Economics
Prospects for the "Dragon" and the
"Tiger"
China and India are now viewed as the next great development
frontiers.
By Marvin J. Cetron
Getting in at the start of
something big is always attractive to stock investors, who now see enormous potential
developing in Asia. Dirt-poor just a generation ago, China and India turning their
economies around and are now the dragon and tiger of global commerce, experiencing growth
rates no other large country can match.
In the past 25 years, China used its dauntingly large population to good
effect and has transformed itself into the fourth-largest industrial producer in the world
after the United States, Japan, and Germany. It produces just about everything from
cameras to major kitchen appliances to computer hard drives. Chinese exports grew by 50%
between 1998 and 2002 and will continue to grow by 20% per year.
According to the World Bank, with the national income per person at
$890, the average Chinese was twice as well off as his Indian counterpart. However, 800
million Chinese still live in rural China, where the general standard of living is
significantly lower than in the cities.
From an investor's point of view, right now, the dragon is far ahead of
the tiger: China's per capita GDP is $5,000, with only 10% of its citizens living below
the poverty line. India's per capita GDP is $2,600, and a quarter of Indians live in
poverty.
China's current lead is due to the fact that it has solved many
development problems that India has not yet conquered, such as in education. While 86% of
the Chinese people can read and write, Delhi claims 60% literacy (and its standards are
low). China's one-child policy keeps its population stable; India is growing rapidly
despite an infant mortality rate twice as high and a continuing tradition of female
infanticide. China is a member of the UN Security Council; India merely wants to be.
Communism stripped away nearly all of China's social inequality; India has officially
banned the caste system but remains handicapped by it. China started toward a capitalist
system in 1978 under Deng Xiaoping; India did not begin to escape Nehru's legacy of
anticapitalist socialism until 1991. Thus, the dragon has gained an early lead over its
Asian rival, the tiger.
But the tiger has advantages that could help it leap ahead of the
dragon. India has a tradition of democracy some 2,000 years old, while China has just
opened its ruling Communist Party to leading capitalists, and Beijing's rule is absolute.
India's National Vigilance Commission is cleaning up the country's legendary corruption,
while China remains opaque. India has opened itself to the world, while China rigidly
censors the Internet.
Most important of all to potential investors and partners, especially in
the United States, India's educated classes speak English as a native language. As a
result, India turns out more English-speaking scientists, engineers, and technicians than
all the other nations combined. In a world increasingly dominated by English-speaking
industries such as services, computers, and telecommunications, this is an overwhelming
advantage.
In general, national stability is an essential factor to consider in
evaluating partnerships with other countries, but it can be challenging to assess because
it requires the use of numerous indicators for economic conditions, demographic trends,
politics, religion, technological development, sociocultural tendencies, and more. All
these factors interact to form a complex array of forces that influence the stability of a
nation.
Monitoring these indicators helps businesses evaluate potential risks,
avoid adverse conditions, and decide whether to invest in a particular nation. One
long-term indicator of success, for example, is the level of a nation's technological
development. Technological progress helps improve economies and raise standards of living,
but it can be impeded by a shortage of trained, creative scientists, engineers, and
technicians.
"Technological progress" might be gauged from the percentage
of the nation's population who are Internet users, for instance. In 2002, 3.6% of Chinese
were online, compared with less than 1% of Indians. However, India had a whopping 14 times
as many Internet Service Providers.
The dragon and the tiger both have continuing problems. China remains
locked in its cold war with Taiwan, while Kashmir is a perpetual source of friction
between India and Pakistan. Yet India today is meeting its challenges more successfully.
If we look 25 years ahead, the tiger may well come out ahead.
About the Author
Marvin J. Cetron is president of Forecasting International Ltd. This article
draws from his forthcoming presentation at WorldFuture 2004. http://www.wfs.org/2
