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Apr. 27 – As the world shifts its political positions and emerging countries flex new found muscles in the aftermath of the global financial crisis, how has China reacted to the situation? As always when it comes to this enigmatic nation, the signs are mixed, and are not consistent. It is also becoming apparent, at least, that U.S.-China comparisons are not really valid. Should a comparison be made with any country, surely it would have to be with India. Not only are the two nations neighbors, they also have massive populations, emerging domestic markets, and until recently, shared religious values. On the other hand, there is mutual mistrust, still simmering border disputes, and completely separate political systems. The similarities and differences between the two are far more aligned than those between China and America.
China’s position over India remains odd. Disputes caused long ago, before India became independent, and before the Communist Party was even established in China, continue to worry both nations like an itching scab. The Great Game between Russia and Britain, and the use of Tibet as a buffer state to separate the two superpowers, has resulted ultimately in a Tibet under communist rule for the first time, a border war between China and India in 1962, and several border disputes, which although both sides recently “agreed to disagree” about, have recently flared up again.
China’s use of its veto at the Asian Development Bank to deny India, for the first time ever, a loan for the development of Arunachal Pradesh, was purely a political issue, and nothing to do with finance or development. China has never controlled the region, yet used its veto to deny India the funds to develop an area close to its border, and upon which China has claims. This is neither consistent, nor particularly statesmanlike.
Elsewhere, China’s issues appear to stem from the difficulties the country now faces in managing itself as a one party state. Make no mistake, this is not an easy thing to do, and to remain benign, committed to development, economic progress and integration with the global community while utilizing such a system has never been attempted before. People forget; while China may appear to have been stable over the past three decades, the Chinese social experiment still remains unproven. Cracks can and do appear – with unemployment rising, graduates leaving, and local corruption fuelling peoples anger, the masses can quickly get out of control. This remains a problem with a one party state, where locals cannot just vote an unpopular or corrupt official out of office, and whose party apparatus largely protects those who sin.
This remains in stark contrast to India, where national elections are currently being held under relative peace, security, and transparency. Over 670 million people are voting, while newspapers from all political views promote their candidates and are dismissive of others. The system used is courtesy of Infosys, is electronic and provides, according to Infosys founder, Nandan Nilekani, “faster settlement than most Western stock exchanges.” China meanwhile is stuck in a system that is patriarchal, yet not answerable to the people at the same time. It’s these internal conflicts that provide China with its own fault lines. They are likely to get worse. China’s population is aging, and this will bring greater stress on a social system that does still not cover all its citizens nationally. As people age, social welfare costs increase, workers salaries have to rise to cater for their aging responsibilities for families at home. The stress levels on the Chinese government under such a system are huge, and not entirely understood. The fact remains, that as an experiment in managing over a billion people, without permitting them the right to vote or rule of law to challenge the system, China is taking a huge risk. It’s never been done before.
India on the other hand, has a young population, and with no state mandated population control in place, is going to be producing much of the world’s low cost labor for decades to come. Younger populations have long been recognized as primary drivers for growth and consumption, and India’s is overtaking China’s right now in this regard. It will be India’s population that begins to drive the global economy, just at the same time that China is slowing down.
India’s democracy, while shambolic at times, is a system that can be absorbed by the population, and largely is. Corrupt officials, if caught, face intense media scrutiny, and are accountable to their voters. If serious offenses are committed, government officials can go to jail. While that is also true of China, the procedure is a closed session process – after all, it’s the party apparatus that is on trial, not just the errant official. Newspapers are barred from reporting, and judges are ‘advised’ not to hear cases. That is not stability. Neither is it sustainable.
In short, while I weigh up the pro’s and con’s of both China and India, it is the rise of both economies that is the real global question. Perhaps controversially, I would state that it is India that is winning the game. China to me – and I lived there for 16 years – is erratic, uncertain, and has reached a glass ceiling in its development. I think it will struggle to get over without extensive changes to the government apparatus. Take for example Chinese companies investing overseas. Apart from state-owned enterprises securing energy and other vital resources for the nation, Chinese companies are not free to invest abroad. They must still seek permission from the government. This impinges upon the ability for China to grow and develop its own breed of truly global entrepreneurs capable of selling “brand China.” This is in direct contrast to India, whose businessmen – and businesses – are developing into global behemoths. Formula One is a good example. While China made the headlines in hosting an annual race in Shanghai, it was India who put together a team, racing under national colors and exposing itself to all 17 races instead of just the one.
