Affect on China & India as of now (During the Sub Prime Crisis)

China
China seems to be much more stable and least affected by the sub prime crisis, compared to other economies. There has been much lesser sell-offs in China as compared to other low-income countries around the region.
Even if China sees a slowdown in its export markets, its strong fiscal position and profuse domestic liquidity would help it overcome the situation.
China has always invested all its money in US treasury. In the short term, keeping Renminbi low by buying US Dollars is good for the economy because it helps to boost the export. However, the export earnings get converted to US dollars and spent on US Securities leading to a virtual cycle. This diminishes the purchasing power of China, leading to a lower standard of living.
After the last crisis in 1998, the Chinese government started spending massively on infrastructure which helped China become export oriented and facilitated labour intensive industries. (US is China’s major export partner)
The low purchasing power of China has resulted in a mountain of cash and bulk of this wealth is denominated in US dollar, a weakening currency. If this wealth which is dollar denominated is sold for renminbi, it would appreciate the Chinese currency and thereby make it less competitive towards export in the international market. This disables China from spending its own money.
The Chinese wealth which is accumulated in US dollars is depreciating too fast for it to be accumulated, however the Chinese government has been excessively dependent on export and to let it go is not easy for them.

At some stage the leaders would be forced to invest more domestically and have stronger domestic market, which would appreciate the renminbi and thereby improve the purchasing power of China.
If also a part of forex reserves is converted into renminbi and used on the two under funded areas: health and education, it would in the long term have immense beneficial effect on the economy. This would reduce the tendency to save and kindle consumption.
It would also help them in importing their essential needs from other countries due to the increased purchasing power.

India
Incase of sharp risk aversion in the global financial markets, India tends to be more vulnerable than other Asian economies due to the large FII influx in the country.
Just 18 percent of the $98 billion of capital invested in India over the past four years has been in the form of long-term FDI, leaving it more exposed than other emerging economies where FDI accounts for about 75 percent of the total capital invested.
Atop this, similar to other western countries, Indian banks too have been undermining the risk associated with the credit making it more susceptible to the sell-offs.
Outflow of funds from India will help in the fall of rupee which would be of some relief to the exporters who are suffering from the sharp appreciation of rupee, which has led to the steep downfall in India’s export growth, now running at its lowest levels since 2003.
It would also assuage the US-centric IT companies, who have suffered from the pangs of recent rupee surge.