The emergence of potential global superpowers, rich in natural resources, has caused concern amongst many western governments and businesses. Outsourcing to developing countries such as India and China has become commonplace amongst large multinational corporations, contributing to a decline in the traditional low value added sectors across America and Europe. These emerging economies have been extremely successful in using their large labour resources to their advantage, but they also have ambitions to further develop their industries in order to move into higher value added activity.

Similar trends are beginning to emerge in South America and Russia where political constraints are slowly being removed, allowing their businesses to compete in international free markets.

Recent developments in the European Union have also created significant opportunities for Eastern European countries to sell low cost and high value added products into more established markets. Countries such as Poland have taken advantage of their industrial infrastructure, a legacy of the Second World War, to create large scale manufacturing operations capable of using Western European expertise to manufacture highly technical components. 

These issues present significant threats to UK and North East businesses, forcing them to rely on technical competencies, rather than low costs, in order to remain competitive. However these businesses are also starting to recognise the various opportunities also associated with these trends. Consumer markets in these developing nations are extensive and relatively untapped by western companies. In countries such as India and China imports are growing just as quickly (if not quicker) than exports, as increased opportunity and prosperity expands the middle class section of their societies.

The influence of these new superpowers extends beyond the world of business. They are also beginning to play a more active role on the world political scene, often using their natural resources as a bargaining tool with established economies, but also attempting to act as ambassadors to dissident countries in the East. The latter trend has been evident recently in the ongoing negotiations aimed at halting the nuclear weapon development programmes of Iran and North Korea; in both cases either Russia or China has used their political influence to finesse a solution to the problems, even if these solutions are only short term. The other side of their political activity has also been evident in the past few years. Russia has allegedly restricted gas supplies to Europe on more than one occasion and China recently publicly demonstrated their missile defence system by destroying an obsolete satellite orbiting earth.

China is also in a strong economic position when bargaining with established economies such as the USA. It is now widely accepted that the Chinese valuation of the Yuan and their government’s decision on when to buy and sell American assets, could have a very serious impact upon the fortunes of the US Dollar.

Fact File

• India and China account for over 1/3 of the world’s population; this represents a huge opportunity and increased levels of competition.
• By 2015;
- World Trade will have expanded by 40%.
- G7 countries will only account for 36% of global output in 2015, compared to 43% in 2004 and around 50% in 1980.
- China and India combined will account for over ¼ of global output
- China will be the 3rd largest economy in the world ahead of Europe
- Both India and Brazil will have doubled their GDP from the levels of 2004.
• In 2004 Chinese exports grew by 35%, but the value of their imports grew by 36%. The level of EU exports bought by China increased by 26% between 2000-2004.