Can China overtake india?

Discussion in 'China' started by longriver, Sep 24, 2009.

  1. longriver

    longriver Regular Member

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    What's the fastest route to economic development? Welcome foreign direct investment (FDI), says China, and most policy experts agree. But a comparison with long-time laggard India suggests that FDI is not the only path to prosperity. Indeed, India's homegrown entrepreneurs may give it a long-term advantage over a China hamstrung by inefficient banks and capital markets.

    Walk into any Wal-Mart and you won't be surprised to see the shelves sagging with Chinese-made goods-everything from shoes and garments to toys and electronics. But the ubiquitous "Made in China" label obscures an important point: Few of these products are made by indigenous Chinese companies. In fact, you would be hard-pressed to find a single homegrown Chinese firm that operates on a global scale and markets its own products abroad.

    That is because China's export-led manufacturing boom is largely a creation of foreign direct investment (FDI), which effectively serves as a substitute for domestic entrepreneurship. During the last 20 years, the Chinese economy has taken off, but few local firms have followed, leaving the country's private sector with no world-class companies to rival the big multinationals.


    India has not attracted anywhere near the amount of FDI that China has. In part, this disparity reflects the confidence international investors have in China's prospects and their skepticism about India's commitment to free-market reforms. But the FDI gap is also a tale of two diasporas. China has a large and wealthy diaspora that has long been eager to help the motherland, and its money has been warmly received. By contrast, the Indian diaspora was, at least until recently, resented for its success and much less willing to invest back home. New Delhi took a dim view of Indians who had gone abroad, and of foreign investment generally, and instead provided a more nurturing environment for domestic entrepreneurs.

    This is really a dangerous and tricky question.

    Why do people always think there are hatrid between these two neighbours?
     
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  3. ahmedsid

    ahmedsid Top Gun Senior Member

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    [mod] Longriver, Please take a Note, That you cannot Post links to other forums. Post links to News Articles etc, But not to other forums. [/mod]
     
  4. tarunraju

    tarunraju Moderator Moderator

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    Shouldn't the title be "Can India overtake China", and my answer to that being "no, not at this rate"? There is a small but rising trend of progressive young politicians in the country, so far they only contribute to the choultry of the senior leaders in their political parties, but some of them look very promising. One can only imagine them being the kind of leaders who can turn worthless lands into investment-magnets in the years to come. India also needs better farm-mechanization as today India has more cultivable land than China. So we can trump them in agricultural output, and exports of related products anytime.
     
  5. Sabir

    Sabir DFI TEAM Senior Member

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    Tarun...Longriver is pointing towords lack of homegrown chinese enterpreneurs.
     
  6. tarunraju

    tarunraju Moderator Moderator

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    Of which they don't really need more than they already have, to stay ahead of us. Whoever is running the businesses there is able to attract FDI, and the Chinese people are doing their bit as employees, if not employers. In India, the private-sector is pretty much pariah to the Government. It is least supportive to the private-sector, and doesn't really have financial schemes and policies that encourage entrepreneurship. The disparity between AI and private airline companies is a good example of that.
     
  7. no smoking

    no smoking Senior Member Senior Member

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    The we destoried the whole capitalist class before 1979. So we have to rebuild it from scratch.
     
  8. Sabir

    Sabir DFI TEAM Senior Member

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    How is small scale industries in China at present? Does Government of China have plan to promote small scale industries..?
     
  9. longriver

    longriver Regular Member

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    actually,as far as I know, Chinese government has released measure that are favorable to the development of small scaled industries, such as tax deduction and bank loan.
     
  10. longriver

    longriver Regular Member

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    Sorry ahmedsid. I will not do this.
     
  11. Singh

    Singh Phat Cat Administrator

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    Partition, License Raj, Draconian laws, spirit of enterprise, culture all have helped in making India a nation of entrepreneurs.

    Refer to Michael Porter's theories on competitive advantage.
     
  12. longriver

    longriver Regular Member

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    India for me is a very misterious country. I have no idea of the disputes that happened 30 years ago when I was not born yet.

    What I know about India is the advanced technology and outstanding performance in IT industry.

    I'd like to know how much percent of your IT companies are small-scaled and what kinds of support does the government provide to such companies?
     
  13. Singh

    Singh Phat Cat Administrator

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    Longriver,

    India is like an open book, China on the other hand is an enigma.

