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By almost any measure – GDP, life expectancy, literacy, exports and more – India has fallen far behind China since 1978 T.N. Ninan The debate in a small group earlier this week was about how far India is behind China.

The quick numbers tossed out varied all the way from 10 to 25 years and more. Figuring out the gap between the two “rising giants of Asia” is in fact an instructive study. For instance, China’s GDP in 2011 was $6.99 trillion, or nearly four times India’s $1.84 trillion. If the Indian economy were to grow at an annual average of 7.8 per cent (the rate for the past decade), it would take 18 years to get to China’s current size. If growth were to accelerate to nine per cent, it would still take 15 years. Could India have avoided falling so far behind China? After all, when China began its Four Modernisations in 1978, the two economies were of roughly the same size ($145-148 billion). Even in 1991, when India began its reforms, China’s economy was only 40 per cent bigger than India’s $268 billion.

The answer is that, in many ways, India in 1991 was already two decades and more behind China on key indicators, and it has not closed the gap. For instance, China’s literacy rate in 1991 was 78 per cent, whereas India’s was just 52 per cent. Even today, India’s literacy rate, at 74 per cent, is short of where China’s was in 1991; meanwhile, China has moved ahead to 94 per cent literacy. Ditto with life expectancy; China’s in 1991 was 70 years.

Twenty years later, India had a tally of only 64 years. Of course, China’s life expectancy has improved slowly in the last two decades, and is at 73; still, it will take India two decades and more to get to that figure.  Some seemingly large gaps might be closed more quickly.

Thus, China’s goods exports are about six times India’s. However, India’s exports have multiplied nearly seven-fold in the last decade (from $43.8 billion to an expected $300 billion this year), so it could conceivably replicate China’s current export figure in less than 10 years. No such hope can be applied to industry, where too China’s is more than six times India’s. Move to research, and China has a citation index that is twice as good as India’s. In the space programme, China sent its first man into space in 2003; India hopes to do it in 2015, but is likely to take longer. As for infrastructure, China has more than 30,000 km of expressways on which traffic speeds go up to 120 kmph; India has a few hundred kilometres. China has a whole inter-city network of high-speed trains, five times as many Internet users, and nearly a million MW of power generation capacity. India has only fractionally increased its train speeds since the first Rajdhani Express of 1969, and even if the country doubles power generation capacity every decade, starting from 150,000 MW in 2010, it will take more than a quarter century to get to where China is today. As for agriculture, China applies fully three times the fertiliser per arable hectare that India does.

The smallest gap is in the mobile phone population. And the largest gap perhaps in the quality of political leadership — China is able to produce a new crop of top-rung leaders every decade, in Beijing and in the provinces and large cities, whereas India’s political parties offer little beyond an upper crust. China’s project execution is of course in a league of its own. As for sport, India got one gold medal in the last Olympics, China got 51.

The cold message to all Indians: stop talking of the two countries in the same breath, and dump the “Chindia” coinage. For why does India not bracket itself with Iran, whose economic size in relation to India (1:4) is broadly the same as India’s to China?    

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Stop the “Chindia” Talk

From WSJ’s Davos blog:

Standard Chartered PLC remains bullish on the major Asian economies of India and China, encouraged by the policy outlook for the two countries this year, the bank’s Asia chief executive said.

The U.K.-based lender, which focuses almost exclusively on Asia and emerging economies, also sees European rivals retreating from those markets as they are beset with challenges at home, Standard Chartered Asia Chief Executive Jaspal Bindra said in an interview on the sidelines of the World Economic Forum.

In India last year, Standard Chartered confronted a range of challenges including slowing growth, rising interest rates and a depreciating rupee. Revenue from the bank’s India unit fell by 12% in the first half of 2011 and by the “mid-teens” in the third quarter, Group Finance Director Richard Meddings said earlier.

Mr. Bindra blamed higher interest rates. “Interest rates went up almost 400 basis points in a short period, and it is very difficult, if you do wholesale business with the best clients in the country, to pass on a 400 basis point increase at any one time.”

