Op-Ed Contributors

Different roads, same destination

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

Both the above success stories have come about as a result of dramatic reform undertaken in China and India. Both have adopted a "gradual approach" to development, in contrast to the "Big Bang" or "shock approach" undertaken by Russia after the break-up of the Soviet Union in 1991.

In contrast to India, China's development has been driven by a strong state implementing reforms in stages. Almost all reforms have been the result of experimentation - as Deng Xiaoping famously said: "Cross the river by feeling the stones".

The long-term goal remains the transformation of China's economy to reduce over-dependence on exports and investment. The well being of society also requires greater focus on healthcare reforms, education, labor legislation and environmental protection, as well as job creation for the growing labor force.

Public infrastructure in both China and India calls for enhancement of its quality and efficiency, and to halt environmental degradation. Whereas China has made extraordinary investment in its basic infrastructure (roads, railroads, airports, ports, telecommunications etc), in the last two years, India has doubled infrastructure investment in its budget to 4 percent, but this remains paltry when one considers that China spends around three times as much.

Both countries are heavily dependent on foreign energy and are strongly pursuing outward investment to secure additional energy sources. A more ambitious goal would be to target government funding to provide incentives to make clean and renewable energy projects a long-term priority. Both countries appear to be moving in this direction.

The challenges that India faces mirror those of China. Both need to progress from low-cost, low-value manufacturing and service provision to higher-value activities, but while China is striving to move up the value chain in manufacturing first and services next, India is doing the opposite.

Despite excess capacity in specific industries like steel and cement, China still has great potential for growth, with many new opportunities on the horizon.

The current crisis offers a unique opportunity to encourage more labor-intensive service industries, reduce over-capacity in many low-cost manufacturing industries, boost job creation and pursue the path of long-term sustainable growth. During this "recovery period", it will be interesting to see how China and India invest in the economic, business and social structures, which characterize more mature and advanced economies.

Will India's "slow-moving elephant" ever catch up with China's "roaring dragon"? It may just be a question of time.

In the meantime, visitors from around the world can get a preview of just how far China has already come during the Shanghai Expo.

The author is deputy director of IMD's World Competitiveness Center.

(China Daily 05/17/2010 page8)

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