China is Australia’s largest trading partner, and China’s economy is slowing. At a 7% annualized growth in gross domestic product (GDP) reported for this year’s first quarter, most countries would trade with China in a heartbeat. That growth rate is down from 7.3% in 2014’s fourth quarter, but on the bright side, 7% actually beat the consensus forecast of 6.9%.

Also on the bright side, Australia is on track to complete a free trade agreement with India this year, opening up its largely untapped markets and growing middle class.

But first, China. This slowing isn’t unexpected, as the Chinese government is moving toward growth from more domestic consumption and services, and less from manufacturing and growing exports. But measures to support the property sector and a series of cuts in interest rates and bank reserve requirements seem to have delivered less support than hoped.

This slowing also reflects the Chinese government’s progress in establishing a social safety net. Health insurance, old-age benefits and free schooling, though still works in progress, have already helped check the remarkable propensity of Chinese to save. At 40% of income, the household savings rate has stopped rising in recent years. (The U.S. savings rate is 5.6%.)

Last year, services accounted for 48.2% of output; industry’s share was down to 42.6%. Services are more labor-intensive, which brings two benefits. First, China is now able to generate many more jobs at lower levels of growth. Though growth dipped to its slowest pace in more than two decades in 2014, China created 13.2 million new urban jobs, an all-time high.

Second, the strong jobs market has allowed wages to keep rising at a steady clip, which is an essential part of getting people to consume more. Reform will take more time, but it’s happening. And Australia remains well positioned to benefit from Chinese economic might.

China’s “excesses” in real estate credit and investment could continue to unwind, slowing down the rate of growth. But reforms and lower commodity prices, according to the International Monetary Fund (IMF), are “expected to expand consumer-oriented activities, partially buffering the slowdown.”

The main risk is failure to implement the reform agenda to address financial risks, rebalance the economy, and tap new sources of growth.

Of course, lower-than-expected growth in China will likely hurt the Asia-Pacific region and the world economy, given these economies’ size and their deep trade and financial ties to other nations.

India’s Ascent

According to the IMF, India’s GDP is set to grow at its fastest pace in five years, at 7.5%, while China’s slowdown will take it to 6.8%, the lowest since the post–Tiananmen Square crackdown in 1990.

India is just now beginning to realize the benefits of its demographics—lots of young people—with the prospect of significant reform to come.

The Subcontinent could well be about to enjoy the advantages that China had in the 1980s and 1990s.

Of course, India has its own challenges to get there, including establishing a much-needed system of land title.

Growth in the Middle Kingdom and on the Subcontinent will benefit from recent policy reforms, a consequent pickup in investment and lower oil prices. Lower oil prices will raise real disposable incomes, particularly among poorer households, and help drive down inflation.

China remains the biggest part of the equation. But India is on the rise: According to projections from the U.S. Department of Agriculture, India, now the eighth-largest economy in the world, will work its way up to the number-three position by 2030, with a GDP of $6.6 trillion.

A Time to Chat

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