Economic Comparison of India and China
From April to June 2005, India’s GDP grew at 8.1 per cent, compared with 7.6 per cent in the same period the year before. More impressively, India is achieving this result with just half of China’s level of domestic investment in new factories and equipment, and only 10 per cent of China’s foreign direct investment…
… in 2003 and 2004, [China] was investing close to 50 per cent of its GDP in domestic plant and equipment - roughly equivalent to India’s entire GDP. That is higher than any other country… China’s growth stems from massive accumulation of resources, while India’s growth comes from increasing efficiency…
While India’s stock market has soared in recent years, the opposite has happened in China. In 2001, the Shanghai Stock Market index reached 2,200 points; by 2005, half the wealth wiped out. In April 2005, the Shanghai index stood at 1,135 points… [Link]
Huang argues against using foreign direct investment as a key measure of economic growth:
With few exceptions, the world-class manufacturing facilities for which China is famous are products of FDI, not of indigenous Chinese companies.
His analysis is that India has a more laissez-faire attitude in both politics and entrepreneurship:
Infosys was founded by seven entrepreneurs with few political connections who nevertheless managed, without significant hard assets, to obtain capital from Indian banks and the stock market in the early 1990s. It is unimaginable that a Chinese bank would lend to a Chinese equivalent of an Infosys.
China was light years ahead of India in economic liberalization in the 1980s. Today it lags behind in critical aspects, such as reform that would permit more foreign investment and do...
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...k rate and reverse repo rate of RBI is 6 per cent.
' Central bank’s prescribed reserve ratio for banks is 13 per cent in China (October 2007), whereas RBI prescribed 32 per cent (25 per cent statutory liquidity ratio and 7 per cent cash reserve ratio) reserve ratio.
• TRADE DATA
' China contributes 8 per cent to the world trade, whereas India’s contribution in the world trade is less than one per cent (0.8 per cent).
' China is in surplus in both fiscal and merchandise trade terms, whereas India was having a trade deficit of $ 21.6 billion in April-June 2007, which is 7 per cent of India’s GDP.
• OTHER DATA
' Exchange rate one US dollar = 7.48 yuan, whereas one US dollar = 39.33 Indian rupees.
' Average salary increase of workers in 2007 was 8 per cent in China, whereas it was 14 per cent in India.
The reserve ratio is the ratio of the required reserves the commercial bank must keep to the bank’s own outstanding checkable-deposit liabilities (Brue, 2004, p. 254). By raising and lowering the ratio, the Fed can control how much the commercial banks can lend. For example, if the Fed lowers the reserve ratio, commercial banks will now have more excess reserves, allowing them to lend more money to businesses or individuals. Vice-versa, by increasing the ratio, the Fed forces the banks to lend less money due to having smaller excess reserves. If the bank is deficient in the amount of reserves it has, the bank is forced to reduce checkable deposits and, subsequently, reduce the money supply.
So when the dollar is depreciating, the exchange rate becomes smaller. Exchange rate (foreign exchange rate, forex rate or FX rate) is the number of units of a given currency that can be purchased for one unit of another currency. The United States capital markets are becoming more attractive to foreign investors. Since the dollar is falling, it makes foreigner’s investment in the United States more affordable. Therefore, foreigners take this opportunity to invest in the United States.
China has been the fastest growing economy in the last thirty years. Its contributions to the global economic growth are substantial. China is the second largest exporter and holds the largest foreign currency reserve in hand. China's account surplus reached 11% of its GDP as of 2008. All of these successful and positive economic indicators increased the global expectations of China. Even though China was extremely responsive in its own borders, during the 2008 G2 submit, China displayed very low-key appearance in front of the world. Moreover, China was still artificially devaluating its currency to sustain its trade surplus, and increasing unnecessary tax cut/incentives on a large number of goods to encourage the exports to be more competitive in pricing. China’s policies were the great indicators that it did not display enough effort to show its global leadership role.
With a population of 1.357 billion (2013)3, China is the most populated country in the world. Along with the huge population comes a market that is unmatched by any other country of the world. Both domestic companies and foreign companies want to tap into this large market that just recently embraced capitalism and entered into the World Trade Organization.
