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GBE Term Paper Presentation
INDIA vs CHINA Kapil
Department of Management Studies Indian Institute of Technology Delhi INDIA
GBE Term Paper Presentation
Contents Part I
: Bird’s Eye view
Part II : How are the two giants emerging? Part III
: Going backward to forward
Part IV
: Who scores where?
Part V
: Conclusions
Part VI
: References
GBE Term Paper Presentation
Part I: Bird’s eye view Economic indicators INDIA
CHINA
$1.17 trillion
$ 6.9 trillion
GDP growth rate
9.1%
11.9%
Population (m)
1,123
1,319
Population growth (annual)
1,2%
0,6%
Inflation
4,3%
5,2%
Export of goods and services (% of GDP)
Over 40%
21%
Imports of goods and services (% of GDP)
24%
Over 30%
Gross Domestic Product
Source: World Development Indicators database, 2008
GBE Term Paper Presentation
Contd… Growth trends GDP Growth of India and China 14 12 10
CHINA
8
INDIA
6 4 2 0 2001
2002
2003
2004
2005
Source: www.worldbank.org
2006
2007
2008
There has been steady growth in the GDP of both China and India, however, growth rate of China has always been higher than that of India. The impact of the slow down in 2008 has been more severe on China as compared to India, which shows its dependence on their manufacturing exports to the Western economies, mainly USA. The Chinese economy is much more integrated with the world economy through international trade and investment, which helps to explain its stronger rate of
GBE Term Paper Presentation
Contd… The added value India: Compositionof GDP 2007 18%
1990 22%
1990 32%
2007 53% Industry
2007 29%
1990 46%
Services
Agriculture
Source: Internal elaboration on World Development Indicators database, September 2008
GBE Term Paper Presentation
Contd… Foreign Investments
160 140 120 100 C HIN A
80
INDIA
60 40 20 0 2002
2003
2004
2005
Source: www.worldbank.org
2006
2007
2 008
The FDI in India was slightly more that China in 2002, but it has increased at a much faster rate as compared to India since then. The main reason that can be attributed to this growth is the focus on the manufacturing sector in China as most of the FDI is attracted towards the low cost manufacturing in China.
GBE Term Paper Presentation
Contd… Foreign Trade
Export of Goods and Services as % of GDP 50 45 40 35
CHINA
30
INDIA
25 20 15 10 5 0 2000
2005
2007
Source: www.worldbank.org
2008
China has been a more exports dominant economy as compared to India with exports as high as 40% of China’s GDP as compared to 22% for India in 2007.
Term Papergiants Presentation Part II: How are GBE the two emerging? India as back office of the world
FACTORS
RELATED AND SUPPORTING INDISTRIES
High profile human resources
High R&D investments and capabilities
Skilled labour
software R&D Centres/Labs and software training institutes
High level infrastructure, (Reliable/satellite telecommunication) availability of fast Digital telecommunication links
telecom, power and roads
High technological internal resources
IT parks (Bangalore, Hyderabad, Chennai, Pune, Gurgaon)
GBE Term Paper Presentation
Contd… China as the work shop of the world
FACTORS
DEMAND
Unskilled and low cost labour
Internal demand (State Owned industries)
Basic industrial infrastructure
External demand (exportation)
Cheap raw materials
Demand of labor intensive production
External source of technology
Dependent on foreign technology
GBE Term Paper Presentation
Contd… India vs China remarks
INDIA
CHINA
Focus on services
Focus on industry
Lower GDP per capita
GDP per capita two times higher than India’s (in USD PPP terms).
