China And India Are Rising Economic Powers, Say Several Economists


  • Subhash Vohra's Report (narrated by Steve Ember) 1.2 MB (Real)

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Two point four billion people, or 40 % of the world’s population, live in China and India. Some economists believe that China and India, with two point four billion people, are moving toward becoming the world's largest economies. We look at the economic growth of the large Asian nations, their increasing trade relations and the change in U.S. policies toward India and China.

China is the world's most populous country with one point three billion people, just ahead of India, with one point one billion people. With economic growth between 8 and 10 % per year, economists say the two countries are moving toward becoming the world's largest economies as well. 

Currently the United States has the largest and most technologically advanced economy in the world, with a per capita GDP of $43,500. China’s per capita GDP is $7,600 and India’s is  $3,700

Pieter P. Bottelier, adjunct professor of Chinese Studies, says China and India may eventually surpass the United States economically, but it will be a long time before that happens: ”I think the prospect is that if these two giant countries continue to grow at the current rate, they will become world’s two largest economies, but that still is some decades away.” 

India and China have different political systems. India is the world’s largest democracy, but China is still under tight communist government control. 

Pranab Bardhan, professor of economics at the University of California - Berkeley, says foreign investors are willing to invest in countries with authoritarian regimes, if it suits their business interests: ”There is no doubt that India is much more of a vibrant democracy whereas China, although in some respect things have been relaxed, remains an authoritarian regime, says Prof. Bardhan. “But it is not the case that foreign investors are always attracted toward democracy. Foreign investors go where more money is to be made and they want a predictable regime, and sometimes authoritarian regimes provide more predictability than in democratic countries.”

According to Dr. Pami Dua, professor of economics at the Delhi School of Economics, University of Delhi, in India, China may owe some of its economic success to its location: “The east coast of China is situated in a highly dynamic and rich neighborhood. Neighbors like Japan, South Korea, Taiwan, Hong Kong, Thailand, and Singapore provide capital for investment, markets for Chinese exports, more advanced technology, and expertise. The neighborhood of India, in comparison, is less dynamic: Pakistan, Burma, Sri Lanka, Bangladesh, and Nepal, says Prof. Dua. “Very few such transfers take place between India and its neighbors to India’s advantage.”

Professor Bottellier argues that China and India face very different challenges: ”Both countries are now growing at an extraordinary high rate of between 9 and 10%. But the challenges facing the two countries are not the same. Generally, China has gone much further than India in trade liberalization and in opening to foreign investment. So, many people have expressed some doubts about the sustainability of the Indian high growth at this time unless the country proceeds more aggressively on the globalization bus.”

Professor Dua adds that India and China have both advantages and disadvantages, as well:  ”Issues facing India are much more broad-based such as improvement in infrastructural facilities, effective administration, labor reforms etc. One disadvantage that China has is lack of a good quality record in software. Another disadvantage is low percentage of Chinese population speaking English and a less mature and relatively new Business Process Outsourcing industry, BPO.  However, China has certain advantages compared to India that includes lower manpower cost as Chinese workers cost less than similarly qualified Indians.”

China and India have come a long way since they fought a brief border war in 1962.  Both countries are not only developing economically at rapid speed, but they are also making extraordinary efforts to increase mutual trade and to improve bilateral relations. Chinese President Hu Jintao's state visit to India last November reflects the progress of bilateral dialogue on a range of issues over the past few years. Rapid economic growth and the expansion of bilateral trade have fueled the development of closer relations.

Trade between India and China reached 18 point 4 billion dollars last year -- up from only 338 million dollars in 1992. Both countries pledged to double trade to 40 billion dollars a year during talks in New Delhi between Indian Prime Minister Manmohan Singh and Chinese President Hu Jintao.

Despite these developments, several analysts say India remains suspicious of China's relationship with its long-time rival, Pakistan. And China is concerned about New Delhi's growing ties with Washington, especially their landmark nuclear agreement allowing India access to civilian nuclear technology. Some expect the United States to deepen ties with India - a democracy it views as less threatening - as a counterbalance.

However, Prof. Bottellier says concerns that the Chinese are worried about India's relationship with the United States are overblown: “I am very pleased that the United States and India are developing good, constructive friendly relations. That is very important for both countries, says Prof. Bottellier. “I do not think that the proposed civilian nuclear agreement between the United States and India is resented or rejected by China. In fact, the Chinese government has been remarkably silent on that subject. One would have expected the Chinese to have protested, but they have not done so. Even during the visit of Chinese President Hu to India in the latter part of last year, this was not the subject of discussion.”

Although the vast majority of the rural population in both countries remains illiterate and impoverished -- and many structural and institutional problems lie ahead -- many analysts say there is no doubt about the enormous economic potential of China and India in the 21st century.

This report was written by Subhash Vohra.  For VOA News Now I’m Steve Ember.



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