China and India confront future with different strategies
By Suzanne Rosselet
THE theme of the Shanghai World Expo is "Better City, Better Life" and signifies Shanghai's new status in the 21st century as an economic and cultural center.
China expects to receive some 70 million people, the largest number of visitors in the history of the world's fairs in terms of gross numbers.
What could be a more fitting venue for this World Expo than China - the country described by economist Jeffrey Sachs as the most successful development story in world history? The size of the economy has doubled every eight years for three decades - the fastest rate for a major economy in recorded history.
But China is not alone. India is also among the world's fastest growing economies and, together with China, has contributed nearly 30 percent to global economic growth.
The two countries' economic performance has been very differently orchestrated.
China's growth has been mainly investment- and export-driven, focusing on low-cost manufacturing, with domestic consumption as low as 36 percent of GDP.
On the other hand, India's growth has mostly been derived from a strong services sector and buoyant domestic consumption.
India is also less dependent on trade, relying on external trade for about 20 percent of its GDP versus 56 percent for China. China remains far more open to the world than India, the latter often "hiding" behind trade barriers or other protectionist measures.
But India is fast becoming a country to be reckoned with and the nation is definitely on investors' radar screens as the third most popular destination for foreign direct investment, after China and the US, with FDI increasingly flowing from the rest of Asia.
Cross the river
In contrast to India, China's development has been driven by a strong state and implementing reforms in stages.
Almost all reforms have been the result of experimentation - as late Chinese leader Deng Xiaoping famously said: "Cross the river by feeling the stones."
The long-term goal remains the transformation of China's economy to reduce over-dependence on exports and investment. The well-being of society also requires greater focus on health care reforms, education, labor legislation and environmental protection, as well as job creation for the growing labor force.
Public infrastructure in both China and India calls for enhancement of its quality and efficiency, and a halt to environmental degradation.
Whereas China has made extraordinary investment in its basic infrastructure (roads, railroads, airports, ports, telecommunications), in the last two years, India has doubled infrastructure investment in its budget to 4 percent, but this remains paltry when one considers that China spends around three times as much.
Both countries are heavily dependent on foreign energy and are strongly pursuing outward investment to secure additional energy sources. A more ambitious goal would be to target government funding to provide incentives to make clean and renewable energy projects a long-term priority. Both countries appear to be moving in this direction.
Challenges
The challenges that India faces mirror those of China. Both need to progress from low-cost, low-value manufacturing and service provision to higher-value activities, but while China is striving to move up the value chain in manufacturing first and services next, India is doing the opposite.
Recent growth recovery in China has mainly been driven by a huge policy stimulus of US$586 billion and financed by aggressive bank lending, helping to offset the negative impact of falling exports last year. Despite excess capacity in specific industries like steel and cement, China still has great potential for growth, with many new opportunities on the horizon.
The current crisis offers a unique opportunity to reduce over-capacity in many low-cost manufacturing industries.
During this crisis, it's interesting to see how China and India invest in the economic, business and social structures that characterize more mature and advanced economies.
In the meantime, visitors from around the world can get a preview of just how far China has already come during the Shanghai Expo.
(The author is deputy director of IMD's World Competitiveness Center. Shanghai Daily condensed the article.)
Read more: China and India confront future with different strategies -- Shanghai Daily | ???? -- English Window to China New
By Suzanne Rosselet
THE theme of the Shanghai World Expo is "Better City, Better Life" and signifies Shanghai's new status in the 21st century as an economic and cultural center.
China expects to receive some 70 million people, the largest number of visitors in the history of the world's fairs in terms of gross numbers.
What could be a more fitting venue for this World Expo than China - the country described by economist Jeffrey Sachs as the most successful development story in world history? The size of the economy has doubled every eight years for three decades - the fastest rate for a major economy in recorded history.
But China is not alone. India is also among the world's fastest growing economies and, together with China, has contributed nearly 30 percent to global economic growth.
The two countries' economic performance has been very differently orchestrated.
China's growth has been mainly investment- and export-driven, focusing on low-cost manufacturing, with domestic consumption as low as 36 percent of GDP.
On the other hand, India's growth has mostly been derived from a strong services sector and buoyant domestic consumption.
India is also less dependent on trade, relying on external trade for about 20 percent of its GDP versus 56 percent for China. China remains far more open to the world than India, the latter often "hiding" behind trade barriers or other protectionist measures.
But India is fast becoming a country to be reckoned with and the nation is definitely on investors' radar screens as the third most popular destination for foreign direct investment, after China and the US, with FDI increasingly flowing from the rest of Asia.
Cross the river
In contrast to India, China's development has been driven by a strong state and implementing reforms in stages.
Almost all reforms have been the result of experimentation - as late Chinese leader Deng Xiaoping famously said: "Cross the river by feeling the stones."
The long-term goal remains the transformation of China's economy to reduce over-dependence on exports and investment. The well-being of society also requires greater focus on health care reforms, education, labor legislation and environmental protection, as well as job creation for the growing labor force.
Public infrastructure in both China and India calls for enhancement of its quality and efficiency, and a halt to environmental degradation.
Whereas China has made extraordinary investment in its basic infrastructure (roads, railroads, airports, ports, telecommunications), in the last two years, India has doubled infrastructure investment in its budget to 4 percent, but this remains paltry when one considers that China spends around three times as much.
Both countries are heavily dependent on foreign energy and are strongly pursuing outward investment to secure additional energy sources. A more ambitious goal would be to target government funding to provide incentives to make clean and renewable energy projects a long-term priority. Both countries appear to be moving in this direction.
Challenges
The challenges that India faces mirror those of China. Both need to progress from low-cost, low-value manufacturing and service provision to higher-value activities, but while China is striving to move up the value chain in manufacturing first and services next, India is doing the opposite.
Recent growth recovery in China has mainly been driven by a huge policy stimulus of US$586 billion and financed by aggressive bank lending, helping to offset the negative impact of falling exports last year. Despite excess capacity in specific industries like steel and cement, China still has great potential for growth, with many new opportunities on the horizon.
The current crisis offers a unique opportunity to reduce over-capacity in many low-cost manufacturing industries.
During this crisis, it's interesting to see how China and India invest in the economic, business and social structures that characterize more mature and advanced economies.
In the meantime, visitors from around the world can get a preview of just how far China has already come during the Shanghai Expo.
(The author is deputy director of IMD's World Competitiveness Center. Shanghai Daily condensed the article.)
Read more: China and India confront future with different strategies -- Shanghai Daily | ???? -- English Window to China New
