Academic journal article World Review of Political Economy

Comparing the Economic Growth of China and India: Current Situation, Problems, and Prospects

Academic journal article World Review of Political Economy

Comparing the Economic Growth of China and India: Current Situation, Problems, and Prospects

Article excerpt

In the early stages following the foundation of the People's Republic of China (PRC ), the national economy of China and India were at similar levels. In 1950, India's gross national product (GNP) was 49.5% higher than that of China, and as for the per capita GNP, India's was 2.3 times higher than that of China, while the Chinese per capita gross domestic product (GDP) was only 43.5% of India's. Since the establishment of the PRC , especially in the late 1970s, with the opening up and reform policy, the Chinese economy has made rapid progress and notable achievements regarded as the "Chinese Miracle" (Lin and Zhou 2011). India has also attained sometimes fast and sometimes slow economic development through a series of economic reform policies since 1991. With the rise of emerging economies and BRICS, the topic of India and China-the so-called dragon- elephant competition-has raised increasing concerns worldwide over the past 10 years.

China-India's Economic Growth: Achievements in Recent Years

Chinese economic reform and development have taken a traditional road of industrialization, in which manufacturing industry has been established as the core force to drive the development of other industries and to eventually accelerate the development of national economy and promote the adjustment, optimization, and upgrading of industrial structure. Chinese economic development has experienced a process of enhancing domestic manufacturing industry and accordingly the general industrialization of the country by considerably expanding investment demand (by domestic investment and foreign direct investment (FD I) entry) and export demand (with huge trade surplus). The developing mode adjusts to the global shifting trend of international industry (especially of manufacturing industry) and domestic conditions. McKinsey & Company claims that the development of the manufacturing industry has made Chinese mainland a "world factory" within a short period of 20 years, and China has found a sustainable developing pattern for manufacturing industry. China has gained great success in opening up as well. First, the introduction of foreign capital has gained notable achievements. By 2010, the Chinese FD I mounted up to US$105.7 billion, ranking the second in the world while the fourth in 2005, its proportion in the world raising from 7.3% in 2005 to 9.4% as well. China has already become one of the world's most attractive FD I countries. Until now, with over 30 million foreign companies carrying out business activities in China, China has become the second FD I inflow country, ranking only second to the USA in the past 5 years. Almost all Fortune 500 companies, with a small exception of companies that are not allowed to invest in China due to Chinese restrictions on foreign access to certain industries, have invested in Chinese mainland. Second, Chinese foreign trade has maintained rapid development. At present, China's volume of total imports and exports rank the second largest in the world. Third, China's foreign investment has made considerable progress. By 2009, China's FD I outflows had maintained steady and rapid growth for 8 consecutive years, with an average annual growth rate of over 50%, ranked fifth after America, France, Japan, and Germany in the world. Fourth, the national per capita income is also increasing rapidly. The gap of gross national income (GNI) per capita between China and the developed countries' average level has reduced significantly. China's per capita GNI ratio to developed countries' average level has increased from 24.8% in 2005 to 41.8% in 2009, narrowing the gap by 17% within 5 years. Fifth, the total scale taken in world economy has been increasing. Chinese GDP ranking in the world increased from fifth in 2005, to fourth in 2006, third in 2007, and surpassed Japan to be the world's second largest economy for the first time in 2010. The proportion of China's GDP in the world has increased year by year, from 5% in 2005 to 9. …

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