Monday, November 20, 2017

Investment News and Commentary from Emerging Markets in Asia - China, India and ASEAN

About discusses business and investment news rising from the geopolitical relations of China and India, and the interactions these two countries have with the rest of emerging Asia.

Why India is Winning the Entrepreneurial Battle with China

Op-Ed Commentary: Chris Devonshire-Ellis

Jun. 10 – As China and India continue to show some of the world’s fastest GDP growth rates, both are also undergoing huge demographic changes. In some ways, there are similarities between the two, yet in others, completely opposite positions exist. Understanding these subtleties is key to working out where future innovation, talent and growth will come from.

In terms of similarities, it is interesting to note that 20 years ago, the average age of a worker in China was 23. That is now the age of the average worker in India today, while the average age of a worker in China has risen to 37. So India’s current young, dynamic, and maybe somewhat undisciplined, workforce is at the same age and in similar numbers to China’s 20 years ago; the very same demographics that propelled China from 11th position in global GDP rankings 20 years ago, to 2nd position today behind only the United States.

While India may be 15 years behind China in its infrastructure development, it has now inherited that worker demographic dividend. Given the right set of policies, India should start to rise along similar growth curves that China has shown over the past two decades.

Also 20 years ago, in China, over 60 percent of the country’s workforce was employed by massive state-owned enterprises. At the time, many of these SOEs were unprofitable behemoths pouring out shoddy products with employees given little incentive to change under the iron rice bowl system. China modified that system and relaxed labor laws, making it easier to offload working staff. Although labor laws were re-tightened a couple of years ago as China’s workforce aged and the State needed to protect pensions and employment, the effect was a reduction in the number of Chinese workers employed by SOEs to around 20 percent today. China, in effect, has a huge latent entrepreneurial class.

But there are problems. While much of the work force has been shed from China’s SOEs – the State’s funding of them has not caught up. China’s banks continue to pour billions of dollars into its SOEs, and are likely to continue to do so as many government officials are far from impartial when it comes to their financial involvement in these same companies. That is bad news for that group of potential Chinese entrepreneurs – they are denied access to funds.

Continue reading this article on Asia Briefing.

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3 Responses to Why India is Winning the Entrepreneurial Battle with China

  1. K. says:

    I think you are doubling down on a losing bet. For years now you have predicted that India will exceed China but there isn’t indication that this will happen. In fact with Indian growth has faltered to 5%. That’s really low for a country at India’s development stage ($1500/per capita nominal).

    China is ahead by a lot because of a combination of better government administration and more numerous energetic entrepreneurs.

    This is pretty apparent to other people like you who have extensive experiences in both countries. I think many of these Indian prediction postings will become really embarrassing in the next 5 years.

  2. Sorachart says:

    India may have a demographic of young workers, but are these young workers skillfull ???????

  3. Crow says:

    Manufacturing is the biggest trump card for any country… will India be able to adopt manufacturing as the next major thing remains to be seen

Comments are closed.

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