[ By Chris Devonshire-Ellis, Dezan Shira & Associates ]
In this special issue of China Briefing we take a look at the recent emergence of another Asian Tiger – India – the impact this will have on foreign trade with China, and the options that it now presents to multinationals trading in the global economy.
On the surface, things do not look all that promising when it comes to Indian development, and indeed with relationship to China. Typical responses, when looking at the picture, are that India is far behind China in terms of infrastructure development, that the democratic process hinders progress, that bureaucracy is out of control and that corruption is rife. Add to that an on-going suspicion on both countries parts towards each other – China and India having fought a border war in 1962, with certain territories still disputed. India is unsure of China’s good relations with its own neighbor, Pakistan, resulting in political mistrust. Trade has been at very low levels between these two giants for much of the past 50 years.
Certain figures back up the inefficiencies. Shanghai for example, can turn a ship around at port in eight hours. In Bombay, it takes three days. So, given these apparent weaknesses and problems, where is the China-India relationship heading?
Let’s have a look at some initial recent history and demographics to see where we are today.
Political system
China: Communist, however with market reforms increasingly encouraging free trade and capitalist-based models of enterprise in commerce. Still a one-party state, yet gradually moving towards democracy.
India: Democratic, but with a commercial system that until the late 1980s was based on the old Soviet model, still undergoing reforms towards encouragement of free trade, and capitalist-based models of enterprise. A multi-party state, yet gradually moving reforms to allow greater autonomy of central planning.
So what’s going on here? Curiously, both countries, despite having different political systems of government, have actually come from the same place – Soviet style planned economies based on communist principles and massive state-owned agricultural based models with state protectionism of these being rife. Both passing significant reforms in the 1980’s and 1990’s, leading to a change in direction for both countries within a relatively short period of about 20 years. There are actually more similarities between both countries recent political past than there are differences. As China modernizes, it is allowing more democracy, while as India modernizes, certain aspects of the democratic process that have previously been subverted to permit minority positions to dictate against policies for the good of the majority are now being reigned in. India is getting it’s democracy under control for the good of the nation.
