China versus India

Earlier, I read a wonderful book by Yasheng Huang on Chinese growth model.  He is a critic of the Chinese way.  He believes that the current Chinese growth model is more like South American model (old Brazilian way, for example) which ultimately failed.

In the below video, he compares China with India, and the gist of his conclusion is that while China has been fantastic in delivering GDP growth, the quality of growth in India is arguably better, and India is gathering momentum in terms of GDP growth as well.

Another popular view on China is that because it has no democracy, Chinese policy makers can make things happen quickly, unlike India, which seems to take them forever to get things built. Huang turns this on its head and urges more political reform in China:


  1. Hugh Hendry said it very well: “The chinese are great at creating
    GDP, but are they creating wealth?” In general, though not
    exclusively, wealth is generated from the roots upward, rather
    than dictated from authorities downward. When the creation of
    GDP becomes a goal in itself, it conforms to Goodhart’s Law, which states that when an index of any activity becomes an end
    sought by policy, it loses its’ value as an indicator. Between China and India, the former is somewhat more “top down”.

  2. The theme that “Chinese growth is doomed because it’s not a democracy.” has been repeated again and again since Tiananment Square. It sells books since it is what most Westerners wants to hear. Meanwhile, China’s economy keeps growing from strength to strength under a dictatorship.

    The reality for China is much bleaker. “Chinese growth is doomed”, period. Due to the one child policy, the working population is set to peak in 2016, and labor cost is going up. The merchantilist export policy cannot survive a simultaneous downturn in both Europe and USA. Furthermore, most of the capital generated during the boom time is pumped into real estate. When Chinese property prices inevitably falls, most Chinese banks will become insolvent and the credit market will freeze up.

    What happens next will determine the fate of China for the next decade. China can go the ‘Japanese’ route and go into terminal decline with zero interest rate and zombie banks. There is the ‘print money’ route which bails out the banks at the cost of high inflation, more mal-investment, and social unrest. Or they can revert back to communism with another ‘cultural revolution’.

    As India grows richer, the chance of a war with Pakistan increases. This will be the biggest danger facing India’s economy in the coming decades.

  3. Interesting presentation. Loosely aligns with Niall Ferguson’s longer term view that in decades ahead India may well be a key economic power. I think Ferguson’s views were more aligned with demographics (China declining birthrate/ageing population v India burgeoning youth population etc). India must overcome significant challenges in literacy, internal political/religious stability, poverty and a fractious relationship with Pakistan. These are not insignificant hurdles.

    The NYT has commenced a regularly section on India, for the interested.

  4. My two cents,
    Japan is not keeping quiet with its ageing demographics. In fact it is world leading in its innovation in robotics and androids. In 20 years time with advancement in computation and hence AI , we should be able to supplant humans with robots for most tasks.

    We will be at a point where we will be dealing with a surplus of human sentience where we wouldnt have enough jobs to go around to keep everyone employed

  5. Chinese Communist Party hierachy Vs Indian Bureaucracy Vs Western Regulatory Democracy.

    In 1971, US Secretary of State Henry Kissinger travelled secretly to China and met with Zhou. Their talks led to the historic visit to Beijing by US President Richard Nixon in 1972, paving the way for full diplomatic relations.

    “It is too early to say”
    Zhou Enlai, asked for his assessment of the 1789 French Revolution.

    The issue of culture is enormous. Just as we ackowledge there are disparate cultures in Europe so also in the sub-continent of India and China.

    I’m still waiting for democracy in the West. I never voted for Gerry Mander.Now waiting for Godot, deGaulle and Democracy.

    Whose culture, whose philosophy, whose democracy? It’s all Greek to me. Not.

    “There is nothing in a caterpillar that tells you it is going to be a butterfly.” American architect Buckminster Fuller (1895-1983)