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TIGER V/S DRAGON

INTRODUCTION:
China opened up in 1978, India did so in
1991 i.e. 14 yrs. after.
India and China rank among the
front runners of global economy.
Both the countries were among the most
ancient civilizations.

CHINA AND INDIA


INDIA AND CHINA EMERGING
GLOBAL PLAYERS:
High Economic Growth Rate.
Rapid Share In The World.
Large Inflow Of Funds.

Development Strategies:
China (1949 1978) -India (1947 mid
1980s)
o Communist take-over in China in 1949 and at
Indias Independence from Great Britain in 1947.
o Both adopted a Soviet Style Centrally Planned
Development Strategies.
o Both insulated their economies from the
world economy.

Development Strategies:
Contd.
o China's economy was almost entirely stateowned and state-controlled whereas Indias
economy was state-controlled and directed
but mostly privately owned except in industry,
finance, transport and communication
o 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.

Sector-Wise Comparison

Liberalization Of The Market


While India's liberalization policies started in
the 1990s, China welcomed foreign direct
investment and private investment in the mid
1980s.
This made a significant change in its
economy and the GDP increased considerably.

Difference In Infrastructure
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.

IT/BPO
India's earnings from the BPO sector alone in 2010 is $49.7
billion while China earned $35.76 billion.
Process and Quality: India would soon have the highest
number of ISO-9000 software companies in the world.
Government Support: The Indian Government has formulated
policies and laws to ensure growth of the ITES-BPO sector in
India.
Skilled and Talented Resource: India has highly talented and
qualified resource in IT.
Education System: The education standard is at par with
global standards.

Communication
Native language: English
Number who has Internet access: 287.5 million
Percentage of Worlds online population: 35.2%
Native language: Other European
Number who has Internet access: 276 million
Percentage of Worlds online population: 37.9%
Native language: All Asian languages (including
Mandarin)
Number of world online population 240 million
Percentage of World online population: 33%

Over 80% of scientific articles are


published in English, up from only 60%
fifty years ago.
Indian managers ability to communicate
easily in English gives them a tremendous
advantage and India is making skilled use
of that advantage.

Company Development
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.

Company Management
Capabilities
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


[2003 bn US Dollars]
45000
40000
35000
30000
25000
20000
15000

Japan
Russia
Brazil
Germany

10000
5000
0
2000

2005

2010

2015

2020

2025

2030

2035

-8Source: Goldmann Sachs: The Path to 2050

2040

2045

2050

Structural Change
China: classic pattern, moving from primary
to manufacturing sector, which has doubled its
share of workforce and tripled its share of
output.
India: Move has been mainly from agriculture to
services in share of output, with no substantial
increase in manufacturing, and the structure of
employment has not changed much.

China Economic Fact Sheet


GDP Real Growth Rate:
9.8% (2008)
13% (2007)
Gdp-per Capita (PPP):
$6,000 (2008)
$5,500 (2007)
GDP Composition By Sector:
Agriculture: 10.6%
Industry: 49.2%
Services: 40.2% (2008)

India Economic Fact Sheet


GDP- Real Growth Rate:
6.6% (2008)
9% (2007)
Gdp Per Capita (Ppp)
$2,800 (2008)
$2,700 (2007)
Gdp Composition By Sector:
Agriculture: 17.2%
Industry: 29.1%
Services: 53.7% (2008)

SECTOR-WISE BREAK-UP

-12-

Comparing India and Chinas


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
Gini index
(standard
measure of
inequality)
Foreign Direct
Investment
Future Areas of
growth

India
36.8

6.8% (up from


0.3% in 2004)
R&D, biotechnology, highvalue IT enabled
services (legal,
medical,
engineering
architecture),
manufacturing,
agro-based
industry

China
47.0 (up 10 points
from 15 yrs ago)

17.8%
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 Indias 83%, the scope for
domestic demand expansion through stimulus packages is
much greater in China. Chinas stimulus packages have in
fact been far larger in magnitude (second only to the U.S) as
a proportion of GDP than Indias (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
households consumption demand, which is only 25% as
compared to Indias 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
Chinas 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 Chinas 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
Chinas 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.

Future Prospects
Indias 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
Rethinking SEZs along the lines of Chinese SEZs