Strong corporate governance standards
Lack of advanced institutional infrastructure and corporate governance
Advanced institutional infrastructure
Indifference towards oil prices fluctuations
Commercially-driven companies
Global economic integration through international trade and investments
GBE Term Paper to Presentation Part III: Going backward forward Development in strategic terms
SOME DISADVANTAGES OF BEING BACKWARD COUNTRIES INDIA CHINA Poverty
Low level of education
Poor knowledge of the industry dynamics
Poor living conditions
Low level of resources
Low level of resources
Bad physical infrastructures
Low level of institutional infrastructures and corporate governance
Inadequate supplies of capital
Skilled labour necessity
Late process of modernisation
Technological capacity
GBE Term Paper Presentation
Contd… Role of the government
INDIA before
CHINA before
Semi-socialist autarkic economy
Socialist economic system
High protection
State monopoly of the foreign trade system
Difficulty to set up a new business
State-owned domestic enterprises
Foreign investment not welcomed
Strict control
INDIA now
CHINA now
State planning through 5Year Plan
3Step Development Strategy
Mixed economy
Reduced control on economy
Reduced control on foreign trade and investment
Government supervision through indirect guidance of a more dynamic economy
Privatization trend
Many institutions to control and supervise (People's Bank of China, National Development and Reform Commission, Ministry of Finance…)
GBE Term Paper Presentation
Part IV: Who scores where? India
China
Referred as
The back office of the world The workshop of the world The technology lab of the world The factory of the world
Development Strategy
Homegrown entrepreneurship. Foreign Direct Investment (FDI)
Development approach
From the ground up.
Top-down approach
FDI status
Medium
Extensive
Domestic firms environment
Nurturing environment for domestic firms supported by stronger infrastructure that allows enterprises to flourish.
Restricted environment with many obstacles for private domestic firms, preventing them from challenging state-owned enterprises.
Legal System
Advanced and decent legal Unfair & inconsistent legal system system, that provides ownership with low political status. Domestic protection for private domestic private enterprises are discriminated enterprises. against several policies and regulations.
GBE Term Paper Presentation
Contd… India
China
Political system
Democracy
No democracy
Capital market
Allows firms to obtain capital they need to grow. Capital market operates with greater efficiency and transparency.
Tightly controlled capital allocation restricting the ability of private companies to obtain stock market listings and access the money they need to grow.
Macro-economic figures
Low performance
High performance
[Growth rate & GDP]
Micro economic level Fuller use of resources Misallocation and Inefficient owned necessary for long- use of resources depending term growth. on FDI.
GBE Term Paper Presentation
Published studies Last year, the Forbes 200, an annual ranking of the world’s best small companies, included 13 Indian firms but just 4 from mainland China. A report issued in 2000 by the Chinese Academy of Social Sciences concluded that, “private and individual enterprises have a lower political status and are discriminated against several policies and regulations. In a recent survey of leading Asian companies by the Far Eastern Economic Review (FEER), India registered a higher average score than any other country in the region, including China. In a World Bank study published last year, only 52 percent of the Indian firms surveyed reported problems obtaining capital, versus 80 percent of the Chinese companies polled.
GBE Term Paper Presentation
Contd… Who scores where?
If India has so clearly surpassed China at the grassroots level, why isn’t India’s superiority reflected in the numbers? Why is the gap in GDP and other benchmarks still so wide?
Why ?
GBE Term Paper Presentation
Contd… Why? It’s the history; India’s economic reforms only began in 1991, more than a decade after China.
India has had to deal with a national savings rate half that of China’s and 90 percent less FDI.
Moreover, India is an extensive, messy democracy driven by ethnic and religious tensions.
India has also had a longstanding, volatile dispute with Pakistan over Kashmir. China, on the other hand, has enjoyed two decades of relative tranquility, it has been able to focus almost exclusively on economic development.
GBE Term Paper Presentation
Conclusions Comparing India and China, India is doing a superior job in utilizing their resources and exploiting the institutional advantages
China and India have development strategies.
pursued
different
China used the fastest route to reach economic development which is foreign direct investment (FDI). Indeed, India’s homegrown entrepreneurs may give it a long-term advantage over the Chinese inefficient financial system and capital market.
GBE Term Paper Presentation
References Books:
Dancing with giants: China, India, and the global economy, by Alan Winters and Shahid Yousuf.
Chindia: How China and India are revolutionizing the Global Business by Pete Engardio.
Papers:
China’s Socialist Market Economy: Lessons for democratic developing countries, by Arvind Virmani, published by Planning Commission (Working Paper No. 5/2006 – PC).
China and India: A visual Essay, Report by Deutshe Bank.
Transferring the Rebound into Recovery: Published by World Bank, November 2009.
