india vs china
DESCRIPTION
India vs China. International Business. Tommaso Jacopo Ulissi Francesco Nicoletti Deng Shuo Chu Luyuan Alessia Bruni. Agenda. Strategy ’ s differences and similarities Institutions A future perspective. Why India vs China ? An overall picture Theoretic framework. - PowerPoint PPT PresentationTRANSCRIPT
India vs China
International Business
Tommaso Jacopo Ulissi
Francesco Nicoletti
Deng Shuo
Chu Luyuan
Alessia Bruni
Agenda
2
Why India vs China?
An overall picture
Theoretic framework
Strategy’s differences and similarities
Institutions
A future perspective
Why India vs China?
People's Republic of China 中华人民共和国Zhōnghuá Rénmín Gònghéguó
Republic of India भा�रत गणर�ज्यBhārat Gaṇarājya
3
Why India vs China? Similarity in the development condition Being part of so-called BRIC’s countries Similarity in the country size,
population and long history Significant influence in Asia Competitors as well as neighbours
Boundary issue
Worldwide cultural influenceConfucianismBuddhism
4
An overall pictureIndia
1.166.079.217
25.3 years
1.548%
61%
3.2 % GDP
300.000
China
1.338.612.968
34.1 years
0.655%
90.9%
1.9 % GDP
645.000
5
Population
Median age
Population growth rate
Literacy
Education expenditures
Students abroad in 2025
Source: The CIA World Factbook 2009; The World in 2025- EU
In 2025 India and China could account for 20% of the world R&D
An overall pictureIndia China
6
Airports
Railways
Waterways
Merchant marine
Internet users
Internet host
Timezone
23° 349
4° 63.327
9° 14.500
23° 501
4° 81.000
22° 3.611.000 m
UTC/GMT+5.30
482 15°
77.834 km 3°
110.000 km 1°
1826 3°
298.000 m 1°
14.156.000 m 7°
UTC/GMT + 8
World rankin
g
World rankin
g
Source: The CIA World Factbook 2009
historyIndia
566 B.C. Siddartha Gautama born
1835 Institution of British education
1857-58 Revolt of Indian soldiers against East India Company
1947 India Independence
1948 Mahatma Gandhi murdered
Oct. ‘62 Border war with China
Dec ‘71 Third war with Pakistan; Bangladesh becomes independent
1984 Indira Gandhi assassinated
China
551 B.C. Confucius born
1368 Ming Dynasty established
1912 Republic of China founded by Kuomingtang party
1945-1949 Civil War between Nationlists and Communists
1949 People's Republic of China
1957 The Great Leap Forward
1965-1975 Cultural Revolution
1978 Deng Xiaoping’s reforms
7 Source: www.hyperhistory.com
8
Major economies share of world GDP (0-2005)
Gdp so far
Source: Angus Maddison (2001) in Saul Eslake
9
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
16000000
GDP based on purchasing-power-parity (PPP) - $ billion
China
India
After 2014, GDP growth is expected to be : 8% for China and 5- 6% for India
Source: International Monetary Fund “Dreaming with the BRICs: The path to 2050”, Goldman Sachs
GDP projections in the next five years
10
INDIA CHINA
THE BACK OFFICE OF THE WORLD
THE MANUFACTURE OF
THE WORLD
Source: “The dragon and the elephant”, Pang Zhongying, 2007
11
The missing element in development theory is:
STRATEGISING
The drivers of development are FIRMS, and the way firm deals with the world is STRATEGY
NO GENERAL LAWS OF DEVELOPMENT
WHY SO ?