But the central bank’s surprise move to loosen monetary policy this week has sent a “clear signal” that there will be no further rate hikes and the government is shifting its focus to promoting growth, Mr. Bindra said.

The Reserve Bank of India Tuesday held its key lending rate steady for a second straight policy meeting but cut the minimum cash reserve requirement by 0.50 percentage point to ease liquidity.

“The government has for a long time shown a huge preference to manage inflation through monetary policy,” he said. But following the RBI cut, “I think we will see a more balanced approach.”

Mr. Bindra also said that the recent “normalization” of the rupee exchange rate — it is up 6% against the dollar so far this year after declining 15.1% in 2011 — will encourage renewed foreign investment.

In China, Mr. Bindra believes authorities will be successful in guiding the economy to a “soft landing” ahead of a leadership transition at the end of the year.

“The priority for all of 2012 and beyond is going to be ‘how do we keep things stable,’ as they have this transition of power at the top,” he said, adding that not just the top political leadership, but also the leaders of major financial institutions and regulators are all due to be reshuffled. “It is quite a massive-scale change of power.”

As European banks regroup and retreat from Asia, Standard Chartered sees an opening. The trend is especially pronounced in industries including shipping and commodities and in markets like Indonesia and India where dollar liquidity is scarce, he said.

“It gives us an opportunity to scale up market share, and second, it gives us a little bit of pricing advantage.”

– Aaron Back. Follow him on Twitter @AaronBack.

In recent years, China has re-invigorated its support for leading state-owned enterprises in sectors it considers important to “economic security,” explicitly looking to foster globally competitive national champions.

In 2009, China announced that by 2020 it would reduce carbon intensity 40% from 2005 levels.

The government has also focused on foreign trade as a major vehicle for economic growth.

The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978.

The disparities between the two sectors have combined to form an economic-cultural-social gap between the rural and urban areas, which is a major division in Chinese society.

The technological level and quality standards of its industry as a whole are still fairly low, notwithstanding a marked change since 2000, spurred in part by foreign investment.

China’s increasing integration with the international economy and its growing efforts to use market forces to govern the domestic allocation of goods have exacerbated this problem.

The growth in both outbound investment from, and inbound investment to, China reflects the nation’s rising economic power and attractiveness as an investment destination.

” Although the figure is already “quite amazing,” the volume is “not large enough” considering China’s economic growth and local companies’ expanding demand for international opportunities, Shen said.

It also aims to sell more than 15 million of the most fuel-efficient vehicles in the world each year by then.

Although China is still a developing country with a relatively low per capita income, it has experienced tremendous economic growth since the late 1970s.

Since the late 1970s, China has decollectivized agriculture, yielding tremendous gains in production.

China is the world’s largest producer of rice and wheat and a major producer of sweet potatoes, sorghum, millet, barley, peanuts, corn, soybeans, and potatoes.

China ranks first in world production of red meat (including beef, veal, mutton, lamb, and pork).

Growing domestic demand beginning in the mid-1990s, however, has forced the nation to import increasing quantities of petroleum.

China’s leading export minerals are tungsten, antimony, tin, magnesium, molybdenum, mercury, manganese, barite, and salt.

Major industrial products are textiles, chemicals, fertilizers, machinery (especially for agriculture), processed foods, iron and steel, building materials, plastics, toys, and electronics.

Brick, tile, cement, and food-processing plants are found in almost every province.

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Davos: StanChart Bullish on China, India

Throughout history, science and innovation have been robust job creators – and as multinational firms shift research and development operations from the US to Asia, the manufacturing jobs have followed. Continue Reading

The release of more than 200 political prisoners on January 13 and the subsequent decision by Washington to announce its readiness to send an ambassador to Burma are the latest steps taken by both governments to normalize relations.

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Taiwan’s opposition Democratic Progressive Party leader Tsai Ing-wen made history by being the island’s first female presidential candidate, but her wider-than-expected defeat last Saturday to incumbent Ma Ying-jeou of the Kuomintang has raised questions about the future of her moderate approach.

Ms. Tsai finished with 45.6% of the vote to Mr. Ma’s 51.6%, a loss that prompted her to say she would resign as DPP leader.

