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China Swot Analysis

INDIA VS CHINA

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From April to June 2005, India’s GDP grew at 8.1 per cent, compared with 7.6 per cent in the same period the year before. More impressively, India is achieving this result with just half of China’s level of domestic investment in new factories and equipment, and only 10 per cent of China’s foreign direct investment…

… in 2003 and 2004, [China] was investing close to 50 per cent of its GDP in domestic plant and equipment - roughly equivalent to India’s entire GDP. That is higher than any other country… China’s growth stems from massive accumulation of resources, while India’s growth comes from increasing efficiency…

While India’s stock market has soared in recent years, the opposite has happened in China. In 2001, the Shanghai Stock Market index reached 2,200 points; by 2005, half the wealth wiped out. In April 2005, the Shanghai index stood at 1,135 points… [Link]

Huang argues against using foreign direct investment as a key measure of economic growth:

With few exceptions, the world-class manufacturing facilities for which China is famous are products of FDI, not of indigenous Chinese companies.

His analysis is that India has a more laissez-faire attitude in both politics and entrepreneurship:

Infosys was founded by seven entrepreneurs with few political connections who nevertheless managed, without significant hard assets, to obtain capital from Indian banks and the stock market in the early 1990s. It is unimaginable that a Chinese bank would lend to a Chinese equivalent of an Infosys.

China was light years ahead of India in economic liberalization in the 1980s. Today it lags behind in critical aspects, such as reform that would permit more foreign investment and domestic private entry in the financial sector.

China’s hidden weakness is the massive and often centrally planned investments, which are often less productive...