China 1992, India 2012

[IndoCarib]

excellent comments!

Keep patting each other's back . Or may be thumping each other's chest. Debunk my foot.... !!!

 

[Abhishek_]

I want to let everyone know that I intend to resurrect this thread at the middle and end of every decade (e.g. 2015, 2020, 2025, and 2030). I will remind all of our Indian members that my analysis is correct.

The core question of this thread is whether 2012-India will experience the massive economic and technological growth of 1992-China. Throughout this thread, I have tried to explain the answer is "clearly no."

strange logic, western companies dominated all segments few decades back. that didnt stop the rise of East asia, it won't stop the rise of south asia either.
you accuse the western world of being myopic and underestimating china in the early 90s, yet you continue the same behavior.

PS: good idea on 5yr-10yr update. please do that.

 

[Martian2]

strange logic, western companies dominated all segments few decades back. that didnt stop the rise of East asia, it won't stop the rise of south asia either.
you accuse the western world of being myopic and underestimating china in the early 90s, yet you continue the same behavior.

PS: good idea on 5yr-10yr update. please do that.

East Asis rose economically and technologically because they generated decades of trade surpluses, which enabled them to invest in new industries and to upgrade their technologies.

In contrast, India runs large trade deficits. This deprives India of a pool of capital to invest in new industries or upgrade its current woeful technology.

Therefore, India is in a very different situation than the East Asian countries and we should expect a different outcome. Namely, India will not industrialize and will not be competitive in the world market for high-tech products.

China has always run trade surpluses and its current account balance (i.e. net trade in goods and services) for 2010 is a $305.4 billion surplus.

India has been running trade deficits for as long as I can remember and its current account balance for 2010 is -$51.78 billion deficit. India's economic strength will be sapped for decades as it struggles to pay its accumulated debt and accrued interest (e.g. think Greece).

Never mind dreaming about investing and competing in manufacturing industries against the entrenched manufacturing superpower China.

Reference: List of sovereign states by current account balance

 

[Abhishek_]

^the underlying assumption is that east asia was export driven. we are internal consumption driven.

stick to the 5yr10yr updates. Your claims about our future have zero credibility.

 

[Martian2]

^the underlying assumption is that east asia was export driven. we are internal consumption driven.

stick to the 5yr10yr updates. Your claims about our future have zero credibility.

Say what?

If you don't earn hard currency from your export industries, where will the capital to invest in new manufacturing sectors come from?

Since you seem to be clueless, let me explain basic economics to you. Taiwan earned money from selling basic electronics, like radios, to the United States. By saving all of their money, Taiwan was able to purchase equipment to expand into making logic circuits.

After making a ton of money from exporting logic circuits, Taiwan moved into the memory sector. After accumulating more capital, Taiwan moved into digital cameras. Next, Taiwan moved into notebook computers.

It doesn't matter how much consumption there is in India, you are not climbing the technological ladder. Who cares how many bushels of onions that Indians are growing and selling to one another? You're still as technologically backward as you were ten years ago.

The point is very simple:

No surplus hard currency = no investment to compete in manufacturing industries

The East Asian countries sprinted up the technological ladder. India has been sitting still for decades. The reason is the Indian lack of surplus hard currency. This situation will not change in the foreseeable future.

 

[Abhishek_]

do explain oh chinese amartya sen, since we are running deficits for as long as you can remember, how did we double our GDP in the last 5 years? and why on earth is the economy still growing, it must be witchcraft

go on, amuse me.

 

[Martian2]

do explain oh chinese amartya sen, since we are running deficits for as long as you can remember, how did we double our GDP in the last 5 years? and why on earth is the economy still growing, it must be witchcraft

India is just like Greece. Like India, Greek GDP grew during the last ten years. However, there will come a point when the banks refuse to lend you any more money. After that, your economy collapses.

It's amazing you don't understand such a simple concept. With billions of dollars of borrowed money, the Indian government can order lots of products from Indian companies. Let's say the Indian government wants to install a new biometric ID system for every person in the country. The Indian government can pay billions of dollars to Infosys to set up the identification system.

