export marketing
TRANSCRIPT
Export Marketing
Dhiraj Arora
T.Y.B.COM
DIV-A
Roll No.-104
Academic Year- 2011-12
Topic- Comparative Export Analysis- INDIA vs. CHINA
Submitted To- Prof. Abhilasha Gupta
M.K. SANGHVI COLLEGE OF COMMERCE & ECONOMICS
Introduction
Reduction of trade barriers creates competitive pressures and the potential
for technology transfer so as to lead to productivity gains and restructuring
of an economy towards its comparative advantage. India has undertaken a
series of economic reforms towards opening up of the economy in the
decade of the nineties. Notable among these has been the extensive effort to
liberalize its international trade. It is therefore expected that trade
liberalization in India would have led to changes in the composition of
exports so as to reflect India’s comparative advantage in the global
economy. Further, a country’s comparative advantage in international trade
may be influenced by differential rates of change in accumulation of
production factors or due to the increased trade integration of other
countries. China’s recent move towards export oriented development strategy
may have altered the picture of comparative advantage for labor intensive
manufactures in the world market. Across developing countries there is an
ongoing debate and emerging concern about the threat and opportunity in
relation to the rise of China and the consequent intensification of
competition in labour intensive manufactures. The debate is even more
pertinent in case of India, as China and India are not just similar in size
but also with respect to factor endowments. It is important therefore, to
explore the structure of comparative advantage of India and China and the
extent to which the two economies compete with each other in the global
market for manufacturing sector commodities.
Main Trade Developments
General Trade Trends - China’s economic transformation and integration with
world markets is one of the most remarkable economic developments of recent
decades: China’s share in world goods trade has increased from less than 1% in
1970 to close to 8% in 2006.The expansion of international trade has been the key
feature of the country’s rising prominence in the world economy with average
annual growth rates of trade at three times the world rates. Already in 2005 China
became the third largest trading nation after the United States and Germany and its
contribution to the growth of world merchandise trade over the period 1996-2006
amounted to 20%. Looking forward, it is estimated that China will become the
world’s top exporter by the beginning of the next decade owing to attractiveness to
FDI, a high domestic saving rate, improvements in productivity spurred by reduced
internal and external barriers to trade, and a significant surplus of labour. The
considerable expansion of China’s trade in recent years concerns both goods and
services. However, as compared with its goods trade, services exports remain at
lower levels and are growing more slowly. Indeed, while goods trade surplus
reached USD 134 billion in 2005, services saw a gradually deepening deficit that
appeared at the beginning of the 1990s and reached USD 9 billion in 2005.
Overall, Chinese goods exports account for approximately 90% of its total exports,
which is substantially higher than the world average at a little over 80%. This
clearly visible in the breakdown of China’s current account in period 2000-2006
which is characterised by a relatively stable negative balance on services (app.
0.5% of GDP), gradually improving income and current transfers balance (counted
together, form -0.7% of GDP in 2000 to 1.4% in 2007) and a rocketing
surplus on trade in goods (from 2.9% to 7.7% of GDP).
Trade in Goods and Services, World and China
Percentage
Goods Services
World China World China
Exports
1994 80 86 20 14
2001 80 89 20 11
2004 80 90 20 10
Imports
1994 79 85 21 15
2001 80 85 20 15
2004 80 88 20 12
Importance of Trade in China and India’s Growth- The remarkable parallel
growth and trade performance in both China and India prompts the classic
“chicken and egg question”, namely, whether the opening up to trade drove the
growth of GDP or whether trade increased simply as a consequence of GDP
growth and expansion of their shares in the world GDP. To gauge the influence of
trade on GDP several analysts consider the evolution of exports to GDP or exports
and imports to GDP ratios. Yet, the use of such ratios can be criticised as
meaningless or even misleading since exports or imports are turnover measures
whilst GDP is a valued added concept. Still, as long as we remember this important
distinction these measures can give us a feeling of the extent of exporting activity
as compared to economy’s income. In China, clearly, the observed trade expansion
reflects at least in part greater specialisation in production in the Asia region where
China engages in the final processing and assembly of large volume of exports
originating from its Asian neighbours that are destined for markets in Europe and
North America. As mentioned above, according to certain rough approximations
almost half of China’s exports are the subject of such “triangular” trade though this
share is higher in certain high technology products trade. Certainly, existence of
such a processing activity would be reflected in relatively high exports to GDP
ratios.
