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Omair Anas, Ankara Yildirim Beyazit University

Omair Anas, Ankara Yildirim Beyazit University

Scroll.in2 days ago

Turkiye's support for Pakistan signals a bigger neighbourhood problem for India
Isolated from their powerful Western allies, Islamabad and Istanbul and need each other. But other South Asian countries are also being drawn into this arc.
Omair Anas, Ankara Yildirim Beyazit University
· 44 minutes ago

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Ajit Ranade: The success of ‘Made in China 2025' alarmed the West
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An after-effect of the global financial crisis of 2008 was that by the following year, China's exports dropped by 16%. This led to widespread factory closures and mass layoffs in provinces like Guangdong. China's prosperity had been built on the large-scale export of low-cost, labour-intensive manufactured goods for three decades. The crisis exposed the vulnerability of that strategy and overdependence on Western markets. Also, China was stuck in low-end assembly roles in global supply chains, with low value addition. Undoubtedly, its economic reforms from 1978 onwards made it possible for 300 million workers to move from rural and agricultural livelihoods to higher paying industrial and urban jobs. But 2008 was a rude reminder of several weaknesses. Real wages had not grown much. As a result, consumption spending was stuck at just 35% of GDP even as late as 2009. Domestic demand could not pick up the slack caused by falling external demand. Also Read: Kaushik Basu: Redefine prosperity; GDP tunnel-vision could prove costly In 2009, Chinese policymakers responded with a 4 trillion renminbi stimulus, with big spending on infrastructure. This restored growth to 10% next year, but also led to industrial overcapacity in sectors like steel and cement, and reinforced the dominance of state-led investment. Consumption was not picking up even as deflationary pressures were building, while state-owned enterprises were struggling, plagued by overcapacity. This in turn caused a debt explosion. China's debt has grown from 150% of GDP in 2008 to about 280% now. A real estate over-build-up made a crisis in this sector imminent, as was later demonstrated by the fall of Evergrande. This was the backdrop to Beijing's launch of 'Made in China 2025' (MIC25) ten years ago. 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This industrial policy was focused on picking champions, channelling vast state subsidies, and guiding credit and support to chosen sectors from preferential government procurement. The West was unhappy, viewing MIC25 as mercantilist and violative of WTO norms as well as non-market driven. There were concerns about forced technology transfer and cyber theft. Unsurprisingly, when US President Donald Trump assumed office for his first term, he slapped punitive duties, put in export controls and investment screening. The EU followed suit in trying to decouple from China. Also Read: The time is right for a reset of India's trade ties with China Fast forward to 2025. There are now several independent assessments of MIC25. Of these, two major studies were commissioned by the American Chamber and European Chamber of Commerce. What emerges is that MIC25 has been a success and has led to a spree of backlash actions, such as this year's Trump tariffs. 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Uncertainty is the defining theme of the global economic environment, according to the World Economic Forum's (WEF) latest Chief Economists Outlook, which said 82 per cent consider it very high now, while 56 per cent anticipate easing over the next year. Ninety-seven per cent placed trade policy among the areas of highest uncertainty, followed by monetary policy (49 per cent) and fiscal policy (35 per cent). Uncertainty defines the global economic environment, the WEF's latest Chief Economists Outlook noted; 82 per cent see it as very high now. The growth outlook is divided, with weak prospects in North America, APAC resilience and cautious optimism in Europe. The most optimism about a strong economic expansion in South Asia, with India set to be the primary engine of growth this year and the next. Eighty-seven per cent anticipated that businesses will respond to uncertainty by delaying strategic decisions, increasing recession risks. The growth outlook is divided, with weak prospects in North America, resilience in the Asia-Pacific and cautious optimism in Europe. In Europe, while growth remains subdued, respondents pointed to emerging signs of improvement, driven by expansionary fiscal policy and continued monetary easing. The respondents were largely aligned in their assessment that higher tariffs and persistent trade tensions would fuel inflation and suppress trade volumes, and persistent uncertainty would inflict significant economic damage on the global economy, including through paralysed decision-making and heightened risks of policy mis-coordination, the report's executive summary said. Artificial intelligence (AI) is expected to drive growth, but 47 per cent anticipate related net job losses. The economists were the most optimistic about a strong economic expansion in South Asia, with India set to be the primary engine of growth this year and the next. They, however, warned of the overall global growth coming under strain from trade policy shocks and AI disruption. Respondents were clear that overall growth prospects were weakening, with the shift in trajectory being most pronounced in the United States, where the majority of respondents expected weak or very weak growth for the remainder of 2025, alongside rising inflation and a weakening dollar. China is also pursuing fiscal expansion in an effort to bolster growth, but the chief economists were divided on whether it would reach its target of 5-per cent gross domestic product (GDP) growth this year, given a range of both external and domestic economic challenges. A majority of surveyed economists saw the current US economic policy as having a lasting global impact, with 87 per cent expecting it to delay strategic business decisions and heighten recession risks. Although the rerouting of Chinese exports is casting a shadow over the South Asian region's economic prospects, a recently concluded trade deal between India and the United Kingdom was another source of optimism, the report said. Globally, public debt concerns were seen mounting as defence spending rises, with 86 per cent of chief economists expecting increased government borrowing. Seventy-nine per cent of respondents viewed the current geo-economic developments as signs of a significant structural shift for the global economy rather than a temporary disruption. Other key risks included rising concentration of market power (47 per cent) and disruption of existing business models (44 per cent). Fibre2Fashion News Desk (DS)

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