India and China had the same GDP in 1950; today China's GDP is more than three times that of India, even as it has a large bureaucracy. Often there are severe charges of corruption on people in power there. All over, bureaucracy is charged to be antithetical to developing entrepreneurship. In today's world of globalization, all those countries that want to have faster and exponential growth have been cutting bureaucracy and promoting entrepreneurship. How does China defies economic and social theory?
I have two thoughts.
First, it is possible that state bureaucracy in China is far more agile than its size and scope would suggest. Further, the existence of bureaucratic structures does not necessarily indicate heavy-handed governmental intervention. China has already demonstrated a degree of ideological flexibility not seen in other present and past "communist" regimes.
Second, savings equals investment, and investment leads to economic growth and development. Until very recently, the Chinese people have been savers, not consumers. This accumulated net savings has provided the means necessary for investment and capital development.
I am not sure how this compares with the Indian economic experience, but my understanding is that there has been proportionately more consumer spending in India. Also, democratic governments seem to foster a political culture more conducive to consumerism (the pursuit of happiness) than do authoritarian ones, such as China's government, which has historically enforced savings and has directed investment towards more capital intensive kinds of development which leads to greater economic growth in the long run.
I firmly believe that the main point is globalization.
Looking at Chine foreign investment strategies, they have been overwhelmed with inward investment from the first world countries and export of end product.
Plus, they aggressively invest in other countries, mostly in the ASEAN region.
Debi,
some general observations on SME's and emerging economies attached
https://www.researchgate.net/publication/299747565_Towards_a_talent-driven_outward-oriented_globally-competitive_SME_framework_Discussion_Paper
Technical Report Towards a talent-driven outward-oriented globally-competitiv...
The information revolution and globalization have significant implications for the GDP and this led to demand for moving government decision making open, leaner, efficient and de-layered governance structures focused on good government. The growth of a nation GDP depend on the ability of the governance system to adapt to this changing world. The reason for higher GDP in China, is a better multi-order governance to cope with this new world economic and political order.
Does China's case tell the world that bureaucracy can be mended even in supposedly communist systems, Ismat? Perhaps, no other country could do that. India's bureaucracy has not been mended even in a democratic system--it is so arrogant, corrupt, and distant from people's aspirations. Of course, its nexus with politicians and moneyed class is perpetuating the status quo. I sometimes feel to have an opportunity to see how things are happening in China.
Dear Debi; Yes China is able to develop within communist systems an efficient multi-order governance system and this is paying back. China is perhaps only country who is able to move from under-develop to Developed on its own in last 200 years. Even they successfully digested one nation two system concept in the past. We in developing world has real problem of good governance. Our leaders (politicians, bureaucracy and junta) intentionally waste time and efforts on non issue.
Regards
ismat
Ismat, what you are saying is definitely true; otherwise how could one notice such an exponential rise in Chinese economy, despite bureaucracy. Their track record on literacy and primary health is also highly impressive. This has happened more post-Deng Xio Ping reforms. I do not know, whether the high performance can be said to be systemic or attitudinal. I have seen more Mercedes cars in Shanghai than anywhere in Europe or US. They adopted a unique amalgam of the private with public.
The productivity of a country (any country) depends upon the way that its 3 factors of production (land, labor and durable capital goods) are combined. The amount of investment in the latter factor in China since 1950, clearly is much greater than in India, whilst the numbers of workers is comparatively slightly less and the value of the land being used for production has increased (that is the usefulness of the land is more). Compared to India, the numbers of workers has grown since 1950 but the effective land in use is not so much greater, due to more speculation in local land values and the associated withholding of it from proper use. Comparing the difference in all 3 factors, it is the smaller increase in investment in durable capital, that is probably the most significant effect. So it should not be surprising that China has increased its relative GDP from 1950 more, when compared to India.
