China May Need a Bigger Bazooka: Lessons in Overconfidence for India

China May Need a Bigger Bazooka: Lessons in Overconfidence for India

China May Need a Bigger Bazooka This stock-market rout isn’t fixable by quick stimulus. Beijing’s experience holds lessons in overconfidence for India.

Simon Schama: Let us be, to grieve, rage, weep

Dara Horn pointed out in the title of her unsparing book of essays, People Love Dead Jews; living ones, especially should we have the temerity to defend ourselves, not so much.

In recent times, China's stock market has been experiencing a major downturn, leaving many investors and analysts concerned about the country's economic stability. As the Chinese government scrambles to find solutions to stabilize the market, experts are suggesting that a quick stimulus may not be enough to address the underlying issues. This situation is a clear reminder that overconfidence can have severe consequences, not only for China but for other countries as well, including India.

China's stock market rout has raised questions about the effectiveness of quick stimulus measures. While injecting liquidity into the market may provide temporary relief, it does not address the root causes of the problem. This is a lesson that India should take to heart, as it too faces challenges in its own economy. Instead of relying solely on short-term fixes, both countries should focus on implementing long-term strategies to promote sustainable growth.

One of the key insights from China's experience is the danger of overconfidence. China, with its rapid economic growth and impressive technological advancements, became complacent and believed that it was invincible. However, the stock market crash exposed the fragility of the Chinese economy and shattered this overconfidence. India, with its own aspirations of becoming a global economic powerhouse, should be cautious not to fall into the same trap. It is crucial to maintain a realistic outlook and constantly reassess economic policies to avoid potential pitfalls.

Furthermore, the issue of defending oneself and the perception of weakness is also relevant in this context. Dara Horn's book, "People Love Dead Jews; living ones, especially should we have the temerity to defend ourselves, not so much," highlights the unfortunate reality that sometimes, defending oneself can be seen as a weakness rather than a strength. This is a lesson that both China and India can learn from. As they navigate the challenges of their respective economies, they must not shy away from taking necessary measures to protect their interests. It is essential to strike a balance between assertiveness and diplomacy to ensure long-term success.

In light of these lessons, there are three actionable pieces of advice that both China and India can consider:

• 1. Diversify the economy: Both countries should focus on diversifying their economies to reduce reliance on specific sectors or industries. This will help to mitigate risks and create a more resilient economic foundation.

• 2. Strengthen regulatory frameworks: Robust regulatory frameworks are essential to ensure transparency, accountability, and stability in the financial markets. Both China and India should prioritize strengthening their regulatory systems to prevent fraud and manipulation.

• 3. Invest in education and innovation: A strong emphasis on education and innovation is crucial for long-term economic growth. Both countries should invest in research and development, as well as in building a skilled workforce to drive technological advancements and enhance productivity.

In conclusion, the recent stock market rout in China serves as a stark reminder of the dangers of overconfidence and the need for long-term strategies in economic management. India, as it aims to achieve its own economic goals, should learn from China's experience and avoid complacency. By diversifying their economies, strengthening regulatory frameworks, and investing in education and innovation, both China and India can better position themselves for sustainable growth and resilience in the face of future challenges. It is crucial to approach economic development with caution, awareness, and adaptability to foster long-term prosperity.