A professor before she became a politician, Ms. Tsai is often credited with lifting the pro-independence DPP out of the mire after former president Chen Shui-bian’s rocky and scandal-ridden tenure at the helm.

“She brings gentleness and sensibility to the party,” Joseph Wu, a former Taiwan envoy to the U.S. and a top advisor to the DPP, said shortly after the election. “She is also very capable in facilitating talks between the factions in the party and consolidating opinions.”

That conciliatory leadership style and approachable personality were what drove her surging popularity both within and outside the party, he added.

But Ms. Tsai also won support by dialing back the DPP’s pro-independence rhetoric, analysts said. An example of that more moderate China policy was her appeal for further dialogues with Beijing and her promise to accept all 16 cross-strait trade agreements signed under Mr. Ma’s leadership.

Although she adamantly rejected the 1992 Consensus—a tacit understanding between the KMT and the Chinese Communist Party that Taiwan and China are one country but each is free to define the term as they see fit—her proposal of a new “Taiwan Consensus” did not completely shut out the option of an eventual unification, a sharp detour from the policy pursued by Mr. Chen.

Despite that softening, Ms. Tsai’s candidacy still did not appear sit well with leaders in Beijing, who warned that any deviation from the 1992 Consensus would compromise the growing harmony on the Taiwan Strait. During the campaign, the “Taiwan Consensus” became one favorite points of attack for Mr. Ma and the KMT, who pointed to it as evidence that Ms. Tsai was naïve to the realities of cross-strait relations.

Yet some analysts said they expected Beijing might still be open to dialogue with a Tsai administration — a notion considered far-fetched during the previous DPP regime.

What effect Ms. Tsai’s loss will have on the party’s platform remains to be seen. The fact that she lost by six percentage points – late polls had her losing by between 3% and 5% — is already being interpreted by some as an indictment of her decision to emphasize social equality and her deviation from the party’s anti-China orthodoxy.

“Obviously, a campaign focused on social justice was not enough to excite the traditional DPP supporters,” said Wu, adding in the future, the party should incorporate more of the possible threats to Taiwan’s sovereignty under the KMT such as China’s continual interference in Taiwan’s quest for more international participation.

Shelley Rigger, a professor of political science at Davidson College expressed similar views, saying that while Ms. Tsai should be lauded for restoring burnishing the DPP’s image, she might have overlooked a key constituency – the “green” pro-independence die-hards—who might constrain the DPP from moving to the center.

“[Tsai] did as well as anyone could have done at pacifying the deep greens, by refusing to accept the ’92 consensus, and at the same time minimizing the role of those ideological issues in the elections, by trying not to talk about that anymore than she had to. The result was still hitting that 45% ceiling,” she said.

Ms. Tsai’s tenure as party leader will officially terminate on March 1, the DPP said, and it’s unclear what she plans to do next. She has said she plans to maintain an office and rumors suggest she may take the reins at a think tank she helped set up.

Analysts say Beijing is concerned less about Ms. Tsia’s future and more about who her successor might be and whether that person will continue the moderate stance she has championed.

“Beijing takes a great interest in the DPP’s leadership because there is always a chance that the DPP might return to power. But I think no matter who becomes the next DPP chairman, the party will retain the more moderate stance,” said Shih Cheng-feng, a dean at National Dong Hwa University.

Party heavyweights Frank Hsieh and Su Tseng-chang are widely speculated to be vying for the seat, though some political commentators on the island say the party should allow up-and-coming stars, such as some of the current DPP county magistrates, to have a shot.

Whether or not Ms. Tsai tries her luck again in 2016, her contribution to the DPP seems likely to be remembered as revolutionary, in a moderate way.

– Jenny W. Hsu

Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2009 stood as the second-largest economy in the world after the US, although in per capita terms the country is still lower middle-income.

In 2009, the global economic downturn reduced foreign demand for Chinese exports for the first time in many years.

The People’s Republic of China is the world’s second largest economy after the United States by both nominal GDP ($5 trillion in 2009) and by purchasing power parity ($8.77 trillion in 2009).

