Monday, July 11, 2005

The Dragon vs the Tiger

China may win the sprint, but India will win the marathon.

I am often asked, the Dragon Vs Tiger comparisons between China and India. India is always equated with a submissive tiger (or worse, as an elephant !!!). It is true that China heads a great manufacturing empire. Foreign companies pour billions of dollars in China. Everyone from car companies to turbine manufacturers wants a heads-up in China by establishing their own manufacturing concerns there. Foreign investment, both direct and indirect, coupled with availability of plenty of natural resources and cheap labor has propelled the 'Made in China' tag to each and every part of our lives. It is extremely tough to obtain any item anywhere nowadays which does not have the 'Made in China' tag.
The main question to be asked it "What if 21st century
dollars are being put into a 20th century power?" Politically, China is controlled with an iron fist by communists who want to maintain the status quo at all costs. Militarily, China relies on its large army to browbeat its neighbors into submission. Economically, it has put the Ford assembly line concept at each and every point in the country. Financially, it hordes its cash and regulates its markets with zeal and uses purposeful devaulation of currency to prevent mass upheaval. The western world wants China to reevaluate its currency, the yuan, to bring in it more in line with what the market demands. Washington wants Beijing to devalue its currency as a way of cutting the staggering trade imbalances spinning out
of lost cost manufacturing. How does this account for the Dragon Vs the Tiger fight ? In a pure economic scenario, China serves as a platform to bring together capital (from foreign sources), cheap labor (mostly prison and forced peasant labor) and industrial technology (often stolen from foreign companies through industrial espionage). China relies on this empire and controls it with an iron
fist.
India, on the other hand, aspires to become a global technology hub, with
a central place in the transnational movement of knowledge and services. India's advantage lies in its political stability (as the world's largest democracy for 58 years now), large and relatively young educated population (around 70% of the country is literate, with many of them fluent in English) and an economic regime which tries to balance 'for the people, by the people' with economic realities. China, on the other hand, faces political upheaval and social unrest. A society which believes in restricting political freedom while at the same time providing economic benefits to its population cannot survive for long.
Around 100 million Chinese surf the Internet and very soon they will know what is denied to them is FREEDOM. The Internet (and especially the blog-boom) is hastening China on the same path of South Korea and Taiwan. In both places, a booming economy nurtured a middle class, rising education, incremental international contact, a squeamishness about curbing dissidence and finally a people revolution against the old guard. In China's case, would this change be one which brings in catastrophic changes in how the Asian century shapes up ?

On the same issue, Thomas Friedman writes in the New York Times," Every time I visit India, Indians always ask me to compare India with China.Lately, I have responded like this: If India and China were both highways, the Chinese highway would be a six-lane, perfectly paved road, but with a huge speed bump off in the distance labeled "Political reform: how in the world do we get from Communism to a more open society?" When 1.3 billion people going 80 miles an hour hit a speed bump, one of two things happens: Either the car flies into the air and slams down, and all the parts hold together and it keeps on moving - or the car flies into the air, slams down and all the wheels fall off. Which it will be with China, I don't know. India, by contrast, is like a highway full of potholes, with no sidewalks and half the streetlamps broken. But off in the distance, the road seems to smooth out, and if it does,this country will be a dynamo. The question is: Is that smoother road in thedistance a mirage or the real thing?

4 Comments:

Anonymous PG said...

India's progress towards being an economic superpower seems very real. This can be turned into a more solid reality if policy makers target development in all areas, whether industry or agriculture. One cannot be neglected for another. Diversity Reigns. This will not only aid us in being selfsufficient, but will ensure economic and social development of all classes of people in India. Nice Blog Ujval!

7/11/2005 12:31 PM  
Blogger Megha said...

Nice post! And i've always liked Thomas Friedman's perspectives on this topic.

By the way, the quote at the bottom of your page - I made it up several years ago and used it in my blog too, and having never seen anyone else use it, i'd like to stake claim to it :) Or as the seagulls say in Finding Nemo - Mine mine mine ;)

7/11/2005 1:50 PM  
Blogger The Greatest Hokie Ever !! said...

PG - that seems like a "socialist" comment, just kidding though

While I look at trepidation at China (and have always have), it is with excitement that I look at our country. What we need is now a "enlightment revolution" wherein each one of us feels that we can contribute our energies to our country's growth.

Megha - Hokie has given the appropriate "THANKS" and says Hi also.

7/11/2005 2:54 PM  
Anonymous Adi said...

Good post. China's rise in the global economy is not sudden, it had been planned by the communist government for over 25 years. In contrast, India's rise as a Information economy is kind of accidental. If we did not have the balance of payments crisis of early 90s, we probably would never have opened up most sectors of economy and would still be in the license raj. That said, Chinese economy is not on solid foundation either. They have cheap labor but they cannot sustain their economy just on that. Most local manufacturing firms are subsidized by the government in one way or the other and bad debt is rising fast. Their financial infrastructure is not as robust as India's. India's financial sector is much much more evolved compared to China, but at this point China is getting all the Foreign Investment. The good thing about being a totalitarian society is that things just get done! Unlike in India, where even after bribing people things don't get done right. Sooner or later I think the Chinese middle class will start demanding more: more money than the government gives them, more freedom, better access to education, etc. And I am pretty certain that the Communist government will not be very willing to give more power to the people. If they do change/reform than that would pose a very interesting dilemma for them. They would have to improve working conditions with better facilities, wages, etc. which would invariably increase the manufacturing costs, which in turn would make them less favorable location for manufacturing, which in turn might increase bad debt and may eventually lead to an financial implosion.
As far as India is concerned, at present I see the Tiger is still sleeping. Whatever the progress India has made so far, unless the basic infrastructure is in place we cannot go much farther. Indian ports, airports, roadways, waterways cannot handle the amount of trade that it currently gets; so if we want to aim for more trade we need to urgently address the infrastructure issues.

7/12/2005 3:29 PM  

Post a Comment

Links to this post:

Create a Link

<< Home