Hey fellow primates I have been thinking about this question for a while and could not come out with clear answer. If you had to invest long term( growth prospects) in either India or China, which one would you choose? Please take into account the different political, economic and social structures. Any good explanations or arguments would be great to go along with your opinions. Let it rip.
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Can't really speak to India... but do a simple test. For the next week, see how many times keywords relating to "China" comes up on Bloomberg.com, versus "India". I think you'll find the results would be extremely lopsided.
You can't really "speak to India" but your analysis of long-term investment opportunity in China is brilliant
I'm not sure if you're joking or not over the internet... so if you are that is pretty good
all the hype is about china. If you got into india now,you might be able to find undervalued investments and gain long term.
how long term?
This is too broad a question, impossible to answear. After all you're not buying a country, so it all depends on the specific project you're looking at. Of course you will want to account for the macro environment in your analysis and in case of China there are a lot of things to worry about - lack of respect for law, beurocracy, blatant currency manipulation potentially fueling speculative bubbles, possibly civil unrest in the future. Mind you I'm not saying I favor India over China - I just don't know as much about what is going on in India. But I'm pretty sure they're screwed in their own way.
The fundamental question, of course, is whether India or China is over/undervalued. Unfortunately, India faces the same developmental problems that China does plus increasing scarcity, massive infrastructure issues, and a government that is no better than China's. All the institutional issues affecting China are pittances compared to the looming demographics problem created by the one-child policy.
Yeah, tandaradei, I think it is helpful to breakdown the issue into sections, maybe what I am looking for is more like a SWOT analysis of each country. India and China both have their own set of problems, but the media focuses so much on China, that all the other BRIC countries get drowned in the coverage. But regardless, good start to the discussion.
And ibhopeful WTF?
India's infrastructure is poor as hell. Just take a look at their roads and train tracks.
chinese food > indian food
nuff said
Ok, that's a start: India's infrastructure is massively lagging China's (don't know when it became a competition, China is like a generation ahead of India in terms of economic development; in terms of other issues, such as democracy, freedom of speech/press/religion etc., India is better off than China. It doesn't seem to matter on an economic basis though since China liberalized it's economy despite no comparable "democratization" of its society).
Anyway, to continue the discussion, the China and India models are totally different...China liberalized far ahead of India. For one, India is probably two decades behind China when it comes to the liberalization of it's foreign direct investment laws.
But hey the question is still too broad, and you still haven't defined your horizon...if your question is which country will give a higher compounded average growth rate over, say, fifty years starting 2010, shit who predicts that far? (But I'd go with India probably haha).
If you are looking at specific industries, here's a "hot tip", five year horizon though- India: PPP infrastructure industry (public-private partnerships for road building, irrigation, dams, ports, power plants, etc) China: Pharma (specially prescriptions, but also generic and healthcare services in general) and Steel And bonus, healthcare services industry in Singapore
I doubt you are looking at specific industries though...I'd estimate you are asking which economy/model is going to be dominant over the other in the long term...I might be wrong. Along those lines, I am curious to see:
This is potentially a great topic btw.
(disclosure: as someone around here says: I'm making it up as I go along. Read: I don't really know what I'm talking about, my understanding is tiny. Want to learn more though!)
Excellent analysis islandoffmorocco. While i def. agree with you that China is at least two decades ahead of India in liberalization of the FDI laws, we must also remember India is in a sense two decades younger than China. I also think that China has much more of an edge on India in manufacturing while India has an edge in information technology and the service sector. However, the edge to India is smaller in the service sector while the gap is much wider when it comes to comparison of the manufacturing. Infrastructure is definitely a huge problem in India and I am also worried that India is skipping a stage in economic development in the sense that it is not harnessing its manufacturing possibilities and focusing entirely too much on IT/services. Most of developed countries have gone through the manufacturing phase before they became who they are. Any more opinions or corrections? But for some reason the future outlook just looks brighter for India when political conditions are taken into account. But, honestly I can see both sides of argument.
As someone who has been to both places a decent amount. China in 20-30 years. India 30+ (?)
As great as democracy for India is, it can be huge problem as well to obtain the land to build a mission critical highway system, which is currently lacking. Mumbai is finally getting a Metro system. I also question the "top down" of IT and high service jobs over more labor intensive and mass hiring jobs of manufacturing India currently pursues. There are decent paying jobs for like 5% population of IT Service sector (comparable to other Indian jobs). A lot of rich/poor discrepancy. India has just as much corruption as China, maybe even more so because it is so "democratic" and bureaucratic. The amount of greasing to get ANYTHING approved is crazy. There is also the fact of no "bullet to the head" deterrence strategy, scary. But, I am hopeful these issues will be resolved as India speeds up its growth engine and hopefully start powering the masses instead of fairly small population % of select IT sector and service. I agree infrastructure projects in India will probably be very hot in 5-20 year time. But India is pretty uncomfortable place to live currently or stay overtly long as compared to U.S. and Tier-1 Chinese cities.
China has so much hype currently. I think the "best" time to go in was around early 2000's. China's first tier cities are pretty developed, more so than many Western cities counter parts as the Chinese cities are newer vs. many older building. The quality is anyone's guess, but looks good on the outside. Metro system is top notch, extensive and fairly clean. I think the 2nd, 3rd tier cities is where huge growth ops are going to be. As China's development moves inland from the Coastal tier 1, tier 2 cities. Thus a good investment horizon of many years. I believe China will learn from the US and many Chinese firms will start moving up the value chain and an increase of consumerism will also occur in next 10 years. Japan, Taiwan, Singapore, and S. Korea all went through and the same similar process and always moved up the value chain after certain amount of years. I can't see how it's different in China's case, except a larger base of consumers, which is huge plus.