Share of World Exports- India vs. China
India: Top Ten Sectors based on the RCAI
Rank HS code Sector
1 50 Silk
2 13 Lac, gums, resins, vegetable saps and extracts nes
3 71 Pearls, precious stones, metals, coins, etc
4 57 Carpets and other textile floor coverings
5 52 Cotton
6 63 Other made textile articles, sets, worn clothing etc
7 09 Coffee, tea, mate and spices
8 97 Works of art, collectors pieces and antiques
9 26 Ores, slag and ash
10 53 Vegetable textile fibers nets, paper yarn, woven fabric
China: Top Ten Sectors based on the RCAI
Rank HS Code Sector
1 46 Manufactures of plaiting material, basketwork, etc.
2 67 Bird skin, feathers, artificial flowers, human hair
3 66 Umbrellas, walking-sticks, seat-sticks, whips, etc
4 42 Articles of leather, animal gut, harness, travel goods
5 50 Silk
6 95 Toys, games, sports requisites
7 65 Headgear and parts thereof
8 64 Footwear, gaiters and the like, parts thereof
9 63 Other made textile articles, sets, worn clothing etc
10 86 Railway, tramway locomotives, rolling stock, equipment
INDIA & CHINA
BIBLIOGRAPHY
WWW.GOOGLE.COM
WWW.WIKIPEDIA.COM
EXPORT MARKETING TEXT BOOK-
MICHAEL VAZ
WWW.OECD.ORG- PRZEMYSLAW
KOWALSKI
WWW.ICRIER.ORG- AMRITA BATRA &
ZEBA KHAN.
INDEX
INTRODUCTION
MAIN TRADE DEVELOPMENTS
SHARE OF WORLD EXPORTS-INDIA VS.
CHINA
INDIA TOP 10 SECTORS
CHINA TOP 10 SECTORS
INDIA-CHINA COMPARITIVE ANALYSYS
CONCLUSION
BIBLIOGRAPHY
ACKNOWLEDGEMENT
I owe a great many thanks to a great many people who helped and supported
me during the making of this project.
My deepest thanks to Lecturer, Prof. Abhiasha Gupta, the Guide of the
project for guiding and correcting various documents of mine with attention and
care.
I would also thank my Institution and my faculty members without whom
this project would have been a distant reality. I also extend my heartfelt thanks to
my family and well wishers.
CONCLUSION
The analysis in the preceding sections demonstrates that international trade will
remain probably the single most important factor that can allow China and India to
continue, or perhaps even speed up, the growth enjoyed in the last decade. Indeed,
the projected expansion of the world economy implies close to 500% cumulated
growth in volume of exports of both these countries. The comparison of the key
features of trade integration processes and the economic outcomes of China and
India reveals that while much has already been achieved in both these economies
in terms of opening up, the Chinese reforms, especially with respect to
manufacturing trade, have gone further and that this is likely one of the key
determinants of better economic performance of China. Of the two countries,
China is probably the example to be followed as far as trade policy is concerned
but China’s integration process so far remains characterized by a certain duality.
On the one hand the opening up of trade and FDI in manufactured goods has
spurred the emergence of a largely private and dynamically growing sector. On the
other hand the high level of public ownership and important regulatory barriers
continue to dominate the services sectors. The full implementation of China’s
GATS commitments would imply significant reforms and liberalisation measures
with important gains for China and many of its trading partners. India has gone a
long way in reducing its tariffs on non-agricultural products as well as certain
nontariff barriers but moderate protection still persists which likely adds to the
costs of intermediate inputs and, thus, to the hurdles faced by the Indian
manufacturing sector. India has revealed a comparative advantage in certain
segments of the services sector but its services trade policy is still very restrictive,
even as compared to China. The extent of liberalisation achieved so far and the
outcomes it brought about suggest that the remaining goods and services trade
barriers are just one item on the list of reforms that India needs to tackle in order to
promote trade-led expansion of labour-intensive activities. Other important
priorities include: reforming small scale industry policies that prevent realisation of
economies of scale and productivity increases in the sector; relaxing of labour
market rigidities that hinder the inter-industry and interstate labour mobility and
underpin misallocation of resources across industries and states; tackling
infrastructure bottlenecks reducing regulatory differences across states.
