Close Menu
TechCentralTechCentral

    Subscribe to the newsletter

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    Facebook X (Twitter) YouTube LinkedIn
    WhatsApp Facebook X (Twitter) LinkedIn YouTube
    TechCentralTechCentral
    • News

      Sita hits back at critics, promises faster, automated procurement

      20 June 2025

      The transatlantic race to create the first television

      20 June 2025

      Listed: All the MVNOs in South Africa – 2025 edition

      19 June 2025

      TCS | Tech, townships and tenacity: Spar’s plan to win with Spar2U

      19 June 2025

      WhatsApp founders hated ads – Meta is adding them anyway

      19 June 2025
    • World

      Watch | Starship rocket explodes in setback to Musk’s Mars mission

      19 June 2025

      Trump Mobile dials into politics, profit and patriarchy

      17 June 2025

      Samsung plots health data hub to link users and doctors in real time

      17 June 2025

      Beijing’s chip champions blacklisted by Taiwan

      16 June 2025

      China is behind in AI chips – but for how much longer?

      13 June 2025
    • In-depth

      Meta bets $72-billion on AI – and investors love it

      17 June 2025

      MultiChoice may unbundle SuperSport from DStv

      12 June 2025

      Grok promised bias-free chat. Then came the edits

      2 June 2025

      Digital fortress: We go inside JB5, Teraco’s giant new AI-ready data centre

      30 May 2025

      Sam Altman and Jony Ive’s big bet to out-Apple Apple

      22 May 2025
    • TCS

      TCS+ | AfriGIS’s Helen Hulett on how tech can help resolve South Africa’s water crisis

      18 June 2025

      TechCentral Nexus S0E2: South Africa’s digital battlefield

      16 June 2025

      TechCentral Nexus S0E1: Starlink, BEE and a new leader at Vodacom

      8 June 2025

      TCS+ | The future of mobile money, with MTN’s Kagiso Mothibi

      6 June 2025

      TCS+ | AI is more than hype: Workday execs unpack real human impact

      4 June 2025
    • Opinion

      South Africa pioneered drone laws a decade ago – now it must catch up

      17 June 2025

      AI and the future of ICT distribution

      16 June 2025

      Singapore soared – why can’t we? Lessons South Africa refuses to learn

      13 June 2025

      Beyond the box: why IT distribution depends on real partnerships

      2 June 2025

      South Africa’s next crisis? Being offline in an AI-driven world

      2 June 2025
    • Company Hubs
      • Africa Data Centres
      • AfriGIS
      • Altron Digital Business
      • Altron Document Solutions
      • Altron Group
      • Arctic Wolf
      • AvertITD
      • Braintree
      • CallMiner
      • CYBER1 Solutions
      • Digicloud Africa
      • Digimune
      • Domains.co.za
      • ESET
      • Euphoria Telecom
      • Incredible Business
      • iONLINE
      • Iris Network Systems
      • LSD Open
      • NEC XON
      • Network Platforms
      • Next DLP
      • Ovations
      • Paracon
      • Paratus
      • Q-KON
      • SevenC
      • SkyWire
      • Solid8 Technologies
      • Telit Cinterion
      • Tenable
      • Vertiv
      • Videri Digital
      • Wipro
      • Workday
    • Sections
      • AI and machine learning
      • Banking
      • Broadcasting and Media
      • Cloud services
      • Contact centres and CX
      • Cryptocurrencies
      • Education and skills
      • Electronics and hardware
      • Energy and sustainability
      • Enterprise software
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Lifestyle
      • Motoring
      • Public sector
      • Retail and e-commerce
      • Science
      • SMEs and start-ups
      • Social media
      • Talent and leadership
      • Telecoms
    • Events
    • Advertise
    TechCentralTechCentral
    Home » In-depth » It’s difficult to be the next China, but not impossible

    It’s difficult to be the next China, but not impossible

    By Agency Staff28 June 2020
    Twitter LinkedIn Facebook WhatsApp Email Telegram Copy Link
    News Alerts
    WhatsApp

    Is the global monetary order ready for another reboot?

    In the 1960s, Japan and Europe exported their way to post-World War 2 prosperity under the fixed exchange rates of the Bretton Woods agreement. The US went off the gold standard in 1971, but the established way of doing things didn’t collapse. Thirty years later, China essayed the role of being the world economy’s periphery and selling cheap widgets to a revamped core — the West and Japan — with the help of an undervalued exchange rate.

    This, as economists Michael P Dooley, David Folkerts-Landau and Peter M Garber noted in an influential 2003 essay, was Bretton Woods revived. The “China phase”, they said, would play out over 10 to 20 years as the world economy absorbed 200 million surplus rural Chinese workers at the rate of 10 million to 20 million a year. To that end, Beijing would acquire vast quantities of foreign-exchange reserves regardless of cost. And when China was done, India would take its place. Will it?

