On January 13, Prime Minister Manmohan Singh will reach Beijing with issues related to business and economy on his mind.
The Chinese economy is roughly three times bigger than India's. The overview of China and India's trade statistics and other related information given below suggests that both countries have a long way to go.
Both countries have some striking similarities and deep differences.
The most-striking difference between India and People's Republic of China is that the latter is largely an atheist country while in the case of the former one has to put an effort to find them.
The country, which is 9.56 million sq km in size, has 23 provinces, five autonomous regions, four centrally-administrative municipalities and two special administrative regions.
Unlike India, China's diversity is not striking. It has 56 ethnic groups of which the Han account for 94 per cent.
The second biggest difference between India and China is its political system.
In China, there is the party and then the government -- Two Constitutions are at work and working so far without colluding. It embodies following power structures.
Communist Party of China structure
- Party Congress, Central Committee (16th CC, members: 198+158 alternate, term: 5 years)
- Politburo, Central Military Commission, Politburo Standing Committee (members: 9)
- Party Control over Government, Legislature, Armed Forces
Unicameral National Legislature
- National People's Congress is the Chinese parliament and highest law-making body.
(members: 2,989, term: 5 years). Theoretically it is the supreme organ of State power.
Chinese People's Political Consultative Conference is between CPC & 8 'democratic' parties plus unions.
- State Council (Premier + 4 Vice Premiers + 5 State Councillors) plus ministries.
- Similar to Centre, 22 provinces, four municipalities and five autonomous regions.
Even a novice knows that China's economy is fourth largest in the world, but if taken on account of purchasing power parity it is the second largest.
It contributes to 5.5 per cent of world's Gross Domestic Product and 7.2 per cent of the world's trade. Since 1978, its economy has grown at an average rate of 9.67 per cent. Since 1978 so much money has been poured into China that its growth cannot be halted now.
So far, world investors have overall contributed direct investment of $750 billion (about Rs 30 lakh crore) to China's growth. It obviously has helped China to build awesome foreign exchange reserve of $1,400 billion (about Rs 56 lakh crore), the largest on the planet.
China overtook Japan ($860 billion or about Rs 34 lakh crore) in February this year in forex reserves
And, China has made sure that it will also buck up its agriculture production. In 2006, it is grain production was 497 metric tonnes. But, obviously, everything is not rosy here, too. The urban-rural gap is growing with actual urban income approaching six times that of rural income.
Evidence of fast changing Chinese
Some socio-economic indicators are enough to put China ahead of all world economy in near future. Its retail sales in 2006 -- $979 billion (about Rs 39 lakh crore) will be unabated. Its national savings rate is 49 per cent even though people have been changing old habits fast.
The Chinese society's biggest fad is automobiles. China produced 7.28 million cars in 2006.
Like all Asians, Chinese too love talking. China has about 520 million mobile phone owners. China has 660 cities of which 141 have a population over 1 million.
The Chinese have changed the way they dress and yearn to learn English. Life expectancy is 74 years.
What makes China click
There are many drivers of China's growth, but following are the key reasons:
- State-led investment -- $1.465 trillion in 2006
- Administratively-directed lending
- Continued strong supply side growth
- Large FDI inflows
- Robust exports (39 percent of GDP)
- FDI and Foreign Trade accounts for 80 percent of the GDP
China means foreign trading. Following are the major features of the China's maddening export sector:
- Exports: 93 percent are manufactured goods
- Exports are import intensive (40 percent inputs imported)
- Processing trade is 49 percent of total trade
- Imports are chiefly capital goods and industrial raw materials
- In 2006 58 percent of FDI went into manufacturing, 12 percent into real estate and 10 percent into banking
- Region-wise: Bulk of FDI to eastern provinces (roughly 90 percent)
- Shanghai and surrounding areas have a 46 percent. Guangdong and surrounding areas get 26 percent and Beijing and surrounding areas received 14 percent.
- 610,000 foreign-invested firms
Challenges to the economy
- Disparities in the Communist state
- Large Non Performing Assents with banks ($500 billion or about Rs 20 lakh crore)
- Low domestic demand
- Speculation in the property and capital markets
- Pressure to revalue the yuan
- Protectionism /economic slowdown in the United States and European Union
- Growth at the cost of the environment
- Quality of Chinese exports being questioned
India-China commercial and economy story
- Trade and economic ties -- biggest gainers of improved political relations
- Extended most favoured nation status to each other in 1984
- Rapid growth in bilateral trade and economic relations since late 1990s. Trade targets regularly beaten
- Since 2000 trade has increased at an average rate of 49 percent.
Bilateral trade trends
Growing commercial linkages
- 100 Indian companies are located in China ($400 million/Rs16,000 crore investments)
- 50 Chinese companies are located in India. The contracts are worth $12 billion (Rs 48,000 crore)
- About 200 trade delegations were exchanged in 2007.
- Eight major Indian banks are also present in China.
Areas of Indian presence
- Manufacturing (for domestic market and exports)
- Sourcing (components, intermediate goods, contract manufacturing for brands in India)
- Services: IT (system solutions, products and IT education); legal; education; entertainment services.
- Financial services (banks)
Indian companies in China
Ranbaxy, Orchid Pharmaceuticals, Dr Reddy's Lab, Aurobindo Pharma, Sundaram Fasteners, JK Tyres, Suzlon, Thermax, L&T, Reliance, Adani Group, Essar Steel, Apollo Tyres, TCS, Infosys, Satyam, Zensar, Aptech, NIIT, iGate, IIHT, Essel Pro-Pack Ltd, Aditya Birla Group, Real and KGK Diamonds, Mahindra & Mahindra, Videocon and Zee TV
Shortcomings in the trade
- Indian exports are dominated by primary products and commodities. Reverse is true for Chinese.
- India faces an increasing trade deficit.
- Free Trade Agreement.
Statistics & information courtesy: Embassy of India, Beijing