China's economy was almost entirely state-owned and state-controlled whereas India’s economy was state-controlled and directed but mostly privately owned except in industry, finance, transport and communication
China was a single-party controlled state whereas India is formally a federal state with a constitutionally set assignment of powers and responsibilities between the Central and state governments.
Compared to India, China has a much well developed infrastructure
Aspects like manpower and labor development, water management, health care facilities and services, communication, civic amenities are well developed in China which has put a positive impact in its economy to make it one of the best in the world.
India is still plagued by problems such as poverty, unemployment, lack of civic amenities and so on. In fact unlike India, China is still investing in huge amounts towards manpower development and strengthening of infrastructure.
Chinese capital market lags behind the Indian capital market in terms of predictability and transparency.
Shanghai Stock Exchange is larger than the BSE
SSE has US$1.7 trillion with 849 listed companies and the BSE has US$1 trillion with 4,833 listed companies.
But BSE is run on the principles of international guidelines and is more stable due to the quality of the listed companies.
Chinese government is the major stake holder of most of its State-owned organizations hence the listed firms have to run according to the rules and regulations laid down by the government. Hence India is ahead of China in matters of financial transparency.
management reform training in China began 30 years ago and sadly the subject has still not picked up as a matter of interest by the citizens of the country.
most of the countries came to China and manufactured their goods. It was not Chinas exports that drove the economy instead it was the export products of outsiders.
Indian companies are rapidly expanding mergers and acquisitions. Some of the recent examples include; Tata Steel's $13.6 Billion Acquisition of Corus, Tata Tea's purchase of a controlling stake in Britain's Tetley for US$407 million, Indian Pharmaceutical giant Ranbaxy's acquisition of Romania's Terapiaetc.
“ GDP Growth 2000 to 2050” Source: Goldmann Sachs: The Path to 2050 -8- 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 [2003 bn US Dollars] Germany Brazil Japan Russia
Comparing India and China’s Growth Stories Indicators India China Political System Multi-party Democracy One-party authoritarian rule Speed of Growth Economic reforms started in 1991. Average 6% growth rate in past two decades. Economic reforms started in 1978. Average 9.5% growth rate in past two decades. Areas of Specialization Rising power in software, design, services, and precision industry. Dominant in mass manufacturing, electronics and heavy industrial plants
Indicators India China Gini index (standard measure of inequality) 36.8 47.0 (up 10 points from 15 yrs ago) Foreign Direct Investment 6.8% (up from 0.3% in 2004) 17.8% Future Areas of growth R&D, bio-technology, high-value IT enabled services (legal, medical, engineering architecture), manufacturing, agro-based industry IT business, services and continued manufacturing
Impact of Global Economic Crisis and Response:
In China also GDP growth declined -from 13% in 2007, to 9 percent in 2008 and even further to a projected 7.2% in 2009.
Real export growth declined from 23.3% in 2006, to 8.8% in 2008. In 2009, the growth projected at a negative 10.1%.
Fiscal balance worsened from 0.7$ of GDP in 2007 to a projected -4.9% in 2009
With domestic demand at 68% of gross domestic expenditure, much lower than India’s 83%, the scope for domestic demand expansion through stimulus packages is much greater in China. China’s stimulus packages have in fact been far larger in magnitude (second only to the U.S) as a proportion of GDP than India’s (a total of 4.4% for three years 2008-10 versus 0.5%).
However, with Chinese investment being comparatively inefficient, it would be better to focus on expanding household’s consumption demand, which is only 25% as compared to India’s 44% of domestic expenditure.
China runs a substantial current account surplus-11.3% of GDP in 2007, 9.8% in 2008 and a projected 8.0% in 2009 and its foreign currency reserves of $1.95 trillion in 2008 is projected at $2.17 trillion in 2009, already reached at the end of June. With most of reserves invested in U.S. Treasury bills and securities and doubts being raised about the credit rating of U.S. government debt, China is understandably concerned about the security and value of the reserves.
The governor of the Peoples’ Bank of China has defended China’s high domestic savings rates and expressed his support for a move away from the U.S. dollar as the major international reserve currency
On balance, given China’s extremely modest fiscal deficit, large scope for expanding domestic consumption and the availability of sizeable resources, China can comfortably adjust to the crisis and resume growth in the near future.
China has liberalized trade far more than India
India –still one of the most protected countries in the developing world by some measures
China’s embrace of openness and its purposive use in accelerating domestic reform process have been important as compared to continuing skepticism about the benefits of openness in India.
India’s potential future prospects once the global crisis ends and growth resumes are bright. Realizing the potential requires that the following reform tasks are completed.
A credible commitment to complete the reform agenda is needed urgently. For example, India could announce its willingness to consider much more liberal commitment to reduce barriers to agricultural and nonagricultural trade in the Doha negotiations; the budget presented on July 6 unfortunately did not announce reductions in non-merit subsidies and handouts, revive and go further on labor law reform.
Constraints of infrastructure –physical and human to be addressed.
Reform of labor laws –their dysfunctionality and growth and equity costs has been known for a long time
Reform of bankruptcy laws –took a decade on average to close a business in June 2008