However, that artificial Indian GDP rests on borrowed money. When the supply of borrowed money runs out, your Indian economy will collapse just like Greece, Portugal, Ireland, Spain, etc.

By the way, India's first big repayment is due in June of this year. If the European banks refuse to roll over the debt, India's economy will collapse. Look at India's $137.2 billion "External Debt Due Within One Year" by June 2012 below.

----------

Is rupee depreciation the new normal?

"Is rupee depreciation the new normal?
Hindu Business Line - Ritesh Jain - 1 day ago

Unless we control inflation and reduce the supply-side constraints, the rupee is expected to depreciate further against the dollar.

India has been relying on capital inflows to fill the current account deficit and this strategy had worked successfully in the last decade. Over the last three-four years, India has slowly and cautiously opened its doors to debt capital by raising caps on ECB/FII/FDI debt investment.

Coupled with the increasing interest rate differentials between India and the developed world, there was a sizable increase in debt capital inflows into the country in the last couple of years. Though these inflows seem to have compensated for the almost dried up inflows towards equity this year, there could be challenges, going ahead. How? Read on.

India's overall external debt outstanding as of June-2011 was $317 billion, an increase of 38 per cent in last two years. The short-term external debt increased at a much faster pace of 62 per cent (in absolute terms) during the same period and it now constitutes about 21.6 per cent of total external debt.

However, a much worrying fact is that the total external debt maturing within the next one year, short-term and long-term debt (with residual maturing of less than one year), is about $137 billion, as of June 2011, constituting about 43.3 per cent of the aggregate external debt — one of the highest witnessed in last decade; and 43.5 per cent of India's total foreign currency reserve (see table).

Additionally, a sizable portion of India's external debt is believed to be financed by European banks, which were the most active lenders to emerging Asia, much higher than the US or Japanese banks put together.

Thus, with the ongoing re-capitalisation needs of European banks, it is likely that these banks will be less forthcoming in refinancing Indian corporate debt. What makes matters even worse is that between March 2010 and June 2011, when the short-term forex repayment obligations have more than doubled, India's foreign currency reserves have grown by just 13.14 per cent over the same time frame.
Dollar liability

The rupee has remained fairly stable (except during Lehmann Brothers crisis) and confined to the 44-48 range against the dollar. This was supposed to be a new normal and with India's GDP growth recovering to 9 per cent in a short span after the crisis, the rupee was expected to appreciate vis-a-vis the dollar by market participants and economists alike. Though inflows and outflows on the currency front were more or less matched during this period, what changed was that short-term credit funding by Indian corporates was taken in dollars instead of rupees.

Further, some corporates converted their rupee liability to dollar liability. With interest rate differential between the RBI repo rate and Fed rate reaching the highest level in recent history, corporates were led to believe that either the rupee would appreciate or the interest differential on their liabilities conversion would more than offset rupee depreciation, if any.

However, contrary to general belief, the rupee depreciated 10-12 per cent against the dollar. In fact, the rupee was so weak that it depreciated 8-10 per cent against currencies such as the euro and the yen.
Import issues

India remains a net importer of goods in foreign trade, with about a third comprising inelastic oil imports. A sharp depreciation in the rupee in recent times would pose a challenge for the import Bill. With a foreign currency reserve of $311 billion, as of September 2011, and import value of about $35 billion for the month, India now has the lowest import cover of 8-9 months; this is the lowest in the last decade.

The elevated inflation, rising wages and increased capital costs during the last three years has diminished India's competitiveness. Further, with slowdown in the global economy, a slowdown in exports growth is inevitable.

The currency depreciation will put pressure on inflation. Sticky inflation and lack of infrastructure will slow down the productivity gains. An interesting point to ponder at this juncture would be — having attracted reasonable amount of foreign money with 8-9 per cent GDP growth, now, if the new normal GDP growth gets closer to 6-7 per cent, will that impact funds flow into the country?
Strained liquidity

The central banker's ability to intervene in the currency market remains strictly limited as we are running close to the lowest foreign currency reserves in terms of import cover in the last decade.