Conjectures based on visits and talking with friends and expats living in said places and my love of reading history and news.
Could not have better said it myself. I have seen corruption take place in plain view in India and I believe Chinese activities are more in shadow. Another huge issue is the tremendous energy it takes to start new enterprises in India, the bureaucracy is just ridiculous. I mean just look at the IPL issue at stake for example. Indian people expects politician to be correct and they are. The issue I see with China is obviously the future of their political system. Civil unrest can set back a country decades in development. However, I believe the mindset of the Indian people is more similar to the American than are the Chinese counterparts. I def. see US and Indian relations becoming ever closer if not for the sole purpose of restraining China.
the point about the lack of a broad-based, labor intensive manufacturing sector and the inherent limitations of the IT/BPO/service-in-general sector as a source of sustainable growth is absolutely fundamental to an evaluation of the Indian economy, just like that about China's changing demographics is to understanding the Chinese economy. I'd love to see where India's IT/BPO sector is in 15 years time when some other developing countries have nurtured an English-speaking population. Where is India's manufacturing base? When India was still reliant on US food aid with vast hordes of its population having nothing to eat (or wear or hide from the rain in), China was taking steps to making sure that its people's BASIC necessities were met first, no matter what the cost on liberty or other such, um, luxuries. China didn't go from an agrarian society to IT/ITES/BPO, it didn't go from a net importer of grain to back office for abbot/GS. It moved from agriculture to toys and radios and things that you could hold in your hand. And then forward.
Democracy definitely did have it's economic drawbacks for India, and continues to. Just as one of a million examples...India gives subsidies to farmers and provides price supports and all manner of populist measures (you need a happy farmer who doesn't riot in the streets, and you need to get re-elected). Investing the same money in yield-boosting initiatives - better seeds, better genetic variants, sprinkler systems which descrease water waste by 50% and what have you - would be far more beneficial. $1 of subsidies leads to 85 cents of additional output, $1 in R&D, $8.5 (don't quote me on this, but the economist did give some very similar figures). But what a farmer votes on is this - did my crop get sold at last year's high watermark price? did i get the floor price honored? and so on...
I think FDI was and the system of governance were the two huge differences between the two countries' models...China's manufacturing machinery probably couldn't have taken off to this extent without liberalized FDI laws. And I'll let you surmise on how a one-party government would affect coherence in the design and implementation of economic policies.
Both suffer from rampant corruption and bureaucracy, and both suffer from deficient systems, financial, legal, political. (China probably less so in both, but still a shit ton). One general rule I've heard and kind of been privy to is this: India has too much legislation and too little implementation. China, the other way round. Btw I don't think India's democracy is anything like the US, power (and money that's connected to power) rule in India. Same goes for China, but I think they are altogether more professional (or I should say, less unprofessional) in getting things done.
Btw Ari you are way off the mark brother if you think that there's any place in China or India that's even remotely as livable as the US...I have lived in two Western European cities that Americans drool over, and even with those (admittedly amazing) experiences in mind I'd say that the US offers an unparalleled quality of life. Most of all for young people who don't just want to have a good time, be surrounded by lots of cool people and BE FREE (who doesn't want these things?), but who also want to hustle and make bank. I am not American by birth or naturalization, but I must say with full sincerity that there is no country and no national character (even thought the latter's diminishing) with which I personally identify more than America and the American.
Again, my disclaimer is that these are total novice opinions.
Island I I agree with you on the earlier part of your argument and for the most extent your arguments against India. But I am compelled to say, that Indians on the whole however are viewed as better managers than their Chinese counterparts in the sense, that they are thought of as having the work ethic of the Chinese and the interpersonal skills of the Americans. I don't want to start a war here but that's what most professionals inside my family have noticed. In reference to saying there is no comparison to American to other countries standards of living...it is for the most part accurate. However, for example, cities such as Gurgoan or Noida in India offer services and environment very similar to America. Same applies for small pockets in China as well. If you have the money, the cost of living in parts of India/China is very attractive.
perennial: bud things on this forum are misconstrued very easily. i should point out that my posts quite clearly point out "arguments against" not just India but also China, more or less equally.
i won't get into an argument why nothing in china or india can even begin to compete with anything (well obviously not cabini green) in the US or W.Europe...there is no point. i feel what i feel and others will feel what they feel. i will say though that having a louis vuitton showroom next door and 5 full-time "servants" at the back of the house or a "skyline comparable to denver and seattle" does not translate into an "environment very similar to America".
I am not going to get into this debate any further haha.
this is a nice topic brother. other people need to drop knowledge.
Compared to China, India is still definitely young and years behind, especially where infrastructure is concerned. Also, India went through its economic liberalization fairly recently compared to China and hasn't had enough time yet. As Ari_Gold mentioned above, the best time to go in to China would have been the early 2000's, but if I had to put my money now, it would probably be India.
The huge middle class in India is definitely growing, making it a great consumer base. The english speak youth definitely have an added advantage compared to their other Asian couterparts. With the advent of media, telecommunication and the internet, the average Indian is learning the consumer driven ways of the west and are ready to spend a good chunk of their disposable income. India is definitely a country to watch out for.
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