The Complexity of Measuring National Power

Zorawar Daulet Singh is an author and foreign affairs analyst and a Fellow at the Centre for Policy Research in New Delhi. His recent books include India China Relations: The Border Issue and Beyond and Chasing the Dragon: Will India Catch up with China? Previously he was a Fellow at the Centre for Policy Alternatives in New Delhi. Zorawar holds a PhD in international relations from King’s College London, a M.A. in international relations from the School of Advanced International Studies (SAIS), Johns Hopkins University and a B.Sc. from the University of London where he majored in economics and finance.
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  • April 2012

    Arvind Subramanian’s recent book, Eclipse: Living in the Shadow of China’s Economic Dominance, has renewed interest in measuring the potential of emerging powers. Subramanian argues that projections of gross domestic product (GDP), trade and creditor status make China’s future dominance inevitable.

    The focus, however, on a narrow metric like GDP growth rate to anticipate the dominant powers of tomorrow is flawed. For one, the GDP figure tells us little about the quality of a nation’s economy or whether its wealth is being converted into competitive capabilities. For example, China’s $5 trillion GDP, second-biggest globally, hides more than it reveals. Nearly half of China’s GDP is driven by investment, mainly in real estate and infrastructure. It is unclear whether this build of fixed-asset investment is producing capabilities or knowledge that great powers typically possess. The other major driver of China’s economy is its role as a manufacturing hub. What is less known is that foreign multinational corporations (MNCs) account for 60 per cent of China’s trade and 80 per cent of the value of their exports is imported. In other words, the value addition that occurs in China itself is a tiny contribution in the overall production process. Even China’s creditor status is circumscribed by the fact that China’s reserve assets are denominated in currencies printed by its principal debtors who have, consequently, transferred the vulnerability of this imbalance onto China.

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