We believe that a sizable portion of external debt maturing in the next one year would require to be rolled over domestically, as global risk aversion would make the dollar availability limited and will, in turn, put pressure on the rupee liquidity. Any move by the RBI to support the rupee would put further pressure on the already strained liquidity. Along with all these factors mentioned above, a heightening risk on the current account deficit front, the best for the rupee seems to be over and we are in a new normal where unless we bring inflation under control and reduce the supply-side constraint, the rupee is expected to depreciate further against the dollar."

 

[Abhishek_]

^Yea I have a hard time understanding unsubstantiated theories.

I'll wait for your 5yr-10yr updates. For now your claims of our economy collapsing like greece are just that, claims.

sidenote: you should talk to Riaz Haq here, you two might enjoy each other's company.

 

[Götterdämmerung]

India is just like Greece. Like India, Greek GDP grew during the last ten years. However, there will come a point when the banks refuse to lend you any more money. After that, your economy collapses.

It's amazing that you don't understand such a simple concept. With billions of dollars of borrowed money, the Indian government can order lots of products from Indian companies. Let's say the Indian government wants to install a new biometric ID system for every person in the country. The Indian government can pay billions of dollars to Infosys to set up the identification system.

However, that artificial Indian GDP rests on borrowed money. When the supply of borrowed money runs out, your Indian economy will collapse just like Greece, Portugal, Ireland, Spain, etc.

By the way, India's first big repayment is due in June of this year. If the European banks refuse to roll over the debt, India's economy will collapse. Look at India's $137.2 billion "External Debt Due Within One Year" by June 2012 below.

----------

Is rupee depreciation the new normal?

"Is rupee depreciation the new normal?
Hindu Business Line - Ritesh Jain - 1 day ago

Unless we control inflation and reduce the supply-side constraints, the rupee is expected to depreciate further against the dollar.

India has been relying on capital inflows to fill the current account deficit and this strategy had worked successfully in the last decade. Over the last three-four years, India has slowly and cautiously opened its doors to debt capital by raising caps on ECB/FII/FDI debt investment.

Coupled with the increasing interest rate differentials between India and the developed world, there was a sizable increase in debt capital inflows into the country in the last couple of years. Though these inflows seem to have compensated for the almost dried up inflows towards equity this year, there could be challenges, going ahead. How? Read on.

India's overall external debt outstanding as of June-2011 was $317 billion, an increase of 38 per cent in last two years. The short-term external debt increased at a much faster pace of 62 per cent (in absolute terms) during the same period and it now constitutes about 21.6 per cent of total external debt.

However, a much worrying fact is that the total external debt maturing within the next one year, short-term and long-term debt (with residual maturing of less than one year), is about $137 billion, as of June 2011, constituting about 43.3 per cent of the aggregate external debt — one of the highest witnessed in last decade; and 43.5 per cent of India's total foreign currency reserve (see table).

Additionally, a sizable portion of India's external debt is believed to be financed by European banks, which were the most active lenders to emerging Asia, much higher than the US or Japanese banks put together.

Thus, with the ongoing re-capitalisation needs of European banks, it is likely that these banks will be less forthcoming in refinancing Indian corporate debt. What makes matters even worse is that between March 2010 and June 2011, when the short-term forex repayment obligations have more than doubled, India's foreign currency reserves have grown by just 13.14 per cent over the same time frame.
Dollar liability

The rupee has remained fairly stable (except during Lehmann Brothers crisis) and confined to the 44-48 range against the dollar. This was supposed to be a new normal and with India's GDP growth recovering to 9 per cent in a short span after the crisis, the rupee was expected to appreciate vis-a-vis the dollar by market participants and economists alike. Though inflows and outflows on the currency front were more or less matched during this period, what changed was that short-term credit funding by Indian corporates was taken in dollars instead of rupees.

