India & China – Comparison of two Asian Giants

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In the Indian cricket team, both Sehwag and Gambhir are prolific opening batsmen. But, when Sehwag is on the song, Gambhir’s performance is almost over-shadowed by his partner’s fast-paced innings.

But, both the players gel-up very well while running between the wickets and mutual understanding. They set the tone of the Indian innings by showing controlled aggression between themselves and a building a firm base for the Team India.

However, Gambhir immediately joins the party once he settles down and gets the measure of the wicket. Furthermore, this provides opportunity to Sehwag to calm down post power-play session and pace his innings for a longer haul.

This is how Indo-China relationship is currently stacked up. China led the way (like Sehwag) with its decade of scorching growth rate; over-shadowing India’s slow and steady growth prospects (like Gambhir).

However, just when the Chinese economy was getting over-heated, the People’s Bank of China slammed the brakes on its scoring rate; thus, passing on the baton of illuminating the world economy to India by taking over the driver’s seat.

In a nutshell, both China and India have to gel-up to emerge as two giants that will firmly buttress the world’s economy in the coming century by preparing themselves for a second wave of growth in aftermath of the global financial crisis, says a report on China-India Comparison – An examination of 2011 Direction and Developments.

Key Findings of the Comparison Report between India and China

India catching up with Chinese economy

India is currently in the phase of growth as explained by Gambhir’s position above. The country has just started to come in lime-light and its growth patterns have mirrored that of China’s at an average of about 8% annually until the financial crisis hit. India’s economy currently is in 12th position, and is likely to break into global top 10 in terms of size. By 2030, India will have overtaken China both in terms of population and GDP growth rates.

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The Indo-China bilateral trade has grown significantly since 2005, except for the crisis-hit year 2009. Chinese imports of Indian goods fell 26.6% more than Indian imports of Chinese goods. The inequality of trade has led to tension as Indian manufacturers have to surpass the rout of low-cost Chinese goods.

Tax Structures

Both India and China have done fairly well when it comes to tax structures and other central and regional levies within the country. Moreover, India is on the cusp of landmark tax reform, especially in indirect taxes through introduction of GST.

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While China did away with preferential tax incentives largely available to foreign investors in free trade zones, with unification of tax base in 2008; India has shored-up tax incentives in special economic zones to gives its infrastructure sector a much-needed boost.

The Manufacturing Hub

Morgan Stanley had reported that China’s rapidly aging population, followed by its one-child policy, is set to dramatically shrink its workforce and effectively pass the baton to India as the world’s manufacturing hub. Moreover, China is becoming a consumer market to sell to, rather than a global manufacturing hub.

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Also, the World Bank’s prediction that China’s GDP growth will fall to 7.7% in 2015 and by 6.7% by 2020, highlights the cause of concerns that could slowdown the dragon’s growth. Morgan Stanley expects India’s growth to surpass China’s growth two years from now.

The Government Intervention

While a vast majority of China’s growth comes from state-owned companies, India’s economic miracle can be largely attributed to its private sector story. Having said this, even India’s state-owned companies are gradually logging change from its conventional business model hit by red-tapism.

China’s state-owned and subsidized model has led to unfair competition and frequent government interventions paving way for difference in decision making and executive talent within the two countries.

The City to reckon with

The stage is set where India-China comparisons are inevitable in any form of demographic analysis. The report finds that though Shanghai is referred as China’s financial center, it seriously lags Mumbai in terms of financial maturity, profitability, and ability to deliver dividends to shareholders.

The Business Environment

In China, the business hubs are already established and running with efficient administration in place. However, India isn’t up to China standards yet when it comes to development and execution of large-scale projects including infrastructure solutions.

But, on the other hand, even China is facing certain headwinds such as increase in labor unrest and strikes due to protectionist policies. The same also applies to social media and internet interventions administered by the Chinese government. Even the levels of corruption is different in both the places – with that at China being more of disguised as favors and connections; rather than in the form of ‘baksheesh’ that is prevalent in India.

