Match of Dragon and Elephant Comparison of Chinese and Indian Economic Nowadays

COMPARISON BETWEEN CHINA AND INDIA ECONOMIC                                    1

Match of Dragon and Elephant

Comparison of Chinese and Indian Economic Nowadays

Yan Chen

Westcliff University

COMPARISON BETWEEN CHINA AND INDIA ECONOMIC                                    2

Abstract

Nowadays, China and India are more and more likely to become the two engines of the global economic. China has been developing rapidly since it policy of reform and opening up, while India is developing more smoothly. The results for the competition between the authoritarian regime and free institution can hardly be predicted, but its already drew a global attention.

 COMPARISON BETWEEN CHINA AND INDIA ECONOMIC                                    3

Match of Dragon and Elephant

Comparison of Chinese and Indian Economic Nowadays

        With the unexpected rising of China and India’s economic development, the economic and political territory in the world has been moving. China and India have both become the engines for the growth of the global economic, but just in different driving directions.

Based on the World Bank’s data report, China’s GDP per capita in 2015 is 7,588 dollars, with a GDP growth rate of 7.3%; India’s GDP per capita in 2015 is 1637 dollars, also, with  a GDP growth rate of 7.3%. These two countries make an interesting pair of comparison in front of the world. China has encountered a rapid expansion in economic in more than past 30 years compared with India, however in recent years, a slow down just occurred, while the economic growth rate in India gradually rose up, just caught up with China in 2016.

Initially, if we take a look at China’s rapid expansion in economic in more than past 30 years, admit it or not, we have to say that the economic growth in China in this period of time is phenomenal. The reasons are multi-folded. Since the policy of reform and opening up in 1979, suggested by Xiaoping Deng, China has opened up the domestic market to global trades market more or less, which has been proved a great contribute to China’s economic growth. Compared with India, China’s economic take-off may lie in the three aspects of reasons, demographic dividend, abundant foreign investment and technology.

1. Demographic Dividend

When it comes to “China economic miracle”, most people would treat demographic dividend as a crucial fact, therefore, the demographic dividend is associated with the future of China’s economic. Based on the data report from World Bank, China’s youth population reached its peak in 1978, and the decrease of elder-support rate would keep going for about 40 years, which depends on the birth rate as well. The growing number of youth population rate has brought China plenty of labor supply since 1965. However, in the report, it also indicates that the growth of youth population rate met its turning point in 2015. Generally speaking, when this kind of situation comes across, labor population decreases with many problems. In the case of China, with a duality system of urban and rural structure, there is still considerable population in rural provides urban with enough labor resource in near future, or even longer lasting. So optimistically, China would still benefit from previous demographic dividend for more than 20 years.

The demographic dividend does not necessarily mean growth of economic, but as long as the economic is on the way of fast growth, the demographic dividend, without any doubt, would be a powerful boost for the economic growth. The advantages of abundant labor resource and low costs make China the world factory and world economic engine. While simultaneously, it is inevitable for people to have some concerns that how long the growth would last when the demographic dividend is gone and what strategy China should take to make the transition.

1. Foreign Investment

Since the policy of reform and opening up in China, especially after 1993, it took the first place from United State in 2002. With a great deal of foreign investment flooding in, it brought advanced technology and experience of management, which, to some extent, filled the technology and management gap in China.

In the first place, before the policy of reform and opening up, China was short of capital, technology and some other essential productive factors, while the foreign investment directly met the massive fund need in the economic development in China. Secondly, the foreign investment also made contributes to industrial restructuring. Before the policy of reform and opening up, in China’s economic composition of industry, primary industry took most share. After that, about 70% of the foreign investment was put into secondary industry, and about 30% of it was put into tertiary industry, which generally accorded with China’s need for industry structure adjustment at the period of time. Moreover, there are still much that China benefited from foreign investment, such as the rapid development of foreign trading, rising of job positions numbers, promoting the establishment and improvement of Chinese modern enterprises, etc.

1. Technology Progress

The foreign investment brought a large amount of new technology to China, which contributed China’s economic development and transition of economic structure. The extensive mode of production has to make a transition to a more sustainable way. But compared to India, this may not be an outstanding reason to articulate.

After the analysis of the reasons that leads to China’s economic take-off, I will get back to the comparison between China and India. Upon the discussion of China’s advantages above, India also takes some shares in this competition. China’s birth control policy is gradually eliminating the demographic dividend accumulated in years, and it makes China an abnormal population structure. While there were no such big increase or decrease rate of population in India, so India’s population structure is healthier which is a stable background for economic growth. China’s economic growth tends to be gentle, while in India, we can foresee a strong domestic demand in future providing a secure for the economic development. Also, Banks in India have higher degree of commercialization, so they are more experienced in managing risks and credit analyst. Moreover, India does better in creativity industry and it is more suitable in India because of their enterprise management experience and legal environment. But in some other fields, China still are ahead of India. Government interventions resulted in better and more complete infrastructure that made a firm foundation for economic development. And China has a much more adequate talent pool than India, better education promises China a brighter future. Still, a relatively low level of loan means there is much room for a lot of to finance. For China, industrial upgrades and restructure are around the corner.