India-China: Comparative Analysis
The resource and labour intensive manufactured commodities hold the dominant
share in India and China’s comparative advantage in the manufacturing sector.
China’s share of labor and resource intensive commodities of the total
manufacturing sector increases marginally from 39 per cent in 2000 to 43 per cent
in 2003. In contrast, India’s share of the resource and labor intensive of the total
manufacturing sector decreases from 39 per cent in 2000 to 37 per cent in 2003.
For both India and China science- based industries contribute less than 10 per cent
of the comparative advantage in the manufacturing sector. While for India only
about 5 per cent of the total manufactured products with comparative advantage
can be characterized as science based in both 2000 and 2003, this percentage is
greater in China.
Science based manufactures constitute 7 per cent of China’s comparative
advantage in the manufacturing sector in 2000 as well as 2003. In absolute terms,
China’s science based industries is double the number in India. For 2000, there are
121 science based Industries in China in comparison with only 57 in India. In
2003, this number increases to 67 for India and 125 for China. Within the science
based manufactures India and China are advantageously placed in same
commodity sectors. In terms of the number of manufactures in these sectors, China
outscores India in all the sectors, except for medicinal and pharmaceutical
products, in which India marginally exceeds China. In fact for India, medicinal and
pharmaceutical products is the predominant category, while in China -
photographic apparatus, equipment and optical goods dominates. In the leading
science- based category China enjoys more than double the comparative advantage
that India does in the same industry category. China’s advantage in the leading
science based industry is much stronger (in terms of the number of commodities)
than that of India’s in its leading science based industry. India has lost its distinct
comparative advantage in aircraft launching gear; deck-arrestor or similar gear;
ground flying trainers; parts of the foregoing in 2003. China on the other hand has
gained comparative advantage in the science based categories of gliders and hang-
gliders, balloons, dirigibles and other non powered aircraft and propellers and
rotors, and parts thereof in 2003. The analysis in the previous section reveals
similarities in the structure of international specialization for both India and China.
Labour and resource intensive manufactured commodities dominate the
comparative advantage scenario for in the export of manufactured commodities for
both the countries. With an ongoing process of trade reform and common objective
of garnering a larger share of the global market, it is only appropriate that we
examine the extent of competition that India and China may pose to each other.
The degree and nature of competition between India and China in the world
market is evaluated by calculating the Spearman’s Rank Correlation (SRC)
coefficients for RCA indices for India and China in the world market for
manufacturing products. The aim is to identify, according to factor intensity, the
sectors where India and China compete/complement in the world market. A higher
and positive value of the coefficient reflecting the fact that both the countries are
contesting for a share in the world market is indicative of a competitive
relationship between the two countries in the export market. A high negative
coefficient in a similar fashion is indicative of complementarity in export
specialization between the two economies. A value of zero for the spearman
correlation coefficient implies no relationship. When calculated for the
manufacturing sector as a whole in 2003, the SRC coefficient is zero indicating no
relationship between manufacturing sector in India and China. Within
manufacturing though, India and China have a competitive relationship in organic
chemicals, inorganic chemicals- sectors that makes a high demand for capital, skill,
technology, and scale, the resource intensive category of non-metallic mineral
manufactures, n.e.s. and in manufactures of metals, n.es which is a low capital,
skill, scale and technology commodity category (Refer Appendix Table A.11). In
the category of road vehicles (including air-cushion vehicles) India and China
compete with each other in 2003, even though the two countries were in a
complementary relationship in this sector in 2000. A complementary relationship
is evident in labour and resource intensive sectors like textile yarn, fabrics, made-
up articles, n.e.s and related products and articles of apparel and clothing
accessories. For photographic apparatus, equipment and supplies and optical
goods, n.e.s. watches and clocks and iron and steel both countries complement
each other in 2003 but did not do so in 2000. Other sectors where a
complementary relationship between the manufacturing sector in India and China
is evident in 2000, but is not maintained in 2003 are medicinal and pharmaceutical
products and footwear.