Intellectual roots for latecomers development strategy
Latecomers status: Gershenkron
Industrial dynamics: Akamatsu “Flying geese Pattern”
Disequilibrium theorizing: Hirshman
“Latecamers need to make up for lost time and for their lack of resources, but they have certain avantage as
latecomers”
“Balanced growth makes sense in growth models, (..) butno sense in the real world of a late- industrialising
country”
Source: “The intellectual roots of latecomer industrial development”, John A. Mathews, 2005
Latecomers status: Gershenkron
“Latecomers are thosebackward countries
and companies withinthem, which might
take advantage of theirapparently weak
position in the global stagewhen they come to the
development task”(Gershenkronian
definition)
Advantages Disadvantages
Low cost of labour Lack of skilled labour
No organizational inertia Lack of financial capital
Creation of new institutions harnesssing capital and technology
Low salaries in local emerging-companies
Leverage of the cutting-edge technology
Lost time
Exploiting global value chain Poverty
Leverage the familiarity with •local market •distribution channel
Poor knowledge of industry dynamics
Gershenkronian’s Theory: Key elements
14
Institutions“The more backward a country’seconomy, the greater is the part played by special institutional
factors ...”.
Catching-up Strategy
“Latecomers adopts the latest technologies in order to gain
advanatages in international competition reducing the gap from developed
countries”
Overcame Disadvantages
Exploit Latecomers Advantages
Source: “The intellectual roots of latecomer industrial development”, John A. Mathews, 2005
Institutional Innovations
tools that allow latecomer countries to take short cuts that might include a financial innovation, according to the country’s degree of backwardness
India ChinaIDBI
Industrial Development Bank of India
MOFCOM Foreign Trade
Development Bureau of Ministry of Commerce
EXIM Bank Export Import of India
Bank
SDPC State Development
Planning CommissionCII
Confederation of Indian Industry
NDRCNational Development
and Reforms Commission
New institutions for the harnessing of capital and
technology
Dominant and Compensatory rule of the Institutions providing:
Financial capitals
Skilled labour
Technological capabilities
Best Effective Catching-up
Strategy
16
Awareness ofLatecomers Advantages
Awareness of local resources
global competitive
market
Driving forces behindIndustrial dynamics Best fit & ad-hoc strategy
Development Strategy
Homegrown entrepreneurship
Robust infrastructure
Financial market:• easy access to credit• greater transparency• greater efficiencyImprovement of corporate governance
Investors Class
Strategy of keeping the skilled labour
Foreign Direct Investement
Weakness of infrastructure
Financial market• obstacles to credit• less transparency• inefficiency
Bureaucrates control: State major shareholder
No same guarantees and protections of MNE
vs
India China
Source: “Emerging Giants” by Tarun Khanna and Krishna G. 2006
Akamatsu: the industrial dynamics
Temporary Competitive Advantage
Industrial upgrading
Latecomer needs to be linked to advanced countries in order to generate its own
activities
Latecomers Advantage: grasp the opportunity presented by developing an industry with machinary and techniques already perfected elsewhere, but at a lower cost
Source: “The Intellectual roots of Latecomer Industrial development” by John A. Mathews 2005
Hirschman: disequilibrium dynamics
Preferred sectors are favoured by price distortion to enable it to work at economical efficient scale: public istitutions create artifical favourable condition to make the sector put down roots.
Development and exports more important than efficency: entrepreneurial
opportunities arise through governament interventions aimed to growth paths.
19 Source: “The intellectual roots of latecomer industrial development”, John A. Mathews, 2005
differences and points of similarity in development strategies
1.Ground-up democracy, and the
divisive ideas of multiparty
government
2. Softer brand of socialism, Fabian
socialism
3.Focus on the Service sector,
especially IT industry, because of
inefficiency of delivery of public
services and resources and
undeveloped infrastructure; .
4.Advanced inherited system and
insitution
5. High-techonology talents (many
IT Engineers graduated from
universities every year)
6. Emigrants do not want to reinvest
back
1.The Top-Down appoach “Open” Reform
2. Eradicateng private ownership in 1949
and quickly did
3.The large pupulation & huge demands for
jobs; Limited capital accumulation after the
establishment of the P.R.C
4.Efficient national capital & resources allocation
5. The return and reinvestment from emigrants
6. The desire to absorb capital and attract
investment to quickily develop the country
Domestic entrepreneurs have
been provided a more nurturing
environment and are flourishing
Foreign Direct Investment(FDI)
largely create China’s export-led
Manufacturing Boom
Political System
History functio
nNationa
l conditi
ons
People Characteris
tics Source: “Can India overtake China?”, Y. Huang, T. Khanna
differences and points of similarity in development strategies
India’s Domestic Nurturing Strategy China’s attracting FDI strategyKey Words:Domestic entrepreneurs , nurturing environment
Key Words:Foreign Direct Investiment(FDI), export-led Manufacturing
The Reflection of the Different Strategies
L&R constraints on private businesses and lower political status
Strong and protected SOEs
Unfair legal, policy and market environment
The protection of private ownership is far stronger
A decent legal system provides the regulatory
framework
A tradition of entrepreneurship and
government has taken a back seat
Source: “Emerging giants: Building world-class companies in developing countries?”, Khanna, Tarun and Krishna P.