Websites:
www.worldbank.org
www.planningcommission.gov.in
www.imf.org
GBE Term Paper Presentation
Kapil
INDIA vs CHINA Kapil
Department of Management Studies Indian Institute of Technology Delhi INDIA
GBE Term Paper Presentation
Contents Part I
: Bird’s Eye view
Part II : How are the two giants emerging? Part III
: Going backward to forward
Part IV
: Who scores where?
Part V
: Conclusions
Part VI
: References
GBE Term Paper Presentation
Part I: Bird’s eye view Economic indicators INDIA
CHINA
$1.17 trillion
$ 6.9 trillion
GDP growth rate
9.1%
11.9%
Population (m)
1,123
1,319
Population growth (annual)
1,2%
0,6%
Inflation
4,3%
5,2%
Export of goods and services (% of GDP)
Over 40%
21%
Imports of goods and services (% of GDP)
24%
Over 30%
Gross Domestic Product
Source: World Development Indicators database, 2008
GBE Term Paper Presentation
Contd… Growth trends GDP Growth of India and China 14 12 10
CHINA
8
INDIA
6 4 2 0 2001
2002
2003
2004
2005
Source: www.worldbank.org
2006
2007
2008
There has been steady growth in the GDP of both China and India, however, growth rate of China has always been higher than that of India. The impact of the slow down in 2008 has been more severe on China as compared to India, which shows its dependence on their manufacturing exports to the Western economies, mainly USA. The Chinese economy is much more integrated with the world economy through international trade and investment, which helps to explain its stronger rate of
GBE Term Paper Presentation
Contd… The added value India: Compositionof GDP 2007 18%
1990 22%
1990 32%
2007 53% Industry
2007 29%
1990 46%
Services
Agriculture
Source: Internal elaboration on World Development Indicators database, September 2008
GBE Term Paper Presentation
Contd… Foreign Investments
160 140 120 100 C HIN A
80
INDIA
60 40 20 0 2002
2003
2004
2005
Source: www.worldbank.org
2006
2007
2 008
The FDI in India was slightly more that China in 2002, but it has increased at a much faster rate as compared to India since then. The main reason that can be attributed to this growth is the focus on the manufacturing sector in China as most of the FDI is attracted towards the low cost manufacturing in China.
GBE Term Paper Presentation
Contd… Foreign Trade
Export of Goods and Services as % of GDP 50 45 40 35
CHINA
30
INDIA
25 20 15 10 5 0 2000
2005
2007
Source: www.worldbank.org
2008
China has been a more exports dominant economy as compared to India with exports as high as 40% of China’s GDP as compared to 22% for India in 2007.
Term Papergiants Presentation Part II: How are GBE the two emerging? India as back office of the world
FACTORS
RELATED AND SUPPORTING INDISTRIES
High profile human resources
High R&D investments and capabilities
Skilled labour
software R&D Centres/Labs and software training institutes
High level infrastructure, (Reliable/satellite telecommunication) availability of fast Digital telecommunication links
telecom, power and roads
High technological internal resources
IT parks (Bangalore, Hyderabad, Chennai, Pune, Gurgaon)
GBE Term Paper Presentation
Contd… China as the work shop of the world
FACTORS
DEMAND
Unskilled and low cost labour
Internal demand (State Owned industries)
Basic industrial infrastructure
External demand (exportation)
Cheap raw materials
Demand of labor intensive production
External source of technology
Dependent on foreign technology
GBE Term Paper Presentation
Contd… India vs China remarks
INDIA
CHINA
Focus on services
Focus on industry
Lower GDP per capita
GDP per capita two times higher than India’s (in USD PPP terms).