So, where are India and China headed from here?

"India & China – Comparison of two Asian Giants", 5 out of 5 based on 1 ratings.
  1. […] numerous similarities between India and China, comparisons are always made between the two countries especially on economic prosperity and attractiveness as a business […]

  2. Prof. (Dr.) Sudhiranjan Dey says

    The statistics in the article is over optimistic and not practical. India’s par capital Income is $ 1219, ranked 142nd in the world which cannot reach US$ 8,000 level in 2013. If it reaches US$ 4000 level it will be a miracle.

    Its not the country but it is the culture, governance and attitude that is playing main role in the growth path of these two countries. China tend to downplay everywhere from their currency to the country’s real statistics being extremely humble while India always try to hype in everything which is perhaps a typical tendency of people suffering from inferiority complex but always tend to portray superior.

  3. Gaurav says

    Justin – I agree hands down.

    I am Indian to the core and lived with a myopia that my nation is great. powerful and rich compared to the rest (neighbors ). Until I got wings to see the rest for years, after 10 years of traveling, My eyes actually opened.

    We take pride in comparing our nation with the rest on data points that are set based on predictions – its like comparing apples to oranges. We some how don’t want to see the truth, and even if we get to see it, shy away from it and say no.

    This is fundamental issue in our thought process. Tell me how can India be what we think it is (or will be) if as individuals we are not what it takes to make our nation that.

    The biggest lack we have is creativity and innovation, not that we are zero – we hold a place, but far behind to compare with tops.

    The great IT Industry that India is proud of, is simply writing codes to make a machine do things which a westerner innovated of !! So is innovation and creativity mere – copy and paste – answer is no.

    As a country we are lazy to provide Justice – why go far, we are lazy to provide justice to our own people. Scams & corruption, disaster & relief – list can go on…. We are making money by creating loss and damage to another fellow citizen of our great nation. Beat that!

    Diversity in unity is what we are now.

    Any way, the grass is getting greener the order will change, I been waiting for the winds of changes my life time, hopefully I will see the dawn be I go to sleep.

  4. Justin OJ says

    See this thing yer discussing is on papers only. Inorder to develop we need to give up retarded mindsets.

    Bring down corrupt politicians.
    Buy Indian products and be Indian.
    Start entrepreneur units, for those who can afford it.
    Give up middle men concept in marketting, and go online for everything.
    Always promote innovative ideas.
    Always think we can make India better place than anywhere else in world if we try.

  5. Vanson Tran says

    My personal opinion is “To Project These Two Countries In Few Decades Later – 2030-2050”. They will both become Great Nations of Economy. China will be better if its Leaders, recalling the Human Revolution and compromising its Human Rights with Moral Philosophy of its Ancient Cultural Values. India, together with the West, Russia and USA will be behind China, if these Nations will less consider on Human Rights sincerely, that means Capitalists still aim at exploiting Human Labor to be rich and selfish or greedy to hold priority position dominating others, w/o considering Human Welfare Level that should be treated fairly, equally with Real Justice. Vanson

  6. Jitendra Maru says

    thanks track.in for giving me help for research….

  7. Darlin G. says

    China’s central financial institution once again bumped up the level of cash reserves the nation’s banks must hold. The move is a try to control Chinese inflation that is emerging as a severe threat to a global economy reliant on cheap Chinese exports. A 25 percent tariff on Chinese imports is the solution floated by Donald Trump, whose attempt to score points with such a canard has inspired laughter among the cognoscenti. Here is the proof: China struggles to curb inflation that threatens global growth

  8. stone says

    i’m a chinese and i was just back from a trip in india. My experience is that india is at least 20 years behind China. Even the IT software industry which indians are very pround of, lags behind China in terms of scale and innovation. They are mostly low-tech coding work without any creativity.