    Yet the domestic political discourse is harking back to a protectionist past. Prime Minister Narendra Modi wants self-reliance

    One clue may lie in official reserves. By purchasing the public debt of a profligate centre, a hardworking fringe signals its reliability; any threat to Western business investments, and the periphery’s holdings of US treasuries and other safe assets could get cancelled. (Far-fetched as it may sound, the idea did get discussed recently when President Donald Trump’s administration was contemplating punishing China for its handling of the coronavirus outbreak.)

    By the time Dooley et al got down to writing The Revived Bretton Woods System’s First Decade in 2014, China’s reserves were peaking, at about US$4-trillion, from under $300-billion at the time of their original study. Just recently, India’s foreign-exchange stockpile crossed the $500-billion mark. In 1990, the country only had enough dollars to pay foreign suppliers for half a month. Now the reserves cover two years of imports.

    Indian Prime Minister Narendra Modi

    Yet the domestic political discourse is harking back to a protectionist past. Prime Minister Narendra Modi wants self-reliance. Other officials are coaxing Indians to buy local even if means paying more. It doesn’t look like India sees itself as the world’s next factory, which requires openness. Emboldened by its recent free trade agreement with the European Union, Vietnam may be more suited to playing that role, even though the Southeast Asian nation of fewer than 100 million people lacks India’s labour power.

    Some of India’s retreat may be tactical and temporary. The US is still coping with China’s rise, and not in a mood to let another 200 million workers latch onto its customers. Industrialisation of the periphery requires a fundamental restructuring of the labour force in the core, as the authors of Bretton Woods 2.0 warned. “No country has found a workable way to compensate its own losers.”

    The Western companies that chose China as a manufacturing location became vocal supporters of its developmental strategy and shielded it from politicians and labour unions in their home countries. This global businesses elite is no longer as powerful amid a rising anti-globalisation tide almost everywhere. The threat of being branded a “currency manipulator” by the US treasury also limits the extent to which the Reserve Bank of India can intervene in the foreign-exchange market.

    Hundreds of millions of Indian workers need jobs, even if that means making things that China can supply far more competitively

    Then there’s Covid-19, and the worst global recession since the Great Depression. While a rapidly deteriorating relationship with Beijing impels Washington to draw the only other billion-plus-people country deeper into America’s embrace, massive unemployment in an election year makes it impossible to grant concessions. India understands the compulsions. When Trump recently ordered a freeze on H1-B visas used by technology workers to the end of this year, there was disappointment in the country’s outsourcing industry, but no sense of doom.

    India has its own constraints. After its Himalayan border with China witnessed the deadliest conflict between the nuclear-armed neighbours in 45 years, there’s little prospect for deeper economic engagement between the two. India’s trade with China is $50-billion in deficit, while that with the US is $22-billion in surplus. The talk of self-reliance in New Delhi may simply be code for weaning the economy off Chinese goods and capital. Hundreds of millions of pandemic-hit Indian workers need jobs, even if that means making things like solar panels that China can supply far more competitively.

    Rules of engagement

    The Western tech industry, which remains broadly excluded from China, will probably advocate for India. Even here, though, India’s powerful local business lobby will seek to define the rules of engagement. After investing billions of dollars in the country, Amazon.com still can’t maintain its own e-commerce inventory. Facebook has waited for two years for approval for its popular messaging service WhatsApp to send and receive payments.

    Eventually, investment banks will enable joint ventures and compromises. Indian tycoons’ wealth is tied to stocks traded in Mumbai. However, if they could float their businesses in New York — just as worried Chinese companies leave to seek listings closer to home — they would happily support an artificially low rupee. That would give them an export advantage while enabling them to be counted among the global rich. Bretton Woods could yet reload.  — By Andy Mukherjee, (c) 2020 Bloomberg LP



    Donald Trump Narendra Modi top
    Subscribe to TechCentral Subscribe to TechCentral
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email Copy Link
    Previous ArticleMark Zuckerberg $7-billion poorer amid Facebook ad boycott
    Next Article Firms placing post-Covid bets on tech not talent need to rethink

    Related Posts

    Trump Mobile dials into politics, profit and patriarchy

    17 June 2025

    Coal to cash: South Africa gets major boost for energy shift

    13 June 2025

    10 red flags for Apple investors

    13 June 2025
    Company News

    Making IT happen: how Trade Link gears up to enable SA retail strategies

    20 June 2025

    Why parents choose CambriLearn for online education

    19 June 2025

    Disrupt first, ask questions later – the uncomfortable truth about incident response

    18 June 2025
    Opinion

    South Africa pioneered drone laws a decade ago – now it must catch up

    17 June 2025

    AI and the future of ICT distribution

    16 June 2025

    Singapore soared – why can’t we? Lessons South Africa refuses to learn

    13 June 2025

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2025 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.