VikramS wrote:2. It is very clear that the CPC controls which companies and which countries get access to their markets. Why do you think they will encourage Indian businesses to make inroads? It is not jingoism, but pragmatism which stops Indian businesses. In areas like IT (NIIT) the Chinese want Indian expertise. But there is very little else India can send to China except raw materials like iron ore.
India has a trade deficit with most countries (incl China); its the FII/FDI inflows that keep INR BOP afloat, services exports are good but not enough. No point in discussing the deficit with China in isolation; India just needs to export more.
But if China controls access to its markets, so can India. WTO rules allow for differential tariffs for China, since its not quite a "market economy" yet. In return, seek access for Indian banks to the Chinese market, maybe ..?
VikramS wrote:3. In fact I would argue that most of the Indian establishment is anti-jingo. They are more than willing to placate China by allowing Chinese goods but are doing little to defend Indian businesses. The arrest of the diamond merchants, the counterfeiting of Indian medicines GOI did very little to help. It is clear that wherever India has an edge the Chinese are trying hard to take it away; total war as they would call it. How do you think Indian companies can thrive in such an environment especially when they are competing with foreign companies who have enough ethnic Chinese employees to do business in China?
China games the market in general, its not oriented to India. Local jobs is the price of entry to most markets; in fact, NIIT runs its Chinese ops through subsidiaries and local employees. So can Indian banks or car parts manufacturers.
VikramS wrote:4. It would be interesting to plot the graph of auto sales in China, especially in the past three years and correlate that with government incentives (hint).
Do you mean China incentivises auto sales? Not sure why they would ..
VikramS wrote:5. No one doubts that the Chinese have have a huge middle class with the willingness to splurge on brand names. Indians on the other hand are hugely value for money people and are always more careful before splurging. In fact the gap in the spending is perhaps an indication of the hidden potential of what the Indian market could offer.
India has a smaller economy, hence the gap in spending. But its also a larger economy than Russia or South Korea today and expected overtake Britain within a decade !
VikramS wrote:6. I hear the clarion call that the size of the Chinese consumer market is making Western CEOs salivate. However there is and will be a limit to which the hoi-polloi will tolerate the enrichment of the capitalist class at their cost. We are potentially entering the age of protectionism, primarily as a backlash to the mercantile policies of the World's second largest economy.
This is true ! I would add that it looks like protectionist sentiment is rising in China just as much as in the west - in both cases, it rises along with nationalist sentiment.
VikramS wrote:7. We live in very interesting times; I hope they are peaceful. China is now on the verge of building a military base in TSP, which does not bode well.
I would agree with shiv that this is to be welcomed
An overtly hostile base forces a better, sharper Indian response. Tibet stretches China where its uncomfortable. Their need to hold Tibet also makes them vulnerable.
Theo_Fidel wrote:I really don't see anyone challenging the consumption numbers.
The question is if they will hold up when the gravy train stops. And it most definitely will stop. My questions is, if China GDP is much large than declared then does this mean the economic stimulus as well has to be much much larger than declared to keep the 10% growth going. Won't debt levels be much larger, won't inflation be much larger, won't the forex seem more puny, etc.
China's debt levels and inflation are far larger than official numbers - pretty much a drumroll of articles and papers on that subject. But their trade surplus acts as additional gross savings, so the investment stimulus is affordable till the surplus stays. China's stimulus, thus, clashes with US stimulus.
Note that China has a remarkable trade surplus only with US - the surplus with Britain, Singapore and India are pretty minor, its the US surplus that powers its BOP (HK surplus is a proxy for US anyway). You can see this on wiki
gakakkad wrote:I am ready to bet my musharraf , that by 2030-2035 time frame India will be the largest economy. The Chinese demographic window is about to end in 2015. Their will be a precipitous decline in workforce . Inflationary economy means that they ll find it difficult to provide cheap labour for the western companies. Rising domestic consumption and lack of natural resources means that their balance of trade will become positive . That is when things start to get interesting . All Indian colleagues want to go back to India . But none of the Chinese want to . That says a lot in itself .
there is a rand study
on comparative effects of Indian and Chinese demographics, gakakkad-ji, which bears out some of what you say
I guess, in the interim, we must learn what policy lessons we can from China's experience. The biggest one is female participation in the labor force, IMO. Thats one area China has really scored over India - do note that its happened inspite of similar gender ratios as India today and starting with similar social attitudes