Globalization is one thing. What I have personally witnessed while travelling all over China is that at the local level, there is urgency to do business and as long projects are not too big requiring central government approvals things can move fast. Key point is the assumption that there is so much money to be made in China so so many companies will go in even though it is not clear if it is profitable to do so. Many have been burned, protectionism is big - so I see things subsiding to a much lower GDP growth over time as the world accepts a more realistic picture of doing business there.
Finally, the machinery and way of doing business that gave China past growth has been undermined by the attacks on the system that brought China to double digits growth in the 1st place - so the country is going through self-discovery in terms of where they want to go, what they want to be "when they grow up"...
Very good article! But Indians are more free in their individual decisions
Best Andreas
Hi Debi,
given that there is a substantial difference in population, first you should compare
per-capita GDP and see if your evidence is robust...
Dear Debi,
please compare realative or even absolute value of FDI during last decades.
Best wishes
JB
Per capita GDP comparison can be easely obtained form here:
http://www.imf.org/external/pubs/ft/weo/2016/01/weodata/index.aspx (in PPP terms)
and here:
http://datos.bancomundial.org/indicador/NY.GDP.PCAP.CD (in current USD)
Notwithstanding, it is controversial how to compare GDP figures between comunist and capitalist economies.
In spite of recent advances in worldwide methodological harmonisation (e.g. leading to: http://www.wsj.com/articles/china-revises-its-gdp-calculations-1418997368), the estimation of added-value in services is still an issue for capitalist-comunist comparisons.
It is well known that the US create a specific comision for that purpuse in the fifties, at the Rand Corporation and the CIA (http://www.ggdc.net/maddison./ARTICLES/USSR,RIW,1998.pdf).
The controvery remains open as it can be seen here: https://www.researchgate.net/profile/J_Neary/publication/228119415_Who_Shrunk_China_Puzzles_in_the_Measurement_of_Real_GDP/links/0912f512351c197625000000.pdf
In any case, it appears that CHINA's GDP is not only bigger than INDIA's one (and growing every year) but also higher than reported, at leat until 2013 (I'm not sure that the underestimation is still present after the last methodological revision).
Hope it helps!
Article Who Shrunk China? Puzzles in the Measurement of Real GDP
My best guess ? The influence of the climate.
'On average' China's climate is more temperate while India's is relatively hot/humid (on average!). GDP has to do with productivity, and productivity depends to a significant extend on 'productive' ambient conditions. In the 50s both countries were below 'standard' (which is some kind of average as well). And China simply has the better chances to prosper.
Taking climatic/ambient conditions into account would give a new view on such statistical numbers. I admit that there are some exemptions (e.g. Singapore), but climatic influences should not be neglected.
Hi Me Saini
I distinguish two types of corruption
· Those who won’t do the job they are hired to do without having their palm greased. Tax inspectors, providers of permits etc. fall in this categories. They ask for bribes and they have a list price to do their legal duties. You also can get a favourable verdict if the price is right. These are reactive people and predators who wait for an opportune moment to strike.
· Those who create opportunities and their palm get greased in the process. These are proactive people. They continually search for investors, buyers or problems require resolution. You might think they are at the fringes of the law, but more often than not they are breaking it by getting rid of completion because of their position in the government, or inflating the purchase prices for a bagger share. In some countries this type of corruption is made legal by calling them facilitation and the money exchanged as the facilitation money. If such facilitation is in open, no abuse of positional power and in the privet sector we call it brokerage, which is perfectly legal.
In the first type of corruption nobody befits except the perpetrator. In the second type, many people may benefit (in the form of new factories, new trades etc.) but the perpetrator (and his cronies) become supper rich. This type corruption rely heavily on sleeping partners in the government.
Without open society you can get rid of corruption. Sleeping partners have the power to silence whistle blowers.
If there is corruption then, it must be of the second type.
