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LAST WORD: India vs. China - Why China is Winning the Race
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Travelling around Asia and witnessing the development here is a remarkable thing. I never cease to be amazed by the mobilisation of man, machine and resources to transform cities and entire nations into modern centres of commerce.   Indonesia, Thailand, Vietnam, amongst other countries, are impressive in their own right, but given the size and population of China and India, what’s happening with these two Asian giants is a miracle indeed.   
 
Watching this phenomenon unfold, I can’t help but wonder about the future - thirty years down the road when all of the dust finally settles (and believe me, there’s A LOT of dust), which country is going to come out on top?  The answer to this question differs greatly depending on who you ask, economic forecasts show varied predictions.  Admittedly, I don’t hold an advanced degree in economics so my observations are purely anecdotal, but on the surface it appears that China holds several distinct advantages.  
 
India’s development is about twenty years behind China’s, so whether or not my prediction proves true won’t be clear for some time.  However, for the sake of advancing my own opinion let’s assume I’m correct and say, for example, that by the year 2050 China’s development is in sync with some of the more optimistic forecast models.  And although some economists predict that India will eventually surpass China, for now we shall also assume that India will have continued robust development but never outpace the Middle Kingdom.  With those assumptions in place, we can explore further.
 
Firstly, although foreign investors are sometimes reluctant to do business in either country due to various legal and cultural obstacles, China is arguably a more attractive option simply because of the Chinese reputation for industriousness and their gusto for making large scale projects become reality.  
 
India, in spite of its recent growth, still has a poor reputation in the business world; to put it simply, they lack the ability to build things. China on the other hand, has many engineering feats to be proud of – the Three Gorges Dam, their rapidly expanding high-speed rail network, and soon the world’s tallest building will be constructed in Changsha - the estimated time it will take to completion: six months!  
 
So why can’t a democratic, free-market country like India be more competitive in the world economy than one which is a mixed socialist/capitalist economy with an autocratic government? 
 
To the chagrin of cheerleaders for democracy, the one-party system in China has unique advantages.   Aware of this, Party leaders often cite China’s population and brisk economic growth as an argument against political reform. It has been suggested by some that democracy is not always the best system for driving rapid economic growth.  
 
The analogy I like to use is the high-speed rail system in China, which rivals that of any other in the world.  China is laying down hundreds of kilometres of track every year whilst the United States, with its so-called flourishing democracy has yet to lay a single metre.  Many high-speed rail projects have been given the green-light in the US but are always caught up in political red-tape and often become bureaucratic nightmares; California is a perfect example.  
 
Californians have long dreamt of a north-south line connecting San Francisco with Los Angeles and San Diego.  With the population explosion in California over the past 40 years and the abysmal traffic conditions it would be an ideal place to begin.  Inevitably, the plan sidetracks when the debates begin about what land will be used and of course who is going to pay for the project.  Tax payers, particularly in today’s economy, are rarely willing to have a massive public works project like this come out of their pockets.  
 
A country like China however, with massive stocks of government capital, an enormous migrant workforce and no Imminent Domain laws can lay down hundreds of kilometres of track in short order;  they simply need the will to do so.  Once the government has taken control of the land they can hire a million workers if needed and complete a line in less than a year. Other countries marvel at the speed in which Chinese infrastructure projects are completed – this is a striking advantage for single-party governments.  
India contends with the same type of bureaucratic hurdles as the US and Europe–Indian citizens lament at the inefficiency of government to carry out projects.  I’ve heard stories of airports being built for over a year with no access road.  This may sound like hyperbole but it’s actually a huge problem with Indian development - there is a lack of will to get anything done.  Taxpayers are unwilling to pay and private investors are reluctant to get involved because they don’t anticipate strong returns.  
 
There’s a direct correlation here with the lack of political will and India’s meagre foreign reserves – yet another complication with India’s development which is in stark contrast to China.  While China’s coffers are flush with US dollars as a result of a trade surplus and the purchase of US Treasury notes, India is starving for dollars.  India is the world’s largest importer of gold. In fact, Indian households alone have more gold than the US Federal Reserve.  Since India’s production is low, this means US dollars are leaving the country en masse. Combine that with their reliance on foreign oil and you’re left with a fairly bleak looking balance sheet; India’s net imports outweigh exports 2-1.  
 
This imbalance causes a litany of problems, for instance The government has reacted by placing heavy taxes on imported goods thus reducing the purchasing power of Indian families, but most importantly it means that there isn’t a lot of extra money lying around to use for the improvement of infrastructure. Ghastly road conditions, a notoriously unreliable power grid and inefficient use of a scarce water supply are among the most pressing problems – none of which have clear solutions in sight.  Even mentioning high-speed rail to an Indian person will be met with a chorus of laughter.  
  
Finally, millions of citizens in each country are rising into the middle class. With this comes an appetite for automobiles, consumer electronics and other items that were previously out of reach. Thus, the battle for natural resources is only going to intensify in years to come.  China has seized the opportunity by investing heavily in Africa and the Middle East– regions which should fall into India’s geographical sphere of influence. China’s head start in these regions will likely be a driving force behind their continued growth in decades to come.  
 
The recent economic crisis in the US and Europe has given rise to an outcry against the democratic/capitalist model. Many in China have used this as a platform to advance their belief that China’s mixed socialist/capitalist economy is more stable and better for the overall good of society and consistent economic growth.  Staunch supporters of capitalism have often used the failure of Communism’s most ambitious experiment (Russia) as proof that the democratic/capitalist model is the most effective.   
 
When the history of this race to develop is finally written, perhaps it will be easier to gauge which political/economic model is superior. It’s also likely that the outcome will influence the decisions made in the future by other countries in the developing world. 
 

 
 By Christopher Ribeiro
 
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