Much has been made of the implications over China and India’s economic reforms, with a generally accepted truth that China is 15 years ahead of India.
While this may be true of the infrastructure development of China, and its larger volume of FDI to date, it is not true in other areas, where India is ahead. This is especially true of the development of Indian companies compared to their Chinese counterparts, and there are a number of component parts to this equation.
Regulatory Regimes & Publicly Traded Companies
Indian companies can list domestically on the Bombay Stock Exchange, which is also Asia’s oldest. Though it does rival Shanghai's in size, however it outstrips it in its strict operating code, rule of law and transparency. In short, the Bombay Stock Exchange is, and has been, run to international standards and has immense security in the quality of its companies.
Indeed, there have been only 22 changes in the past 15 years of its top 100 companies. Indian companies are also successfully listed overseas and have been for decades. Compared to this, both the Shanghai & Shenzhen Exchanges are new and still largely state supported.
While the Securities Commission in China as regulatory body has no powers to impose punishments on errant firms. That requires civil action initiated by the Government – meaning on the China exchanges, while the government remains the largest stockholder of its State-Owned Enterprises, these are not subject to third party independent policing. Consequently, this casts doubt on the true financial status of many of China’s listed entities when some accounts are not released by the government for scrutiny and others are not subject to proper independent examination. China still has a long way to go to get transparency into its stock exchanges, and the inherent quality of those stocks is more questionable than India’s tougher and more independent regime.
Comparisons of capitalization:
- Bombay Stock Exchange:
- US$1 trillion; 4,833 listed companies
- Shanghai:
- US$1.7 trillion; 849 listed companies
- Shenzhen:
- US$0.122 trillion; 540 listed companies
It’s all to do with the English language. Quite simply, Indian businesses speak English – often at all levels of staff – and Chinese ones do not. This means business and transactional discussions can be far more easily conversed, understood, and executed. Despite the fact that Mandarin is the worlds most spoken language, with some 874,000,000 people speaking it, it is only spoken in 16 countries in any substantial numbers, and these all being in Asia. English is the world’s third largest spoken language, with 341,000,000 people, yet it is the most global of languages, being spoken in 104 countries – six and a half times more – than Mandarin. Spanish comes in at fourth with 322,000,000 speakers in 43 countries.
Interestingly, Hindi is the world’s second most spoken language – 366,000,000 in 17 countries, and Bengali fifth with 207,000,000 speakers spread around nine countries. Simply put, Indian’s speak the worlds second, third and fifth most common languages, whereas China speaks just the one – and most of those are within its own borders. It is unlikely this trend will cease, as Mandarin remains essentially a regional and not global language. English and other European languages dominate the global internet by a factor of close to 75% of all internet traffic communications.