One of the best thoughts about China's high GDP seems to be given in the following link:
https://blogs.cfainstitute.org/investor/2011/12/06/what-explains-china’s-economic-growth-and-is-it-sustainable/
Dear Debi S. Saini. thank you for this excellent question. It sure questions basic standpoints in economics or future directions, due to enormous size of China, and incredible growth during last 1.5 decade. If only think of GDP, it is GDP x capita, there is a tremendous lot of capita, economic relations from smaller countries (Switzerland, Denmark, Croatia, Sweeden..) is not reproducible. What is the optimal level of "background services" and better yet how to coorinate things in order to boost productity and decrease redundancies is very perplexed, tentative and visionary. Certainly one difficult task for ministers of economics, agriculture or finances/taxation.
Dear Debi S. Saini,
The bulls say India is the next china. India is very different country than china on many fundamental dimensions as democracy being key China is able to develop within communist systems an efficient multi-order governance system and this is paying back. China is able to develop within communist systems an efficient multi-order governance system and this is paying back. India began its economic reform in the early 1990 But in the past 25 years chin a has turbocharged its economy while india has languished in relative terms.China and India is the two emerging economy of the world. China and India is 2nd and 9th largest country of the world, respectively in nominal basis. On PPP basis, China is at 1st and India is at 3rd place in 2014. Both country together shares 16.08% and 23.16% of total global wealth in nominal and PPP terms, respectively. Among Asian countries, China and India together account for 52.77% (PPP) and 48.99% (Nominal) of total Asia's GDP.
GDP of China is 5.06 and 2.39 times more than India at nominal and ppp terms, respectively. China crossed $1 trillion mark in 1998 while India in 2007 at exchange rate basis. Now in 2014, India crossed 2 trillion mark and China crossed 10 trillion. In 1980, size of economy of China and India was $309 and $181, respectively.
China and India is the two emerging economy of the world. China and India is 2nd and 9thlargest country of the world, respectively in nominal basis. On PPP basis, China is at 1st and India is at 3rd place in 2014. Both country together shares 16.08% and 23.16% of total global wealth in nominal and PPP terms, respectively. Among Asian countries, China and India together account for 52.77% (PPP) and 48.99% (Nominal) of total Asia's GDP.
GDP of China is 5.06 and 2.39 more than India at nominal and ppp terms, respectively. China crossed $1 trillion mark in 1998 while India in 2007 at exchange rate basis. Now in 2014, India crossed 2 trillion mark and China crossed 10 trillion. In 1980, size of economy of China and India was $309 times and $181, respectively.
Regards,
Prem Baboo
Thank you for the invitation.
Here, in Athens, Greece, I see a considerably larger number of Chinese people who work in the trade, in comparison with Indian people.
I don't know what happens in other countries but I consider that Chinese people, both inside and outside their country, play a very active role in its progress.
I agree, one reason that explains the difference is that China started modernizing itself much earlier i.e. from 1978 onwards under the leadership of Deng Xiaoping. That is, even before Thatcher's globalization policies began in the UK. That gave an early advantage to China. On the other hand, India started opening up in 1991. By that time, Chinese manufacturing infrastructure had been developing at a good speed. Also, China focused itself on investment in education, an area in which India has been quite slow.
China has less corruption and well documented economy as compared to India
Economy need not collapse into a Chinese Great Depression to produce a global economic crisis, although the possibility of economic collapse in China cannot be ruled out. The 17% contraction in Chinese imports last year was already enough to tip the global economy into recession. The consequences of this economic hard landing in China will be felt in ever corner of the world.
Source - http://news.goldseek.com/GoldSeek/1466094593.php
The International Monetary Fund (IMF) last month cut its 2016 global growth forecast for the fourth time in the past year to 3.2 per cent, citing China slowdown, persistently low oil prices and chronic weakness in advanced economies. This was down from 3.4 per cent projected in January.
In contrast, for India, it retained its 7.5 per cent GDP expansion forecast for 2016 and 2017, up from 7.3 per cent in 2015.
Source - http://auto.economictimes.indiatimes.com/news/industry/india-to-drive-world-growth-for-next-10-years-singapore-pm/52500826
Being a student of science, I try to answer in my own humble way:
No doubt, it looks 1:3 in favor of China, but there are serious doubts raised time and again about the validity of this data.