None of the scenarios I mention are reasons to abandon China. In fact, I believe the domestic opportunities to sell to the Chinese market are improving. But when it comes to strategy, the dreadful term “Chindia” doesn’t fit the bill. Both China and India need separate attention, and understanding as to their differences and developments. Longer term however, China in my mind looks uncertain in its apparently new-found role as a focal point of the global engine for trade. Fingers are being pointed, questions asked, and it is not used to this. Meanwhile, India continues to develop and looks more confident on the international stage. I will continue to invest and develop business in China. But longer term, I am also putting my money and investing in India. A China-only strategy, when it comes to global development, is no longer enough.
April 28th, 2009 at 1:09 am
“with unemployment rising, graduates leaving, and local corruption fuelling peoples anger, the masses can quickly get out of control.”
Sounds like India, except their democratic system makes sure they can’t blame anyone. Of all the failed democratic developing countries around the world, you’d think at one point or another these political-religious fanatics would realize just having elections does not make a modern society. Until India’s democracy can at least help its malnurished children enogh so they get close to what China achieved decades ago, to them, India’s democracy is and is continuing to be a failure.
April 28th, 2009 at 5:32 am
Just another meaningless, typical “Bull on India, bear on China” comparison. The same old stuff is rehashed over and over again. China’s problems are highlighted while India’s are overlooked. I actually think this approach will do China a great service and India a great disservice. The Chinese, like the Japanese, have a sense of crisis and seek a low profile. India, with all of its flashy, flamboyant style might not fare much better than China or any other country down the road. China the hare India the turtle thingy has been around for almost a decade. We will see, it ain’t over until it is over.
And by the way, there is no comparison between China and the US, at least not put forth by the Chinese as they acutely understand where their place is, a third world developing country.
Anyway I wish you China naysayers and India yeasayers the best of luck. You might just need it.
April 28th, 2009 at 5:36 am
One more thing, I think it’d be much better if this blog is renamed to “1.1 billion, the emerging India”.
Enough silly China vs. India comparions. Other than the fact that both are large, third world developing countries there are no similarities. You might as well compare China to Brazil.
April 28th, 2009 at 11:07 am
There are many things that India isn’t doing well that has slipped through your senses somehow. First of all, if whatever you said is true about the good democratic system the country has, why are there so many religious violence happening in the country? The government of India seems slow or laidback in their response every time violence occurs. Secondly, the very mentioned of how Indian will somehow make cheap stuffs to the world in the future shows your sense of economics very lacking indeed. People are suggesting that China move up its value chain to produce higher value production so that they could increase the living standard of its people. You can visit Henry C.K Liu’s website for more details explanation on this issue. With limited land and resources India has, If their population have truly increased, do you think this will bring prosper to the country or massive starvation? Your analysis is really not fair as what you claimed to be. Maybe you should try harder next time. If you really indeed preferred India so much, why don’t you just shift there by the next day?
April 28th, 2009 at 1:52 pm
It seems my suspicions are confirmed – there is too much easy acceptance that everything is going to be permanently OK with China and that India is a disaster as a democracy. However, I don’t believe this to be the case. The demographics are rapidly changing. Rather than dismiss this out of hand (I recall when I first went to China to work in 1987, people thought I was mad and that it was dirty and horrible), why don’t you spend at least a little time clarifying the situation? Nandan Nilekani’s new book “Imagining India” is a good place to start. Who’s he? The Chairman of Infosys, and a book endorsed, no less by Thomas Friedman, who calls Nilekani “The Great Explainer”….You’ll find it a well put together thesis and again, similar views on the China vs. India debate. If you don’t want to listen, then fine. But I choose to study both countries, travel between them monthly, and I’ve had 21 years in China, 16 with my own business and investments. I can usually spot a trend, and the new one is India, and it is sustainable. Competing with China, yes, but is that such a bad thing? Probably not. But taking off those cliche’d China – India blinkers first may not be a bad idea before trying to absorb what is actually going on.
April 28th, 2009 at 2:09 pm
@John; India is now lifting millions of people out of poverty. It’s happening. It has a long way to go (an estimated 300m people live on or below the poverty line) but growth is occuring and wealth is being created. You have to start somewhere – just as China did. There’s an interesting BBC interview with Mr. Chidambaram, the current Home Office (then Finance) Minister on the issue of Indian growth and poverty alliviation here: http://news.bbc.co.uk/2/hi/business/6330691.stm
Yes, there is still a problem. Yes, they are dealing with it. I don’t think that can be called a failure of democracy. The issue of poor crop yields and the creation of a population remaining disenfranchised comes from India using the Russian style model of agricultural collectives up until the 1990’s rather than any issue of democratic government.
