| Topic: |
Politics > Politics-USA |
| User: |
"nkdatta8839" |
| Date: |
29 Jul 2003 04:05:33 PM |
| Object: |
Can India Overtake China? |
United Press International
8 July, 2003
Analysis: India gains, from free market
By Martin Sieff
UPI Senior News Analyst
WASHINGTON, July 7 (UPI) -- By attracting scores of billions of
dollars of foreign investment a year, China has outstripped its fellow
Asian giant India. But now India's far slower, more cautious path of
nurturing home entrepreneurs first, may be paying off instead.
For years, we have felt at United Press International Analysis like a
voice crying in the wilderness when we argued that India was poised to
make dramatic free-market economic progress while China's wonder
economy was overdue for a devastating, systemic crisis. But now we
find unexpected support in the July-August issue of Foreign Policy
magazine.
There, Yasheng Huang of the Sloan School of Management at the
Massachusetts Institute of Technology and Tarun Khanna of the Harvard
Business School have challenged the conventional wisdom of more than
two decades to argue that India over the past decade has become the
true champion of domestic free-market-based growth, while China's
immense growth is an unstable, hothouse outcome of Direct Foreign
investment at the cost of stifling the home market.
China's goods flood the world's markets. India's do not. Ask any
American businessman and he will credit China's entrepreneurial
free-market revolution of the past quarter century. India, by
contrast, is still seen as mired in complacent bureaucratic sclerosis,
able to attract less than one-tenth the annual foreign investment that
China does. But look closely, say Huang and Khanna, and you will see a
very different story.
First, they note, while India is still far, far behind China in
export-led growth, it is becoming an increasingly significant and
confident player in the international market place.
"India," they write, "has managed to spawn a number of companies that
two compete internationally with the best that Europe and the United
States have to offer. Last year, the Forbes 200, annual ranking of the
world's best small companies, included 13 Indian firms but just four
from mainland China."
Nor is this excellence limited to India's traditional expertise in
knowledge-based industry, especially software. The Forbes "13"
included, Huang and Khanna noted, "pharmaceutical and biotechnology
powerhouses Ranbaxy and Dr. Reddys Labs."
And of far-greater importance in the long term, "India has also
developed much stronger infrastructure to support private enterprise.
Its capital markets operate with greater efficiency and transparency
than do China's. Its legal system, while not without substantial
flaws, is considerably more advanced."
By contrast, China owes its enormous growth not to friendly domestic
conditions that allow free market entrepreneurial initiative to
flourish everywhere, but to its huge levels of FDI, totaling $44.2
billion in 2001 compared to only $3.4 billion for India that same
year.
And far from encouraging domestic entrepreneurial enterprise, this
huge inflow of FDI per year has allowed China's ruling Communist Party
to maintain repressive and corrupt restrictions on its own people. Far
from being an entrepreneur's paradise, as is still generally assumed
in the West, China, outside its havens of FDI, is an entrepreneur's
nightmare.
As Huang and Khnna wrote, "As of the late 1990s, according to the
International Finance Corporation, more than two dozen industries,
including some of the most important and lucrative sectors of the
economy -- banking, telecommunications, highways and railroads -- were
still off-limits to private local companies.
"These restrictions were designed not to keep Chinese entrepreneurs
from competing with foreigners but to prevent private domestic
businesses from challenging China's state-owned enterprises. Instead,
the government has ferociously protected them."
In this sense, 21st century China does not resemble 19th century
America as much as independent but impoverished nations of that time
that managed to attract large sums of foreign investment, but failed
to nurture any truly free or healthy domestic competitive free market,
like Mexico under President Porfirio Diaz or Egypt under Mehmet Ali
and his successors. (However, one crucial difference must be noted.
China, like America but unlike Mexico or Egypt, has built massive
capital infrastructure -- coal mines, steel mills, giant dams and
electrical generating capacity.)
By contrast, at the very time China was increasing its squeeze on
local entrepreneurs in the late 1990s, India was trying to make life
easier for them.
Huang and Khanna acknowledge that Indian privatization is still
progressing "at a glacial pace." But, they continue, "The government
has ceded its monopoly over long-distance phone service; some tariffs
have been cut; bureaucracy has been trimmed a bit; and a number of
industries have been opened to private investment, including
investment from abroad."
And reflecting an argument we have often expressed in UPI Analysis,
Huang and Khanna conclude, "democracy, a tradition of entrepreneurship
and a decent legal system have given India the underpinnings necessary
for free enterprise to flourish. Property rights are not fully secure,
but the protection of private ownership is certainly far stronger than
in China."
Indeed! For as UPI Business Editor Martin Hutchinson warned on April
26, on Dec. 31, 2000 Foreign Direct Investment in China, including
Hong Kong totaled around $288 billion, including $64 billion from the
United States. In all, combined U.S. and European foreign investment
in China then totaled $150 billion, Hutchinson concluded.
Now, suppose the Beijing government were to react to any catastrophic
economic crisis and domestic radical tilt away from international
engagement towards nationalistic xenophobia -- a recurrent theme in
20th century Chinese history. Then the vast annual inflow of
investment from Europe and the United States would certainly stop. And
the domestic economy would be in no position to take up the slack
because, as Huang and Khanna documented, far from flourishing during
the decades of vast FDI inflow, they have been deliberately neglected
and even held back.
We do not believe, as some pundits have gone so far as to predict,
that China's central government would disintegrate or collapse in
anarchy under such circumstances, or that the very real, indeed truly
extraordinary growth of the past 25 years would then prove illusory.
But China would certainly go through its own version of America's
1929-32 Great Depression, with all the political and social
transformations and dislocations that would entail.
Meanwhile, if India can end or limit its ongoing terrorism problem in
Kashmir and avoid thermonuclear war with Pakistan, its own growth
prospects look far brighter, especially in relative terms.
Can India overtake China in 21st century economic growth? No one can
truly know, given all the vast imponderables involved. But the
question is no longer ridiculous or a foregone conclusion, as it would
have been up to a few years ago. And that is a thought-provoking
answer in itself.
.
|
|
| User: "Joe User" |
|
| Title: Re: Can India Overtake China? |
29 Jul 2003 04:17:35 PM |
|
|
nkdatta8839 wrote:
United Press International
8 July, 2003
Analysis: India gains, from free market
By Martin Sieff
UPI Senior News Analyst
It's like Dumb and Dumber.
Both China and India are over populated human cesspools that need
thermonuclear sterilization in the worst possible way.
Lest the thrid world creatins overwhelm us like the plauge.
What ever you have, we don't want it, now go back to your mud hut and rot.
.
|
|
|
|
|
Related Articles |
|
|