Yet admitting your observation to be true, I explain the large difference in the economies of two countries -China and India who jointly account for 2.7+ billion people, which is roughly 40 percent of the total population of the world.
[1] More availability of natural resources per ca pita in China: With 1.4 billion population(2016) in 9. 597 million kM^2( excluding Hongkong and Macau), there are available more natural resources/ person in China than that in India having 1.33 billion(2016) residing in 3.287 million kM^2 .
[2]*Higher population growth: With the adoption of ONE CHILD policy( now abandoned) , China’s population growth is only 0.44% while India’ population growth is 1.25%. Naturally, there will come CRUNCH in resources all the more year after year as India have 3 times the new mouths to feed per year as compared to China.
[3] Surrounded by neighbors with different view points: India has fought THREE wars with one neighbor and ONE with the other. The defense budget of India has more than tripled over the past decade from Rs 80,500 crore to Rs 2,46,727 crore (2015-16) making India the world’s largest arms importer. It has certainly eaten up India’s economy.
[4]* Democracy versus Autocracy: India’s founding fathers have willfully opted for a democratic form of government. Certainly, the making of rules/laws and their implementation needs more time / money/ resources in a democracy and thus the generation of wealth slows down.
[5] Policies differ with change in government: In a democracy, the rulers are elected by the people. It went very well in nineties when the Liberalization/ Economic Reforms prevailed and the economy started looking up. But India's economic growth began slowing in 2011 because of a slowdown in government spending and a decline in investment, caused by investor pessimism about the government's commitment to further economic reforms and about the global situation.
[6] High international crude prices affected India more than China. This exacerbated the government's fuel subsidy expenditures, contributing to a higher fiscal deficit and a worsening current account deficit.
[7]There comes 2012:In late 2012, the Indian Government announced additional reforms and deficit reduction measures to reverse India's slowdown, including allowing higher levels of foreign participation in direct investment in the economy which got a further fillip in 2014-15. Only yesterday, the Indian government has announced measures for more Economic Reforms, which, hopefully, will create more wealth for India.
[8]*One consequence of population control policy is that China is now one of the most RAPIDLY AGING countries in the world while India is a MOST YOUNG nation.
Hopefully, India’s economic growth will catch up with China in 3-4 years.
Agree Everyone's opinions. I add one thing, it depends individual interest with all peoples interest to do work in the right way.
1.China's legal system (high coefficient of fear; in 2015 there were punished 300.000 officials for bribes; these acts are represented for the public); 2. 87,4% (2012) practice some kinds of Chinese folk religions and Taoism. 3.Ethics of generosity, minimalism, collectivism; 4.Grassroots capitalism; 5.Groundwork; 6. Embedded capitalism; 7.Effective and efficient institutional infrastructure; 8. At first exploitation of numerous cheap workforce; 9. After successsful agrarian economy to successful industrial economy; 10. New technologies from all over the world; 11. Flexible prices (including love of the developed countries to hand-made goods); 12.Influential uncle; 13.Peaceful and constructive foreign policy.
https://www.washingtonpost.com/world/asia_pacific/is-china-heading-in-the-wrong-direction-for-once-the-west-calls-beijing-out/2016/03/22/c4cad76e-eacb-11e5-a9ce-681055c7a05f_story.html
India has made a great breakthrough and we hope on success in future.
China would have never gained access to capitalism on its own. Its partial or specific capitalism has been controlled by the US and other English-speaking countries. The alliances and interests of WW2 will be valid until the next war.
Who would need or encourage powerful India with less corruption, innovations (incl. spiritual) and so many young people (potential workforce) or innovative Japan (knowing what they could do with spirit embedded in technology or fearful of that)? People - especially political leaders - seek to avoid change, difference and any events of scale (revolutions, disruptions, crises).