April 28th, 2009 at 8:56 pm
@KWC: There are religious problems in India, it’s a secular nation. However, violence during the elections – which have been going on the past few weeks, has been very limited. It’s been remarkably peaceful in fact. Concerning India manufacturing cheap products, sheer demographics dictate it will be a major competitor to China for the next 30 years, it is a younger country than China is. Labor costs go up as a population ages, this is already starting to impact on the cost of doing business in China; viz-a-viz the new labor law; India is lifting people out of poverty, starvation is not increasing; and finally, regarding your somewhat pithy comment if I like it so much why don’t I move there – I have. I live in Bombay. However I still continue to visit China regularly. Thanks for your comments. I didn’t expect such hostility to the concept however I have to say, that is surprising.
April 29th, 2009 at 5:01 am
Chris,
You are brining NOTHING new to the table. Everything that you have said here has been said by someone else somewhere else, and for a while already. A lot of them are simply overly simplistic observations and generalizations. Like I said I have been hearing the same stuff for almost a decade and yet I have see nothing indicative enough of India faring well than China or any other country. Yes India has got its big potential with a democratic society and young population. However these alone are not good enough for a sustainable success.
China and India are apples and oranges that have very little in common except for both being large, poor, third world developing countries. You don’t compare apples and oranges.
April 29th, 2009 at 9:49 am
Pffefer, you are entitled to your opinion. However, as I said, I have the benefit of travelling extensively to both and I stand by what I said. You’ve made your position very clear. Thank you for that, but please let other people breathe while reading this instead of constantly sniping at opinions which you happen not to agree with. Otherwise I regret we’ll have to start moderating your comments if you continue to clutter up this site. You’ve had your say, now let other people have theirs. Thank you
April 29th, 2009 at 1:52 pm
Nothing will beat a determined Chinese as we had seen what they had done in Olympics. more than a decade ago, foreigners used to laughed at Chinese athletes for using drugs to cheat at winning medals. A short 10 years later, they are already world beaters in gold medal tally. Now, they are looking at innovation, quality, safety and green clean technology. Would you bet your money against them? Good luck to you. By the way, I would also like to suggest you read books by Jim Rogers especially his Bull On China. It doesn’t matter whether India will be developed or not, China had its days of high development and they will find a way for sustaining its development again ‘albeit Singapore style I hope’.
April 29th, 2009 at 2:30 pm
@KWC: It’s not a case of betting against China. It’s a case of putting money into BOTH China and India. However, in some cases, for example export manufacturing, India is starting to become the better option due to cost. In both however, a rise in domestic wealth and purchasing power are leading to large domestic markets than are becoming increasingly less restricted. However, in terms of global markets, it is Indian, rather than Chinese companies who are making the running at the present. China has some catching up to do there. As I indicated in my last sentence in the article, either one or the other is no longer enough. A presence is required in both if one is to be a competitive player, regionally or internationally.
April 29th, 2009 at 4:35 pm
Under democracy, India’s planned economy was a failure; Under communism, China’s planned economy was even worse – a disaster.
After the economic reform to build open and market-leading economy, both countries have been enjoying a continuous development and growth for decades.
So, it seems that economic development models matter much more than political systems.
Thomas Friedman once said in his book “The World Is Flat” that “Given China’s joining into WTO an open voting, it will never get passed.”
Here are another pair of examples – Singapore and the Philippines. Singapore, being a politically autocratic (one-party ruling) and economically liberal country, is a first-class shining star in Southeast Asia, while the Philippines, being democratic politically and not-so-liberal economically, is slipping behind even Indonesia, Vietnam and Cambodian. Singapore ranks very high globally in good governance, competitiveness, and transparency, while the Philippines, with all those free media, open elections, democratic politics, and good connections with US, ranks the most corrupted country in Asia.
And, I now can not find proper words to describe the recent democratic events in Thailand.
Mr. Deng Xiaoping once said China should learn more from the success of Singapore, and obviously his successors, former-Pres. Jiang Zemin, and Pres. Hu Jintao, are following his wisdom, while still keeping Mao’s political ideology.
And similiarly, Primier Singh is also a great state leader, when we talk about him economically, as former Primier Gandi or Nehru (politically)…
April 29th, 2009 at 5:19 pm
@Howard – “So, it seems that economic development models matter much more than political systems”. I would agree with that. It’s interesting to note the current educational background of the current Indian and Chinese government leaderships. In India, it’s economists and lawyers (former to drive economic reform, the latter needed for democratic legal reform) while in China they’re all engineers (infrastructure developments). Perhaps when India is firmly in place with a reasonably coherent sustainable government, we’ll begin to see engineers in senior positions there also to deal with the infrastructure issues. Indian’s also tend to be professionals first, then politicians, in China it’s the party almost from birth. Certainly I would view the Chinese leadership as the more pragmatic. They can however afford to be with no opposition.
May 4th, 2009 at 3:31 pm
The “golden age” of China is right now; in fact, it is nearly a “glowing sunset on a glorious but short past”.