Further, some corporates converted their rupee liability to dollar liability. With interest rate differential between the RBI repo rate and Fed rate reaching the highest level in recent history, corporates were led to believe that either the rupee would appreciate or the interest differential on their liabilities conversion would more than offset rupee depreciation, if any.

However, contrary to general belief, the rupee depreciated 10-12 per cent against the dollar. In fact, the rupee was so weak that it depreciated 8-10 per cent against currencies such as the euro and the yen.
Import issues

India remains a net importer of goods in foreign trade, with about a third comprising inelastic oil imports. A sharp depreciation in the rupee in recent times would pose a challenge for the import Bill. With a foreign currency reserve of $311 billion, as of September 2011, and import value of about $35 billion for the month, India now has the lowest import cover of 8-9 months; this is the lowest in the last decade.

The elevated inflation, rising wages and increased capital costs during the last three years has diminished India's competitiveness. Further, with slowdown in the global economy, a slowdown in exports growth is inevitable.

The currency depreciation will put pressure on inflation. Sticky inflation and lack of infrastructure will slow down the productivity gains. An interesting point to ponder at this juncture would be — having attracted reasonable amount of foreign money with 8-9 per cent GDP growth, now, if the new normal GDP growth gets closer to 6-7 per cent, will that impact funds flow into the country?
Strained liquidity

The central banker's ability to intervene in the currency market remains strictly limited as we are running close to the lowest foreign currency reserves in terms of import cover in the last decade.

We believe that a sizable portion of external debt maturing in the next one year would require to be rolled over domestically, as global risk aversion would make the dollar availability limited and will, in turn, put pressure on the rupee liquidity. Any move by the RBI to support the rupee would put further pressure on the already strained liquidity. Along with all these factors mentioned above, a heightening risk on the current account deficit front, the best for the rupee seems to be over and we are in a new normal where unless we bring inflation under control and reduce the supply-side constraint, the rupee is expected to depreciate further against the dollar."

You are right, Greece and the other PIGS were borrowing more than they generate and thus inflating their GDP without any substance. Their debts grew over their heads and now it's repaying time and we see the mess they have created. Growing on debt is just not sustainable in the long run and never will.

 

[Martian2]

The laws on intellectual property have been greatly strengthened in the last twenty years. Aside from the lack of a strong Indian scientific base and lack of a trade surplus to subsidize new industries, India will be confronted with a Great Wall of Chinese patents.

In the last ten years, Huawei alone has "filed 40,000 patent applications." In our lifetime, India will never be able to compete in industries dominated by China.

----------

Huawei, the world's second-largest telecom manufacturer

Huawei Spent $3.76 Billion on Research Last Year, Ren Says - Bloomberg

"Huawei Spent $3.76 Billion on Research Last Year, Ren Says
By Bloomberg News - Feb 3, 2012 5:08 AM ET

Huawei Technologies Co., China’s largest maker of phone equipment, said it spent $3.76 billion on research and development last year to boost its competitiveness in the global market.

The company has invested a total of $15 billion in research over the past 10 years, which allowed the company to file 40,000 patent applications, Ren Zhengfei, chief executive officer of the Shenzhen-based company, said in a speech to the European Competition Forum. His prepared remarks were supplied by the company.

Huawei is spending on research and development to aid its expansion beyond sales of phone-network equipment into cloud computing and mobile devices including tablet computers and smartphones. The products will help the company more than triple sales from 2010’s level to about $100 billion in the next five to 10 years, the company said in April.

“Driven by competition, we have to continuously improve,” Ren said in the speech. “A company that cannot continuously improve and innovate through fair competition in its home market can hardly be globally competitive.”

Huawei has also paid more than $1.2 billion to license technology from others, an amount Ren said is “unprecedented” among Chinese companies.

Sales were 185.2 billion yuan ($29 billion) in 2010, fueled by growth in overseas revenue, the company said in its annual report. Sales from outside China climbed to 65 percent of the total from 60 percent in 2009, according to the report.

