China and India are two of the fastest growing economies in the world. As far as the former is concerned, manufacturing supremacy aided by low cost capital and subsidized exports have been some of the prime reasons for the growth. However, China is witnessing certain changes that could impact its status as an export hub. Consider this. The Chinese Yuan has gained 33.3% against the US dollar in last 10 years as can be seen in today's chart. What this implies is that the exports from China will not be as cheap as they used to be. Especially in light of the fact that over the same period, other economies like South Africa, Indonesia and India have seen depreciation in their currencies.
And this is just one of the many reasons why China may get hit as far as exports supremacy is concerned. Unlike in the past, the labour cost in China has gone up. Meanwhile, the labour supply has become tight. Further, with China getting serious about clamping shadow banking, its manufacturing sector that is a major driver for exports is unlikely to get the support as in the past. A withdrawal of export subsidies by China in various sectors is a further dampener for China's exports. However, what is going to be China's loss could be a huge gain for India. Around 23.5% depreciation in rupee against dollar in last 10 years makes Indian exports quite competitive. What could aid India further are the favorable demographics, cheaper wages, access to raw materials and spare manufacturing capacities. As such, India seems to have the right mix of elements to dominate the exports market. All it needs to march ahead are the right policies and an uptick in global demand.