    India has very many success stories, the IT success story though is more visible in the media. IT companies are spread all over the spectrum, some are startups, some established behemoths.

    India is one of the toughest places in which to setup and run a business. Refer to : Rankings - Doing Business - The World Bank Group and the Indian government is not helpful at all.
     
  14. NSG_Blackcats

    NSG_Blackcats Member of The Month OCTOBER 2009 Senior Member

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    China and India followed two different economy model for development of their respective economy. Now it is debatable which one is better. China is a predominately export driven economy Where as India is an economy which depends upon its Service Sector and Internal Demand. The reform of Indian economy started in 1991. There is a steady increase in FDI flow to India. To bring more FDI GOI need to provide sector specific incentives. Export of small car is an example of incentives provided by GOI to this sector.

    It is not that China is ahead of India in all sectors. There are few sectors in which India is way ahead of China. The example is IT and ITES. It is because of the timely initiatives and tax concession provided by GOI to IT and ITES sector. So to bring FDI to any sector GOI need to have sector specific incentives.

    Be it India or China we are way behind in creating brands compared to our western counter parts. In future we may have bigger companies revenue and sales wise but it is to be seen what the brand value of that company is. For example brands like: - Microsoft, Apple, Google, Intel and many more.
     
  15. ppgj

    ppgj Senior Member Senior Member

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    there is lot of skepticism about china's accounting practices. the growth rates are projected on the basis which is not a standard international practice. so it is doubtful whether they are actually coasting along as they report. though more FDI has poured into china in the last 3 decades or so it remains to be seen whether that sustains in the long run. with major english speaking middle class (note that will shrink in china due to their one child policy) and the opportunities just opening up in india i think india is a better bet in long term.
     
  16. Vladimir79

    Vladimir79 Defence Professionals Defence Professionals

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    I think the Chinese economy is about to have a rude awakening. Depending on all the FDI is sucking the profitabiliy Chinese owned companies could have on the global market. US and EU corporations are getting all the mark-ups from Chinese back breaking labour with little in return for the items they produce. As this dependency grows the wages in China rise and FDI is starting to dry up to lower wage areas like Vietnam. As this trend continues FDI is going to be making a run for the third world as it did when they initially set up in the PRC. The economic disparity in China is increasing and one of the greatest in the world. This will cause future social unrest between the haves and the have-nots making political stability an issue. The extreme pollution in China is already affecting GDP by 15% and only growing which will further erode government support.
     
  17. NSG_Blackcats

    NSG_Blackcats Member of The Month OCTOBER 2009 Senior Member

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    It is always nice to have constructive criticism. But generalizing that Governments in India (both Central and State) are not helpful at all is not right.
     
  18. tarunraju

    tarunraju Moderator Moderator

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    Hyderabad is one of important IT cities. The part of the city where I live, you have small IT establishments everywhere. The house opposite of mine runs an internet radio, there's an online advertising home-office business down my street, and then there's a 'Pista House' online caterers thing in the next street that sells Hyderabadi cuisine online (delivered anywhere in the city). So yes, the scale of small IT-related businesses are huge. Every big name in the IT industry has a base in Hyderabad, including Intel, AMD, NVIDIA, Creative, Microsoft, Google, you name it. It's the same in many cities in the South. I myself work for an international technology portal called "TechPowerUp.com". The support the government provides is small but pretty useful. Small transactions online (over say Paypal.com) are not taxed at all (or taxed very less).
     
  19. roma

    roma NRI in Europe Senior Member

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    The Chinese FDI vs INdian homegrown entrpreuner was actually a Harvard U paper

    The Chinese FDI type investment vs INdian homegrown entrepreuner was actually the topic of a Harvard U paper.

    written by an indian origin Harvard professor and his China born associate . they had a hard debate on which was the better .

    Personally, I wonder WHY ? Because we need both !

    The China FDI is more an investment towards assembly type manufacturing industry ( majority ) and the indian approach is towards building a better R&D base.

    They are in different categories and both countries need both type of investments.

    India would do excellently well to employ more of its "about to lose faith" farmers and other underemployed and indeed unemployed in fdi funded manufacturing type industries where returns are quick and the investor can see his profit fast.

    but india still of course needs the continuing and increasing investment in basic and intermediate R&D laborotories.
     

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