Available energy is insufficient to run at fully installed industrial capacity, and the transport system is inadequate to move sufficient quantities of such critical items as coal.

The two most important sectors of the economy have traditionally been agriculture and industry, which together employ more than 70 percent of the labor force and produce more than 60 percent of GDP.

A report by UBS in 2009 concluded that China has experienced total factor productivity growth of 4 per cent per year since 1990, one of the fastest improvements in world economic history.

The market-oriented reforms China has implemented over the past two decades have unleashed individual initiative and entrepreneurship, whilst retaining state domination of the economy.

China now ranks as the fifth largest global investor in outbound direct investment (ODI) with a total volume of $56.5 billion, compared to a ranking of 12th in 2008, the Ministry of Commerce said on Sunday.

In 2009, global ODI volume reached $1.1 trillion, and China contributed about 5.1 percent of the total.

China reiterated the nation’s goals for the next decade – increasing market share of pure-electric and plug-in electric autos, building world-competitive auto makers and parts manufacturers in the energy-efficient auto sector as well as raising fuel-efficiency to world levels.

In large part as a result of economic liberalization policies, the GDP quadrupled between 1978 and 1998, and foreign investment soared during the 1990s.

Even with these improvements, agriculture accounts for only 20% of the nation’s gross national product.

In terms of cash crops, China ranks first in cotton and tobacco and is an important producer of oilseeds, silk, tea, ramie, jute, hemp, sugarcane, and sugar beets.

Horses, donkeys, and mules are work animals in the north, while oxen and water buffalo are used for plowing chiefly in the south.

Coal is the most abundant mineral (China ranks first in coal production); high-quality, easily mined coal is found throughout the country, but especially in the north and northeast.

There are also deposits of vanadium, magnetite, copper, fluorite, nickel, asbestos, phosphate rock, pyrite, and sulfur.

China also has extensive hydroelectric energy potential, notably in Yunnan, W Sichuan, and E Tibet, although hydroelectric power accounts for only 5% of the country’s total energy production.

Other leading ports are rail termini, such as Lüshun (formerly Port Arthur, the port of Dalian), on the South Manchuria RR; and Qingdao, on the line from Jinan.

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What Next for Taiwan’s Opposition?

With implications both local and global, minimum wages and prices are on the rise in Guandong province, a region that’s been at the center of China’s manufacturing and economic rise. Government goals include moving beyond the low-end manufacturing that has long characterized Chinese industry and dealing with mounting inflation while keeping unemployment low. But these might be contradictory goals. Chinese small-business and factory owners are protesting the mandatory wage increase, which increases their expenses at a time when other costs are also on the rise. Companies are looking to poorer countries for labor, but the scale of the labor force in neighboring nations offer no quick alternative to China’s. The wage hikes signal the end to a large, inexpensive labor force at the world’s beck and call – as well as affordable Chinese-made products. – YaleGlobal Higher wages, combined with China’s goals to move beyond low-end manufacturing, signal an end to low-cost goods for the global consumers Kathleen E. McLaughlin GlobalPost, 16 January 2012 Rights:Copyright 2011 GlobalPost – International News

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Bye-bye Cheap, Chinese Labor

China’s growth rate is slowing but it is still a good investment for a long-term play. Jim McCaughan, CEO of Principal Global Investors, tells Deborah Kan investors should look to the U.S. for the near term.

After keeping its currency tightly linked to the US dollar for years, China in July 2005 revalued its currency by 2 % against the US dollar and moved to an exchange rate system that references a basket of currencies.

In 2006, China announced that by 2010 it would decrease energy intensity 20% from 2005 levels.

China is the world’s fastest-growing major economy, with an average growth rate of 10% for the past 30 years.

Nevertheless, key bottlenecks continue to constrain growth.

The disparities between the two sectors have combined to form an economic-cultural-social gap between the rural and urban areas, which is a major division in Chinese society.

China has acquired some highly sophisticated production facilities through trade and also has built a number of advanced engineering plants capable of manufacturing an increasing range of sophisticated equipment, including nuclear weapons and satellites, but most of its industrial output still comes from relatively ill-equipped factories.

