The International Monetary Fund in Washington Thursday hosted a forum on the sustainability of the rapid economic gains being recorded by both India and China, whose economies have been big beneficiaries of globalization. VOA's Barry Wood reports.

As a result of recurrent 10 percent annual growth rates, China now has the world's fourth largest economy. And, say experts, it will shortly overtake Germany to reach the number three spot after the United States and Japan.

Jahangir Aziz, a China specialist at the IMF, offers graphic evidence of what that rapid growth actually means. "It's like adding a country the size of Portugal every year to the world economy, creating as many new jobs each year as Chile's total labor force, and eradicating poverty from Ethiopia, Nigeria, Tanzania and Zambia combined," he said.

Economic growth has lifted 300 million people out of poverty in China since 1990.

But speakers at the forum emphasized the formidable problems that could threaten China's economic miracle. Minxin Pei heads the China program at Washington's Carnegie Endowment. He says an eventual crisis in the weak banking sector is a strong possibility.

"This (current) round of over-investment in China will lead to over-capacity, and then when the business cycle experiences a downturn you're going to have a massive problem of non-performing loans. And that triggers financial panic in China that can affect all kinds of people," he said.

Pei says rescuing Chinese banks could absorb all of Beijing's $1 trillion in hard currency reserves. Longer-term, Pei is more optimistic about sustained rapid growth in India than in China.

Yale University professor T.N. Srinivasan says India also faces serious challenges, foremost among them a very large government budget deficit. "(Externally) India remains one of the most closed economies in the developing world. And even in foreign investment, we have caps and so on. The mind set of the people has not completely changed," he said.

Srinivasan says India has a long way to go just to catch up with China, which began its market-based reforms much sooner. India, he says, chose reform in 1991 because it was aware of China's success and didn't want to be left behind, and because its economic role model, the Soviet Union, fell apart. Srinivasan says longer-term India's strengths in comparison to China are a free press, an independent judiciary, and democracy.