To contact Bloomberg News staff for this story: Bloomberg News in Shanghai at emailtv@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net"

 

[Abhishek_]

India is just like Greece. Like India, Greek GDP grew during the last ten years. However, there will come a point when the banks refuse to lend you any more money. After that, your economy collapses.

By the way, India's first big repayment is due in June of this year. If the European banks refuse to roll over the debt, India's economy will collapse. Look at India's $137.2 billion "External Debt Due Within One Year" by June 2012 below.

so can I count on you to post the ceremonial "I told you so" in june 2012, when the Indian economy collapses like greece?

The laws on intellectual property have been greatly strengthened in the last twenty years. Aside from the lack of a strong Indian scientific base and lack of a trade surplus to subsidize new industries, India will be confronted with a Great Wall of Chinese patents.

patents aren't a natural resource, i.e. in a limited supply.
It's a constant build up on existing knowledge. Existing western patents didnt stop east asia to develop, I don't see the logic in assuming chinese patents will stop south asia.

 

[Hello_10]

What you posted 70s-90s stuff is not the excuse for your failure. What you posted is the result of your failure.

So…what?

So, China is always one step ahead of India?

So, the Chinese is always smarter than the Indians?

So, the Chinese authoritarian system has better vision than your democracy?

If so, why don't you trash your copy/pasted UK system and adopt the Chinese system so as to be more far-sighted?

Chinese GDP (PPP) per capita is about 2+ times of India’s. How could the Chinese earn less?

Check this out, buddy:

BBC NEWS | Business | China tops India on average pay

And more recently this:

China Now Has Third Highest Labor Costs in Emerging Asia | China Briefing News

Now, why can't you guys stop finding excuses for your failure, but find fixes for it?

Please don't let down democracy.
.

Please make it more correct. GDP of India was around 75trillion rupees or $1.5tn last year while its purchasing power value was calculated by IMF as around $4.5tn. so we would use a factor of '3' to have an idea of actual salary in India on PPP. And for China, its GDP is calculated as $7.47tn and on purchasing power parity its $11tn for 2011 so you would use a factor of '1.5' only to transfer the salary in PPP term. And then you will find salary of Indian professionals and workers in India higher than that of Chinese in China on PPP term

China could increase its per capita income with higher rate than India since 1991, but how did they reach this level? few examples.

Wei, a seamstress, was well aware she had breached the one-child policy by having two sons, Xiaojie, now age 6, and Xiaoming, age 4. (In deference to China's ingrained preference for sons, the government sometimes allows couples to have a second child, but only if the firstborn is a girl.) As punishment, the authorities refused to officially register the younger boy, who is mildly disabled, thereby denying him access to state health care and education. The family was also ordered to pay a fine of 5,000 yuan ($750), amounting to a third of their annual income (the heaviest fines for birth-policy violators are up to six times a couple's annual income). Wei knew there would be consequences to having two kids, but says, "Children mean happiness to people here. The bigger your family, the greater your joy. It's as simple as that."

In the past, when most people worked in state-owned factories and on farms, officials enforced family-planning quotas with brutal efficiency. Their methods included giving women forced abortions up to even the ninth month of pregnancy, and smothering newborns and dumping them in the trash. Female workers were required to prove they were menstruating by showing supervisors a soiled sanitary napkin every month. But as the country has gradually abandoned mass state enterprise in favor of private commerce, authorities have had to resort to even more inventive methods to keep tabs on women and prevent illegal pregnancies.

Read more: One Child Policy in China - Punishment for Violating China’s One Child Policy - Marie Claire

One Child Policy in China - Punishment for Violating China’s One Child Policy - Marie Claire

The incident took place near Tiananmen on Chang'an Avenue, which runs east-west along the south end of the Forbidden City in Beijing, on June 5, 1989, one day after the Chinese government's violent crackdown on the Tiananmen protests. The man placed himself alone in the middle of the street as the tanks approached, directly in the path of the armored vehicles (39°54′23.5″N 116°23′59.8″E). He held two shopping bags, one in each hand.[1]

http://en.wikipedia.org/wiki/Tank_Man

At the same time China was always blamed for copying techs/ manipulating currency and giving heavy subsidies to support and gain on export side to increase its GDP through external demand during last 21 years. Thanks

 

[manojb]

China's Online Propagandists Revealed

2011-12-09
How much money do China's paid commentators, the '50 cent army,' really make?