It is easier to control countries or entities that are already controlled from the inside by some form of a regime (China, Russia) and that seem opposite (for opposites are often similar) than ones that are more democratic (India, Japan, Korea) because differences (e.g. in culture) cannot be reduced - they stand out and the outcomes of such alliances cannot be easily predicted.
Dear Debi:
According to Wikipedia, China's GDP measured by Purchasing Power Parity is equivalent to 2,5 India's GDP.. I am not an economist, but I think China has been growing faster and during more time than India. Comparatively, China probably entered the modernization phase in a more integral way, while in India there are still large remnants of the pre-modern society. These different modernization rates may tend to balance out over time.
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)
I am not an economist and cannot give an exprert's opinion. Yet, this reminds me the history of Soviet Union. Till there were very large investments in science and education, the USSR was growing fast and "defying capitalist economic models". Once the investments in science became less generous (financial reforms early 1960s), the USSR stumbled and start to collect and acummulate econnomic problems.
China is investing now in infrastructure and science very generously, I think no comparison with other developing countries
Both countries China and India are currently capitalists, immersed in the global economy and the free market economy. Both countries have the largest populations in the world and a major economic and cultural inequality, besides bureaucracy and corruption
In all they look alike but how to explain the great economic growth and as trebled its GDP in about 66 years (2 business generations of 33 years). I think the difference lies in its political system, India is a democracy after he was released from his status as English colonist, Democracy at last with many shortcomings.
But China claims to have a democratic system, but in their social and governmental structure is a Dictatorship (pseudo democracy). He unceremoniously introduced to ultransa fierce, regardless of social costs, more illnesses, many deaths, more miserable with starvation wages, it suffered a population that no longer revolting because they're starving or kill capitalism.
A large bureaucracy and middle class very orderly and obedient to the authoritarian regime to "behave as expected by the nomenclature" are rewarded with the authorization of having not one but up to two children, a credit to buy and pay for life a department .
All this crowned at the top of the social scale of the oligarchy, by favored industrial and high ruling bureaucracy that has no limit its ambitions and possessions, under penalty of "losing everything even life" for disobedience to authoritarian regime, mainly plans for economic growth and savage capitalism, regardless of the human costs in the present, future growth.
I think this is the big difference.
India will (most likely) accelerate faster than China soon: during the last two generations they concentrated more in (the development of) human resources/democracy than the GDP, whereas the concentration of China was in other way around ...
GDP of China is 5.06 and 2.39 times more than India at nominal and ppp terms, respectively. China crossed $1 trillion mark in 1998 while India in 2007 at exchange rate basis. Now in 2014, India crossed 2 trillion mark and China crossed 10 trillion. In 1980, size of economy of China and India was $309 and $181, respectively.
GDP of China at ppp terms is 1.7 times more than compare to nominal basis. This ratio of India is 3.60.
According to CIA Fackbook sector wise GDP composition of India in 2014 are as follows : Agriculture (17.9%), Industry (24.2%) and Services (57.9%). Sector wise GDP composition of China in 2014 are : Agriculture (9.7%), Industry (43.9%) and Services (46.4%).
In nominal terms, per capita gdp of China is $7,589, 80th position in world and 19th in Asia. India's gdp per capita is around of $1,627. India's rank in world and Asia is 145 and 33, respectively. On PPP basis, gdp per capita of China is $12,880 and of India is $5,855. China is 4.66 times richer than India in nominal method and 2.20 times richer in ppp method.
Fore more informatoion please consult yje following link
http://statisticstimes.com/economy/china-vs-india-gdp.php
Debi,
Your question has generated many outstanding answers. Differences in resources, history, culture, and momentum seem to make a difference among others such as the response to globalization and many others.
It will be interesting to observe what will happen in China when it experiences something like a recession, and not just a reduction in its growth rate. Will such an experience increase volatility in he future?
Rob
Brenda Jacono referenced an interesting piece. The link is below. Brenda, you might wish to edit your post and attach the link to your post; you should see the link image at the bottom.
http://www.theglobalist.com/can-india-surpass-chinas-economy-by-2050/
What explains the fact that China's GDP is more than three times that of India?
