China and India: giants of the 21st century

China and India, the renaissance

Narendra Modi, the Indian Prime Minister, celebrated the anniversary of his first year in power not in India, but in China. In a speech at Tsinghua University in Beijing, he said that the most important aspect of our times was the rebirth of China and India. Indeed, in 1800, these two giants represented 50% of the world economy. Today, they simply want to take their place...

A Chinese economy on track

China and India have 1.35 and 1.25 billion inhabitantsrespectively, or 60% of the Asian population and 35% of the world population. The massive size of their populations is of course their main asset. The Chinese economy (in nominal GDP) should thus overtake the American economy within a few years to become the leading economy on the planet, while its GDP/inhabitant will only reach 20 to 25% of GDP/inhabitant. American. China is only at the beginning of its catch-up. While it has developed very rapidly at average growth rates above 9% over the last 30 years, it is however only expected to grow at rates of 6-7% over the next decade, its economy being more mature. China initially developed through exports and investments, particularly in real estate and infrastructure. The Chinese model is evolving and should rebalance in favor of domestic consumption. A middle class has notably formed and now constitutes a growing domestic market. China has succeeded in its economic catch-up thanks to a strategic vision implemented with flexibility. It will, for example, have carefully managed the evolution of the yuanexchange rate, despite foreign pressure, to maintain the competitiveness of its companies, while encouraging them to move upmarket.

Revival of the Indian economy?

Under the leadership of new Prime Minister Narendra Modi, can the Indian economy take off again?

Although its potential is similar to that of China, India has stalled economically in recent years due mainly to a paralyzed political system. The Indian economy is now far from the Chinese economy which is now 5 times larger. Hope has, however, returned again on the Indian side with the spectacular victory in May 2014 of the BJP, the Hindu nationalist party, and the takeover of power by Narendra Modi. Modi has a real ambition for India and has notably worked to improve the business climate and develop infrastructure in order to encourage Indian and foreign companies to manufacture in India. If Modi likes to act quickly as he demonstrated in foreign policy during his first year in power, some of his economic reforms will take time because he does not have an absolute majority in both Indian houses. Modi nevertheless appears to be heading in the right direction and if he manages to stay at the head of the country for ten years, winning a new term in 2019, India could make spectacular progress. It can also count on large Indian family businesses, capable and present in all sectors of activity.

Indian democracy and the Chinese Communist Party

Although it often proves to be a brake on the country's economic development, Indian democracy is a guarantee of counter-power and ensures stability for the country, insurance for the future. Indians are very attached to their system and closely follow the political events relayed by the media. They will, for example, have passionately followed the campaign for the 2014 general elections. In addition to the general election, Indian life is also punctuated by the elections of its 29 states and 7 territories. After notably Maharashtra and Jammu & Kashmir in 2014, and Delhi at the beginning of 2015, it was Bihar which chose its new assembly at the end of last year. If Indian democracy allows for a certain transparency, politics in China is a black boxwhere everything is negotiated and decided between a small number of people without real consultation of the people. Although there is only one party in China, there is a certain plurality with different schools of thought within it. The strength of the Chinese Communist Party is its ability to implement decisions quickly, even if it is also the subject of lobbying by various interest groups. Without a strong counter-power, the Communist Party, which has evolved little over the last twenty years, requires enlightened leaders.

Diametrically different Chinese and Indian societies

The goal of the Chinese Communist Party is to develop China economically while ensuring societal stability. This stability, notably ensured by the conformism of society and the Confucian hierarchy, is however undermined by corruption, creating social injustices and revolts, mainly in the countryside. China also suffers from glaring social inequalities, but these inequalities are an integral part of a fundamentally hierarchical Chinese society. The most important thing for a Chinese is social status which is mainly determined by money. While India is much freer than China in politics and the media, Indian society is relatively rigid. Indians, especially in the countryside, are in fact always very linked to their caste and their community. A gap also separates the Indian elite from the rest of the population and it is therefore more difficult than in China to climb the social ladder. There is, on the other hand, great religious freedom in India, where religions coexist. Religion is one of the essential values ​​of Indian society, just like family.

Indian diversity versus Chinese unity?

Indian civilization is ancient, but India is a relatively new country. India is above all characterized by great diversity, with strong regional identities. Northern India, for example, differs very clearly from southern India. China, on the other hand, despite its 55 minorities, is quite unitary, with the Han ethnic group comprising more than 90% of the population. Western companies also compare the Chinese market to the relatively uniform American market and the Indian market to the European market where each country has its specificity.

China and India, by the size of their populations, are the two countries with the greatest potential for the coming decades. While China is already on track to become the world's largest economy, India has a good chance of expanding rapidly at growth rates above 10%. Will they be able, as Narendra Modi mentioned in his speech, to cooperate to make the 21st century the century of Asia?