The impact of the emergence of China and India on the world economy Essay

The impact of the emergence of China and India on the world economy - Essay Example The concept of "emerging markets" was suggested by the International Finance Corporation to describe the developing economies with the extraordinary potential for rapid growth. According to statistics, majority of the emerging markets have transformed and improved their economic performance over the last two years. Moreover, the total output of the emerging markets (led by China) represents more than half of the global gross domestic product (Siddiqi 2006, p. 48). In 2005, the emerging markets combined GDP by $1.6 trillion outpacing the $1.4 trillion of advanced economies! China and India account for 20 percent of the total increase and have the share of 42% in total merchandise exports. United States, Eurozone and Japan are exporting more than 50 percent of total exports to developing countries. There are three factors which prompted the emerging markets on the higher growth: export-led growth fuelled by increasing American import demand, increased commodity prices and low interest rates (Siddiqi 2006, p. 49). ... India and China have contributed 30 percent of the global growth between 2000-2005 and their share in the world trade has increased from 7 percent to 15 percent. They have doubled their contribution to world economy in only five years. International corporations are increasing their operations in China and India. Moreover, India and China are also increasing their activity on the international business arena. For example, India's Vedanta Resources invested in Zambia's Konkola Copper Mines and China National Petroleum Corporation has actively invested in African oil-production countries (Siddiqi 2006, p. 51). The stable commodity markets, reflecting the demand for energy and natural resources, have enabled China to overtake Japan as the second largest oil importer after United States. BRIC countries account for 20 percent of world oil demand, while Indian intellectual property second has ensured that its government takes the lead in the negotiations within World Trade Organization. India's annual growth rate is at least 6 percent and even before 1991 when India's finance minister began to dismantle the post-colonial license Raj of state regulation of the economy, the national growth was above 3.5 percent a year (Luce 2006, p. 23). Despite of the rapid growth, more than one-third of global poor population lives in India. Even with a such a high number of poor people, India might capture the large share of the global software, manufacturing, pharmaceutical, and automobile components markets. India's growth derives from the service sector: information technology, back office processing, outsourcing, finances, medical services, media services and consumer industry. China's growth, on the contrary is based on manufacturing