared to the previous forecast we are saying that the growth rate of the world economy will fall quite significantly, as low as 0.7 percent. The forecast for the Chinese economy for 2012 is 8.2 percent. The forecast for the Indian economy is 7.2 percent. They have to maintain that. If we are not careful we are probably going into simultaneous recession of the world economy. We need to manage the situation very well and we have to accept that economic structure has already changed,” he advised.
In fact, according to Sakakibara, many companies in Japan are now maintaining businesses with China. “So globalization is the key. They been doing that and they are quite successful. The production side has been shifted out of the country. Globalization has been one of the reasons for the Chinese economic growth,” he added.
“If you check the Japanese economy from 1955-1974, the economy has performed pretty well. We had about a 9.1 percent growth rate during that period. From 1974 to the end of the 1980′s growth has declined, but we maintained the average growth of 4.2 percent. From the 1990′s to the present, the average growth rate has fallen to one percent,” he said.
Sakakibara mentioned several advantages Japan has compared to the rest of the world in the environment, safety and health.
“We have 65 percent of our land covered with forest. We have lots of water, we are surrounded by sea. We have a variety of fish. The country is one of the safest countries in the world. Safety is connected to the history and prosperity of Japan,” he said.
Sakakibara also spoke about the history of Eurozone and shared some insights about the recent development in Eurozone. He said the European financial crisis is continuing and gradually spreading.
“The future of Eurozone has become increasingly fragile. I believe they have two logical ways out, although they are buying time, but I think it will only have two solution: 1. to unite as one country (although Germany will not allow it) or 2. disintegrate.”
Source: Kuwait Times