Harvard Sees Growth Shifting from China to India as “Economic Complexity” Lags

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A new study from Harvard University foresees a shift in the international economy from China to India as growth in the Middle Kingdom’s “economic complexity” lags behind that of other emerging nations.

Researchers from the Center for International Development at Harvard University (CID) have just released their new country rankings for the 2015 Economic Complexity Index (ECI), which seeks to measure of the amount of knowhow that is held in each economy based on the complexity of their export baskets.

“Economic complexity not only describes why countries are rich or poor today, but also can predict future growth, about five times more accurately than the World Economic Forum’s Global Competitiveness Index,” said Sebastion Bustos, a research fellow at CID.

The 2015 ECI ranks Japan, Germany, Switzerland, South Korea and Austria as the world’s five most complex economies, while China currently holds 23rd position after rising ten spots across a decade-long period.

The Harvard researchers point out, however, that China has recently ceded four spot on the ranking s for the first time since the global financial crisis, while rapid growth has narrowed the gap between the country’s economic complexity and income, which is a likely portent of slowing economic momentum.

As a consequence they forecast average per annum growth of 4.41% for the Chinese economy over the next decade, as compared to growth rates of 7.72% for India, 5.82% for Indonesia and 5.30% for Vietnam.

CID researchers also point out that that China’s exports posted a decline in 2015, which was the first year that world exports fell since the 2009 GFC, primarily due to a drop in the high oil prices which had driven a decade of rapid growth.

“The major oil economies are experiencing the pitfalls of their reliance on one resource,” said Ricardo Hausmann director of CID, professor at the Harvard Kennedy School (HKS) and lead researcher of The Atlas of Economic Complexity.

“India, Indonesia and Vietnam ┬áhave accumulated new capabilities that allow for more diverse and more complex production that predicts faster growth in the coming years.”

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