  9. Altaf Rahman says

    @ Viral,

    I was carried away with the title of the article which is comparing India and China. But if the context is to imagine how it will be if resources of both India and China are pooled together, it is like win win for the block.

    The only comparable situation is that of US and Canada. Both are mighty countries (combined land area is 1.5 times that of Indo China and combined population of 1/8th that of Indo China) and if you see the trade figures between them, it is mind boggling. Both of them co-exist so easily, they dont have cultural differences (being dominated by destitute european migrants who eliminated locals to occupy the countries). Our traditions, cultures, history and the mighty Himalayas are coming in way of each trying to know the other. Even scintifically India is a piece of land broken from African continent and drifted into Asean plate.

    What ever past says, the vision you portray (that of what combined Indo China can achieve for the global economy) is mouth watering.

  10. neashi says

    really wonderful post..

    1. Viral says

      Thankyou Neashi !

  11. Altaf Rahman says

    A nice way of compiling many diverse facts.

    However my personal views defer from the author’s.

    1. Both Viru and Gauti when batting play for the team. For them reaching personal milestones though is desirable, they see the bigger picture and play to the needs of the country.
    In case of China and India, they play for themselves. They dont care what happens to the other. For them the wellbeing of their own country (comparable to personal milestones of Gauti and Viru) are of utmst importance.

    2. It is good for anyone to have goals. But you need determination to achieve them. India can wish to reach the modernization of that of China. The ground reality is we do not have the resources, wealth, technology, determination to achieve that. People can take few factors and make some graphs and wish that by 2020 or 2030 or 2050, we will reach China in some factors.
    Let me give you an example.
    Suppose your family of 5 members lives on a 2 acre farm land. Your neighbors family of 5 or 6 members lives on a 6 acre farmland. Your family just make ends meet with the income. Where as the neighbor lives on the income of 2 acres and saves the income of the other 4 acres and invests it in other profitable ventures like food processing. He will continuously outpace you in all factors. As his income is more, his kids are well taken care of, they get more advanced education, they have a better house to live in, they get better medical facilities, they do more business.

    Now you can say, with hybrid farm product, you can beat your neighbors income. But the ground reality is your neighbor has been using the hybrid varieties 20 years before you. So you cant beat him on this angle.

    This is what is happening in case of China and India. The figures are the proof. China has more products to export than it imports. For more than 20 years China has current account SURPLUS. India imports more than it exports and so for the last 60 years it has current account DEFICIT.

    Even in hand to hand duel, China beats India hands down. Take the case of militery might or strong govt will or trade in bilateral front. China dominates India. Proof – ??

    Militery might – It won the Indo China war.
    Govt policy – India surrundered to the force of Chinese policy in bilateral issues. While India finally agreed that Tibet is integral part of China, China refuses to vacate 1/4th Arunachal Pradesh it occupied or even acknowledge the fact. On the other hand China claims total Arunachal Pradesh as part of China. And India can do nothing but sulk.
    Bilateral trade – Check the figures, China exports more to India than it imports from China. The worst thing is China imports Iron ore from India and refines into steel and makes equipment and sells it to India.

    Bottom line is China is 3 times bigger in land area where as equal in population. It had nuclear capability even before we were graduating from rifle to machine gun. It is developing infrastructure at such freightening pace in order to achieve western standards while we are facing problems even to widen roads in crowded cities.

    Though I wish I could see such growth in India, as a pessimist, I dont think I can see that in my life time.

    Just my two paisa :(

    1. Viral says

      Altaf,

      My comparison of China and India with the Indian opening pair is w.r.t. their relation to the world economy. So, though, India and China are perfectly individual economies, for the world economy this pair of Asian countries is like opening batsmen for the team, leading from the front :)

  12. mediafire says

    as per my thinking… india will beat china…

    because… on paper only india has 8% gdp… india is operating with an underground black money economy which is too huge…

    no chance for china..

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