Pls see the following writeup in the internet link. The author hilighted 4 points:
http://www.forbes.com/sites/panosmourdoukoutas/2016/07/24/how-can-india-catch-up-with-china/#63f9a3d6b44c
One recent interesting article on this issue;
How Can India Catch Up With China by Panos Mourdoukoutas ,
link
http://www.forbes.com/sites/panosmourdoukoutas/2016/07/24/how-can-india-catch-up-with-china/?utm_source=yahoo&utm_medium=partner&utm_campaign=yahootix&partner=yahootix&yptr=yahoo#35a381f6b44c
Here is an interesting article;
Is India Lying About Its World Beating Economy?
American Enterprise Institute’s Derek Scissors says India’s desire to report faster growth trumped accuracy
http://www.barrons.com/articles/is-india-lying-about-its-world-beating-economy-1488769695
Economists generally attribute much of China's rapid economic growth to two main factors: large-scale capital investment (financed by large domestic savings and foreign investment) and rapid productivity growth. These two factors appear to have gone together hand in hand.
While economic reforms might explain some of the differences, China outpaced India because (1) the economy was privatized faster; (2) prices were released faster; (3) the labor market underwent much deeper reforms;
La interrogante sobre cómo el PIB de China es más de tres veces el de India a pesar de su burocracia y corrupción, desafía la teoría económica convencional, especialmente la que vincula directamente la reducción burocrática con el crecimiento exponencial. Considero que esta situación se explica por una combinación de factores complejos y no solo por la presencia o ausencia de burocracia.
En 1950, el PIB de China e India eran, en efecto, similares. Sin embargo, en 2023, el PIB de China alcanzó aproximadamente los $$$17.7 billones de dólares, mientras que el de India fue de cerca de $$$3.7 billones de dólares (Fuente: Banco Mundial, 2024). Esta divergencia no puede atribuirse simplemente a la eficiencia burocrática, aunque esta sea un factor.
China, a pesar de su burocracia y desafíos de corrupción, implementó un modelo de desarrollo liderado por el Estadoque priorizó la inversión en infraestructura a gran escala, la educación y la manufactura orientada a la exportación. Sus zonas económicas especiales atrajeron IED masiva, mientras el Estado centralizó la planificación y movilizó recursos de manera eficiente hacia objetivos específicos. Por ejemplo, la inversión en infraestructura de China como porcentaje del PIB ha sido consistentemente superior a la de India, superando el 8% en muchas ocasiones, mientras que la de India ha rondado el 5% (Fuente: Asian Development Bank, 2023).
Además, China se benefició de un control estricto sobre su tipo de cambio y una política industrial agresiva, que, aunque en ocasiones generó tensiones comerciales, le permitió ganar cuota de mercado global. La inversión en I+D ha sido crucial: China gasta alrededor del 2.4% de su PIB en I+D, comparado con el 0.7% de India (Fuente: UNESCO, 2022). Esto impulsó la innovación y la sofisticación de su producción.
Si bien la corrupción es un problema, el régimen autoritario de China ha demostrado una capacidad para implementar políticas a largo plazo sin las interrupciones o consensos que a menudo caracterizan a las democracias. Esto no es una defensa del autoritarismo, sino una observación pragmática de cómo un Estado puede dirigir el desarrollo económico, incluso con sus deficiencias. La "burocracia" en China, aunque grande, ha sido en muchos casos una herramienta de implementación de políticas y no siempre un obstáculo insuperable.
La lección para la teoría económica y social es que el "emprendimiento" y la "reducción burocrática" son importantes, pero no son los únicos determinantes del éxito. El papel del Estado en la dirección del desarrollo, la inversión estratégica, la política industrial y la capacidad de acumulación de capital humano y físico son igualmente, o más, cruciales. China desafía la noción de que solo un modelo neoliberal de mínima intervención estatal puede generar un crecimiento rápido y sostenido.
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