A pair of leaked receipts from a university in northwestern China that apparently shows the pay given to government-backed Internet commentators, known as the "50 cent army," has been circulating among netizens this week.

Sealed with the official stamp of "The Party Committee Propaganda Department of the Northwestern Polytechnic University of the Chinese Communist Party," the receipts confirm that money was paid to "Internet commentators."

An employee who answered the phone at the Xian-based university confirmed that such a job exists on campus.

"You mean a propaganda specialist," he said, when asked if there was such a job as "Internet commentator" at the college.

But he said he didn't know much about the job, and supplied a second phone number for more information.

The employee who answered this number also confirmed the job exists.

"Of course we do," he said. "The job is to write news ... for example, they might use their knowledge of scholarly articles."

"With editorial input from the team, they can produce something of great value," he said.

However, he hung up when pressed for further details.

Stepped-up training

China is stepping up media training for its officials, as well as an army of freelance commentators paid to direct public debate online, known as the "50 cent army," according to official media reports in recent months.

A news report from local television station, Hubei Xishui TV, said local officials from the Xishui county propaganda department had held training exercises for official spokespersons and "Internet commentators."

Media training courses for commentators and government officials include tips on how to influence coverage by the country's biggest news organizations, as well as numerous methods of using the Internet and social media to spread the government's message.

Internet commentators are expected to report "the truth" as fast as possible, to supplement their information with explanations for events, and to influence Internet debate in the "correct" direction, reports have said.

Veteran bloggers and online activists say that a typical workday for a 50-center would involve watching forum posts, microblog posts, and chatrooms for topics linked to a specific keyword allocated by their managers.

How much they are paid depends on the number of comments, tweets, and posts they make that steer the debate in the government's preferred direction.

According to the receipts currently circulating, which had the personal details of the 50-centers obscured, two commentaries were paid for by the university, one at 20 yuan, and one at 30 yuan.

A shadowy world

The world of the government-backed online commentators is shadowy, with ordinary netizens left to infer how they operate from their behavior online or from the occasional leaked document.

Earlier this year, the news website Canyu leaked a document titled "Internal Work Handbook" allegedly written for 50-centers.

In it, hired commentators are instructed to track down the source of any online "rumors," and then to order the website that first posted it to delete the offending item.

One Chinese student who declined to be named said he had once written articles for the government online, to earn a little extra money.

"I saw that my classmates were doing it as well, and I didn't think anything of it," he said. "I didn't know that we were the so-called '50 cent army.'"

"I didn't really understand what I was doing, and I was somewhat lacking in values," he said. "Now I deeply regret going out to bat for them with comments like that."

He said he was able to earn around 100-120 yuan a month writing the articles.

Chinese Internet expert Li Li said that while the 50 cent army appears to be growing in numbers, their effectiveness is limited.

"If you do a lot of bad things, you will lose credibility ... and eventually no one will believe anything you say," Li said.

"Then there will be a backlash; everyone will know who the 50 cent army are, and the government's credibility will be at its lowest possible level."

Blogger Wen Yunchao, known by his online nickname Beifeng, said most netizens adopted a policy of ignoring 50-centers.

"We pretend we don't hear or see them," he said. "We treat them as if they weren't there, and never give any kind of reaction."

"This makes them much less effective."

Reported by Xin Yu for RFA's Mandarin service. Translated and written in English by Luisetta Mudie.

http://www.rfa.org/english/news/china/online-12092011145353.html

 

[roach]

Jeez. All you guys that have been c*ck-wrestling on India Vs China, I wonder what would have been accomplished had you spent the same time working. I check out the threads once in a while, the same guys, the same 'mine's bigger' arguments.
Good for a laugh, though. Carry on.