Strong corporate governance standards
Lack of advanced institutional infrastructure and corporate governance
Advanced institutional infrastructure
Indifference towards oil prices fluctuations
Commercially-driven companies
Global economic integration through international trade and investments
GBE Term Paper to Presentation Part III: Going backward forward Development in strategic terms
SOME DISADVANTAGES OF BEING BACKWARD COUNTRIES INDIA CHINA Poverty
Low level of education
Poor knowledge of the industry dynamics
Poor living conditions
Low level of resources
Low level of resources
Bad physical infrastructures
Low level of institutional infrastructures and corporate governance
Inadequate supplies of capital
Skilled labour necessity
Late process of modernisation
Technological capacity
GBE Term Paper Presentation
Contd… Role of the government
INDIA before
CHINA before
Semi-socialist autarkic economy
Socialist economic system
High protection
State monopoly of the foreign trade system
Difficulty to set up a new business
State-owned domestic enterprises
Foreign investment not welcomed
Strict control
INDIA now
CHINA now
State planning through 5Year Plan
3Step Development Strategy
Mixed economy
Reduced control on economy
Reduced control on foreign trade and investment
Government supervision through indirect guidance of a more dynamic economy
Privatization trend
Many institutions to control and supervise (People's Bank of China, National Development and Reform Commission, Ministry of Finance…)
GBE Term Paper Presentation
Part IV: Who scores where? India
China
Referred as
The back office of the world The workshop of the world The technology lab of the world The factory of the world
Development Strategy
Homegrown entrepreneurship. Foreign Direct Investment (FDI)
Development approach
From the ground up.
Top-down approach
FDI status
Medium
Extensive
Domestic firms environment
Nurturing environment for domestic firms supported by stronger infrastructure that allows enterprises to flourish.
Restricted environment with many obstacles for private domestic firms, preventing them from challenging state-owned enterprises.
Legal System
Advanced and decent legal Unfair & inconsistent legal system system, that provides ownership with low political status. Domestic protection for private domestic private enterprises are discriminated enterprises. against several policies and regulations.
GBE Term Paper Presentation
Contd… India
China
Political system
Democracy
No democracy
Capital market
Allows firms to obtain capital they need to grow. Capital market operates with greater efficiency and transparency.
Tightly controlled capital allocation restricting the ability of private companies to obtain stock market listings and access the money they need to grow.
Macro-economic figures
Low performance
High performance
[Growth rate & GDP]
Micro economic level Fuller use of resources Misallocation and Inefficient owned necessary for long- use of resources depending term growth. on FDI.
GBE Term Paper Presentation
Published studies Last year, the Forbes 200, an annual ranking of the world’s best small companies, included 13 Indian firms but just 4 from mainland China. A report issued in 2000 by the Chinese Academy of Social Sciences concluded that, “private and individual enterprises have a lower political status and are discriminated against several policies and regulations. In a recent survey of leading Asian companies by the Far Eastern Economic Review (FEER), India registered a higher average score than any other country in the region, including China. In a World Bank study published last year, only 52 percent of the Indian firms surveyed reported problems obtaining capital, versus 80 percent of the Chinese companies polled.
GBE Term Paper Presentation
Contd… Who scores where?
If India has so clearly surpassed China at the grassroots level, why isn’t India’s superiority reflected in the numbers? Why is the gap in GDP and other benchmarks still so wide?
Why ?
GBE Term Paper Presentation
Contd… Why? It’s the history; India’s economic reforms only began in 1991, more than a decade after China.
India has had to deal with a national savings rate half that of China’s and 90 percent less FDI.
Moreover, India is an extensive, messy democracy driven by ethnic and religious tensions.
India has also had a longstanding, volatile dispute with Pakistan over Kashmir. China, on the other hand, has enjoyed two decades of relative tranquility, it has been able to focus almost exclusively on economic development.
GBE Term Paper Presentation
Conclusions Comparing India and China, India is doing a superior job in utilizing their resources and exploiting the institutional advantages
China and India have development strategies.
pursued
different
China used the fastest route to reach economic development which is foreign direct investment (FDI). Indeed, India’s homegrown entrepreneurs may give it a long-term advantage over the Chinese inefficient financial system and capital market.
GBE Term Paper Presentation
References Books:
Dancing with giants: China, India, and the global economy, by Alan Winters and Shahid Yousuf.
Chindia: How China and India are revolutionizing the Global Business by Pete Engardio.
Papers:
China’s Socialist Market Economy: Lessons for democratic developing countries, by Arvind Virmani, published by Planning Commission (Working Paper No. 5/2006 – PC).
China and India: A visual Essay, Report by Deutshe Bank.
Transferring the Rebound into Recovery: Published by World Bank, November 2009.
Websites:
www.worldbank.org
www.planningcommission.gov.in
www.imf.org
GBE Term Paper Presentation
Kapil
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