Op-Ed Contributors

Different roads, same destination

By Suzanne Rosselet (China Daily)
Updated: 2010-05-17 08:00

It will be interesting to see how China and India invest in their economic, business and social structure

The theme of the Shanghai Exposition "Better City - Better Life" signifies Shanghai's new status in the 21st century as a major economic and cultural center. More than 190 countries and regions and over 50 international organizations are participating in the Expo.

What could be a more fitting venue for this World Expo than China. The size of the economy has doubled every eight years for three decades - the fastest rate for a major economy in recorded history.

Yet, 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 as the balance of economic power continues to shift from West to East.

Contrary to popular belief, both China and India are not emerging economies, they are actually "re-emerging." China and India have particular strengths and competitive advantages that have allowed each of them to weather the global financial crisis better than most countries and to gain ground in the "catching-up game" with the developed world.

India, often referred to as the "sleeping giant", is the fourth largest market in the world if its GDP is measured on the scale of purchasing power parity. Both economies are increasing their share of world GDP, attracting high levels of foreign investment, and are recovering faster from the global crisis than developed countries. Each country has achieved this with distinctly different approaches - India with a "grow first, build later" approach versus a "top-down, supply driven" strategy in the case of China.

Although China's income per head is still low, at about $3,566, and less than one-tenth of what Americans have, it is more than three times higher than that of Indians (just over $1,000). China is currently the fifth fastest-growing consumer economy in the world, and is on course to become the third-largest by 2020, with India close behind and expected to move into the fifth position by 2025.

Chinese consumers are indeed putting into practice Deng Xiaoping's famous quote, "It is glorious to get rich". The country recently surpassed the United States to become the world's largest automobile market and huge potential remains in terms of future purchasing power.

China is also the first country in the world to have met the poverty reduction target set in the UN Millennium Development Goals, and enjoys the remarkable success of having lifted more than 400 million people out of poverty. This contrasts sharply with India, where 456 million people (42% of the population) still live below the poverty line, defined by the World Bank at $1.25 a day.

The two countries' economic performance has been very differently orchestrated. China's growth has been mainly investment and export-driven, with domestic consumption as low as 36 percent of the GDP.

On the other hand, India's growth has mostly been derived from a strong services sector and buoyant domestic consumption. India is also much less dependent on trade than China, relying on external trade for about 20 percent of its GDP versus 56 percent for China.

There are equally large differences in how deeply China and India are integrated into the world economy. 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.