Technology & Institution late-development advantage
Resource late-development advantage
Attract FDI to increase Capital
Lower labor cost
Huge population
High availability of cheap unskilled workforce
Products exporters
Efficent allocation of resources across the country by the government
Tech
nolo
gy-in
tens
ive
Indu
stry
&
Adva
nced
Sys
tem
and
Insti
tutio
nLabor-intensive Industry
& Capital-intensive Industry
Software, ServiceManufacture
Indroduce advanced technologyLow imitation cost (capital & time)Inherited system and insitution
Skilled engineers
Time zone differences
English speakersWater scarcityUnreliable electricity systemConflicts between States
Foreign Trade Development Bureau of Ministry of Commerce
(MOFCOM)
Export Import of India Bank (EXIM Bank)
A premier export finance institution of India. Started
with a mandate to enhance overall
economic growth.
A catalyst and a key player in the
promotion of cross border trade and
investment.
A public management
agency under the Chinese State
Council, in charge of international trade and international
economic cooperation
1 Prime mover in encouraging project exports and advisory and support services
2 Offers credit to overseas financial institutions to finance imports of goods and services from India
3 Provides financial assistance for the upgrade of facilities and for acquisition of leading equipment and technology overseas.
4 Rural Initiatives Program linking Indian rural industry to the global market
Main functions
Source: “India: everything to play for” by Lehman Bros 2007
Main functions
1 To formulate development strategies, guidelines and policies of foreign trade and international economic cooperation
2 To monitor and analyze market activities and commodity supply and demand on foreign countries, organize the
adjustment of market supply and regulation of the distribution
3 To give general guidance to nationwide efforts in foreign investment, analyze and look into China’s foreign investment
developments
Characteristics:
1 Entire Public Background
3 Give top-down support to Chinese “latecomer” companies in global market
3 Offer consultancy support and advisory services to Indian latecomers
4 Keeping a balance on FDI to avoid that it plays a bigger role in the
economic growth
Characteristics:
1 Partnered with Small and medium enterprises
2 Act institutional functions in a more detailed way: offering credits and
facilities, providing financial assistance
4 Attract FDI to speed up economic development
2 Act institutional functions in macro and Long run vision: issuing policies,
formulating guidelines
CAS (Chinese academy of Science)
Other examples of institutions of India and China
IDBI Bank (Industrial
Development Bank of India Limited )
CAE (Chinese academy of
Engineering)
CNSA(China national Space
Administration)
Reserve bank of India
United bank of India
What could go wrong?Both China and India appear to be on a path of strong and
sustainable growth. What, if anything, might knock them off this path?
India
-The big and growing population and not generating enough jobs for a very large proportion of its population
-the lack of delivery of public services and resources
-developing and maintaining infrastructure
-health
-the conflicts of politicians and interests groups
28
China
-Missteping in political reform
-Interruption of global economic growth
-Energy shortage
-Income disparity
-Taiwan Issue
-Renminbi
-demographic time bomb because of the one-child policy
-Will "opening up" lead to a demand for democracy?
Can India overtake China or not?
What is the answer?
The answer is change the question!
What matters most is how to catch up with early-develped countries for China & India!
Because the latercomers advantage will not exist forever!
Source: “Can India overtake China?”, Y. Huang, T. Khanna
A future perspective
Short term early development advantage Short term later development advantage
Long term early development advantage Long term later development advantage
31
..for your
attention!
Thank you..