The market-oriented reforms China has implemented over the past two decades have unleashed individual initiative and entrepreneurship, whilst retaining state domination of the economy.

The ministry made the announcements during a press conference held in Xiamen on the upcoming United Nations Conference on Trade and Development (UNCTAD) World Investment Forum and the 14th China International Fair for Investment and Trade.

In this period the average annual growth rate stood at more than 50 percent.

It also aims to sell more than 15 million of the most fuel-efficient vehicles in the world each year by then.

China’s challenge in the early 21st century will be to balance its highly centralized political system with an increasingly decentralized economic system.

Despite initial gains in farmers’ incomes in the early 1980s, taxes and fees have increasingly made farming an unprofitable occupation, and because the state owns all land farmers have at times been easily evicted when croplands are sought by developers.

Except for the oasis farming in Xinjiang and Qinghai, some irrigated areas in Inner Mongolia and Gansu, and sheltered valleys in Tibet, agricultural production is restricted to the east.

Horses, donkeys, and mules are work animals in the north, while oxen and water buffalo are used for plowing chiefly in the south.

There are also extensive iron-ore deposits; the largest mines are at Anshan and Benxi, in Liaoning province.

There are also deposits of vanadium, magnetite, copper, fluorite, nickel, asbestos, phosphate rock, pyrite, and sulfur.

China’s exploitation of its high-sulfur coal resources has resulted in massive pollution.

Other leading ports are rail termini, such as Lüshun (formerly Port Arthur, the port of Dalian), on the South Manchuria RR; and Qingdao, on the line from Jinan.

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Investor: Take U.S. for Near Term, China for Long Term

Inflation in China is slowing down, according to government statistics released last week.  But while economists have greeted the news as a sign of easier times ahead, many in China remain wary.

The National Bureau of Statistics reported last Thursday that the December consumer price index (CPI) had increased 4.1 percent from the previous year, the lowest rise in 15 months.

Many observers abroad saw the news as allowing Beijing more leeway in making monetary policy and addressing other economic concerns.

“The easing inflation pressure is good news and provides further room for policymakers to shift their focus towards growth concerns,” said analysts at JP Morgan Chase, according to a report by the Wall Street Journal.

“The inflation story will move out of the limelight this year,” predicted analysts at IHS Global Insight.

But for now, inflation remains center stage.  The new CPI figures made headlines across China, and though many newspapers agreed that the slowdown was a reason for optimism, others warned consumers of continued hard times ahead.

A shopper inspects prices at a market in Anhui province. Pic: AP

“Last December’s CPI is the lowest in 15 months,” reported Tianjin’s Chengshi Kuaibao.  Similar headlines appeared on front pages throughout the country.

Xibu Shangbao, an economic paper in western Gansu province, was even more hopeful.  “The price of goods recedes, becomes the dominant trend,” read the bold yellow headline, superimposed over a photo of a woman walking through a supermarket filled with colorful packages of food.

The news received a more pessimistic spin in several morning tabloids, which emphasized the continued burden faced by consumers.

In Yantai, a coastal city in Shandong province, the newspaper Jinchen Liudian ran the headline “CPI rises” in large red characters, accompanied by an image of a basket of goods being lifted in the air by balloon.  An infographic showed the particular inflation of various goods, from  cigarettes to housing.

The headline of Anhui’s Jianghuai Chenbao was a single word: “Inflation.” Below was a cartoon of a young man struggling to carry a basket of goods over a red arrow rising above the letters “CPI.”

Front page of Jianghuai Chenbao, Jan. 13 Pic: abbao.cn

The CPI report was given little coverage in Communist Party newspapers, which devoted most of their attention to the meetings of local city legislatures now in session.

But the economic news made the front page of Wuhan’s official Changjiang Daily.  The paper reported that the inflation rate for all of 2011 stood at 5.4 percent, while Wuhan’s inflation rate was 5.2 percent.

The newspaper also noted that food prices had risen by over nine percent.

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China’s inflation slows, but anxiety remains