The United States and China share the most imbalanced bilateral trade relationship in the world. The United States imports more goods from China than it exports to a tune of $202 billion dollars each year. All told, China alone accounts for nearly 26% of the United States' $725.8 billion trade deficit. “Increasingly, this imbalance has been the subject of a major political backlash within the U.S. congress, where some have charged that the US is destroying its industrial base to support a communist country's industrialization." http://worldnews.about.com/od/china/a/china_trade.htm
According to Teagarden & Cai (2009) Chinese companies have expanded abroad for three reasons. Firstly, ‘to secure natural resources to satisfy the demand of their home costumers for raw and fuel; secondly to identify and secure foreign technology and know-how; finally, to escape home market saturation and ruthless price wars’ (Teagarden & Cai, 2009: 73). In addition, Teagarden & Cai (2009) noted that in order to become multinational firms, Chinese companies followed a pattern of four phases:
In the year 2007, China and India ranked first and second respectively in the list of ideal foreign direct investment (FDI) destinations, according to A T Kearney, a global strategic management consulting firm (The Press Trust of India Limited, 2007a). The two nations, because of their similarities in geopolitical, economic and demographic aspects, are often compared with each other. To determine which one is more attractive for businesses to expand to, this essay will examine the business environment of both countries from the following perspectives: political/legal, economic, socio-cultural and technological.
[6] Kripalani, Majeet & Egnardio, Pete. The Rise Of India. Business Week Online. December 8, 2003. http://www.businessweek.com/magazine/content/03_49/b3861001_mz001.htm
Subramanian, Arvind. India’s Economy is stumbling? The New York Times. August 31, 2013: A19. Print.
Whereas China ushered in the 21st Century as member of the World Trade Organization (WTO) and as an economic power, Japan entered the Asian Century with a stagnant economy. And as China transforms its economy into a ‘socialist market economy’ it is held that the attendant social, economic, and political transformations necessitate that its state controlled IRs system is decentralized and more so, it should be converge with international best practice IR sta...
China's development is praised by the whole world. Its developments are not only in the economic aspect, but as well in its foreign affairs. Compared with other developed countries, China is a relatively young country. It began constructing itself in 1949. After 30 years of growth, company ownership had experienced unprecedented changes. Entirely, non-state-owned companies can now be more involved in sectors that used to be monopolized by state-owned companies.
If the development of Financial Market in America is like a sturdy adult, I would say the development of Financial Market in China is just like a child. The history of the U.S. financial market was established and has been growing over two centuries. For China, only twenty year has now passed since the financial market was built and growth. The Chinese financial market seems to be immature compared to the U.S. For example, China’s financial market does not have a thorough monitored stock market. The child is just starting to imitate the behavior and follow the step of the adult. However, the child is too young that mistakes always being made. On the other hand, since the child is in his early growth stage, a high level of growth is undertaking and a large progress might be attained. In today's China’s financial market, it is necessary for China to gather finance professionals in development of financial market. As a recent graduate student, working in the finance field less than a year, it is extremely hard for me in making a tiny positive effect on the growth of Chinese financial. However, to be engaged myself to the development of Chinese financial market is my long-term career goal.
...st and stand in the world. It is predicted that China will one day be the largest economy growing country in world. They continually growing and rebalancing their world to be the best. The growth of economy will depend on the Chinese government comprehensive economic reforms that more quickly accelerate in China transition to a free market economy. The consumer demand, rather than exporting the main engine of economic growth; boost productivity and innovation; address growing income disparities; and enhance environmental. (Morrison, 2014,para2)
Economic boom in India and China: India and China account for 1/3 of the world population and these countries have seen a great economic boom in the recent years and this partially is attributed to the rising costs. Around the world, people have eaten more as they grew richer. This phenomenon is called Nutritional transition. Hundreds of millions more people are now rich enough to eat meat compared with 10 years ago, with meat consumption in China more than doubling over the past 20 years.
China’s economical strength comes from its international trades as the economy has grown to a rate of 10.3% in 2010. It has become the world’s largest exporter in the global economy. In the area of trade, three major strengths of China are 1) it is the single most important challenge for the European Union (EU) trade policy, 2) China is the second trade partner behind the U.S., and 3) it is the EU’s biggest source of imports by far with the dramatic increase in the EU-China trades over the recent years. The EU exports of goods to China were 113.1 billion Euros and in imports was 281.9 billion Euros in 2010. The service exports were 18 billion Euros and in imports were 13 billion Euros in 2009. China has also established trades with Australia. Recently, the two countries have been cooperating and assisting each other in industries such as agriculture, energy and minerals as they continue their free trade agreements (Jia Qinglin).