Tuesday, September 14, 2010

Chinese economist praise Indian economic growth model

World Economic Forum is hosting a meeting in Beijing this week. In this news item by PTI, filed from Beijing, report a side event, where Peking University economist Fu Jun said that  India has comparative strategic advantage in the value chain whereas China relied mostly on the labour and cost advantages. This is from the Times of India on 14 Sept. 2010, under the title "Indian model of growth wins praise over its Chinese rival".
BEIJING: Indian economic growth, often described as chaotic and weighed down by poor infrastructure, came in for praise from experts here, compared to more disciplined but highly autocratic Chinese model.

While Indian economic growth was more fuelled by high domestic consumption and services, the Chinese model relied heavily on manufacturing and exports, said Western and Chinese experts at the state TV debate, on the sidelines of of the World Economic Forum being held here.

Besides, India has comparative strategic advantage in the value chain whereas China relied mostly on the labour and cost advantages, said Fu Jun, professor of the Political Economy of the Peking University.

"India in comparison has done a better job", Jun said.

"What is interesting from now on is which one is more viable. I have to give credit to India. What India will do next is to continue the strategy and move into other areas. By comparison we (China) have to readjust our strategy into manufacturing. I do not see reasonable balance between supply and demand," he added.

Human resources development minister Kapil Sibal, who was participating in the debate, said, "Because our economy is based on domestic demand, there is much greater innovation and ability of the entrepreneurs to actually produce wealth. In the long run a lot of innovation and lot of wealth production is going to come from our part of the world."

Martin Wolf, associate editor of the Financial Times, who was critical of the Indian growth model said, however, "Indian development is working despite failure of organisation and poor infrastructure. It is clear that lot of successful multinational companies have good assets in India."

The debate, the first of the three was held on the side lines of the Geneva based World Economic Forum which was being held at Chinese port city of Tianjin, where over 1,400 political, business leaders and economists gathered to deliberate on "Driving Growth through Sustainability".

Besides Sibal, Karnataka chief minister, BS Yeddyurappa and a host of Indian business leaders are taking part in the meeting, which is inaugurated today by Chinese Prime Minister, Wen Jiabao.

Friday, September 10, 2010

Europe's crisis a win-win opportunity for China

The sovereign debt crisis of Europe has shaken the Euro, and exposed fissures in the European Union.Chinese demands for the lifting of an arms embargo have been publicly backed by Spain.There is massive public support for the euro. It is a smart political move as of the fact that China’s exchange rate policy is still vulnerable to international criticism, writes Pallavi Aiyar in Business Standard.


"While Europe’s sovereign debt crisis may have shaken the euro and exposed fissures in the European Union, one country’s hand in the region has been strengthened: China’s. It has converted Europe’s crisis into an opportunity to extend Beijing’s clout in the region."

"But in June, only hours after credit agency Moody’s downgraded Greece’s credit rating to junk, it was China that held out a financial lifeline, in the form of a multibillion euro investment package. While signing the deal, Chinese vice premier Zhang Dejiang gave the eurozone’s weakest link a public vote of confidence, declaring Beijing’s belief in Athens’ ability to overcome its fiscal problems, an announcement that moved markets positively, following weeks of turmoil."

"At the time, Greek deputy prime minister Theodoros Pangalos praised China in an interview, echoing sentiments often expressed by African nations indebted to Beijing. “They are not like these Wall Street people, pushing financial investments on paper. "

"The Chinese deal in real things, in merchandise. And, they will help the real economy in Greece,” he said."

"It’s not only debt-laden southern European countries that find themselves beholden to Beijing. Even power house Germany’s continued economic buoyancy owes much to its exports to China. Jonathan Holslag, research fellow at the Brussels Institute of Contemporary China Studies, notes that Germany’s economic recovery over the past year is due in substantial part to its exports of cars and advanced machinery to China."

"Access to technology is also increasingly being built into deals struck by Chinese corporations. For example, the Greek package included an exchange of know-how between China's Huawei Technologies and OTE, the Greek telecom organisation."

"While the commercial interest behind companies capitalising on the European downturn is clear, reasons for the Chinese government’s “goodwill” gestures are murkier. Holslag believes Beijing is motivated by the desire to ward off creeping protectionism in Europe, thus ensuring its most important export market remains open. In July, when German chancellor Angela Merkel visited Beijing, Chinese Premier Wen Jiabao was explicit in making the connection."

"In return, Merkel made a joint statement with Wen, vowing to oppose protectionism in Europe. There are other pluses for Beijing from its increasing influence. Chinese demands for the lifting of an arms embargo have been already publicly backed by Spain. Holslag believes with Beijing’s new leverage with certain EU member-states, backing for this and other issues like the granting of market economy status to China will intensify."

"Economic clout can translate into greater political influence, a lesson the Chinese know well and apply in their diplomacy across the world. Europe’s economic woes have opened room for these techniques to be used within the EU."

"In sum, the region’s economic fragility has allowed the Chinese government to project itself as a benevolent supporter of the euro, even as it acquires strategic leverage and Chinese companies sniff profitable deals. The kind of win-win situation that Beijing is partial to."