Academic journal article Monthly Labor Review

China and India: Two Paths to Prosperity

Academic journal article Monthly Labor Review

China and India: Two Paths to Prosperity

Article excerpt

Both China and India have experienced rapid economic growth in the last several decades. In 1980, annual per capita income was $556 in China and $917 in India (2007 dollars). By 2006, China's annual per capita income had increased to $4,766 and India's had risen to $2,534. The growth has been especially pronounced since 1995: China's income increased 8.4 percent per year since then, while India's increased by about 5 percent per year during the same period. In a recent study of these two emerging economic powerhouses ("China and India: Two Paths to Economic Power," Economic Letter, Federal Reserve Bank of Dallas, August 2008), economists W. Michael Cox and Richard Alm compare the different strategies employed by the two nations on their way to rapid economic development.

The general change in strategy for both countries involved opening their markets to foreign trade and investment and encouraging more private enterprise. For its part, China took what the authors call the "traditional route." Following the earlier model provided by Japan and South Korea, China became a center for low-wage manufacturing of goods for export (for example, clothing, toys, and electronics). India, by contrast, recognized that it would have difficulty competing with China and instead used its large English-speaking labor force to focus on exporting services--by, for example, establishing international call centers and data-processing operations for multinational corporations. …

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