China and India are two neighbouring countries with the largest populations in the world, an unusual geographical phenomenon. With a population of 1.38 billion, China’s GDP grew 6.7 percent to more than $10 trillion in 2016, while the Indian Central Statistics Office estimated India’s GDP growth for the full fiscal 2016-17 at 7.1 per cent.
China may become “an unfortunate bystander watching India’s success” if it does not develop an effective growth strategy to respond to India’s increasingly competitive economy, according to a rare warning delivered by a Beijing think-tank.
The report said that “if India intentionally creates a competitive situation in front of global investors, it will pose a challenge for China”.
“As China’s demographic dividend diminishes, India, with half of its population below the age of 25, is poised to take advantage,” a study on Indian economy by Chinese private strategic think tank Anbound said.
Anbound Consulting (Anbound) is one of the earliest independent most renowned Chinese think tanks dedicated to macro-economic and strategic decision research. It was founded in 1993 and has developed steadily for two decades.
As the leading consulting firm in China, Anbound’s independent research and policy proposals are sought after by governmental decision-makers at all levels.
The report was an unusual contrast, arguing that the Narendra Modi government had been successful in raising India’s profile among global investors,and even succeeding in bringing in Chinese companies,which could pose a long-term challenge to China, according to the think-tank.
“Generally speaking, India does have the conditions to copy China’s economic growth model thanks to its vast size and market, low labour costs and large population, which are all similar to China’s conditions. In fact, it added, “global investors are currently undecided. Moreover, there are growing signs that India is succeeding in attracting more and more investment, which China should take seriously.”
An increasing number of Chinese companies have invested in India in recent years, covering such sectors as hardware, software and marketing.
Smartphone manufacturers like Vivo, OPPO and Lenovo have already entered the Indian market; while mobile tools like SHAREit, UC Browser, Cheetah Mobile and APUS have also been downloaded by vast amounts of users.
It is noteworthy that Chinese companies’ investment in India has shifted from simply marketing to research and development (R&D). For instance, Chinese telecom company Huawei Technologies Co invested $170 million to open an R&D facility in Bengaluru, and announced its plan to join Prime Minister Narendra Modi’s “Make in India” campaign.
“With a large population of young people, which is not only the labour force but also a potential consumer group, India has the possibility of seeing explosive economic growth in the future. Therefore, we must pay close attention to the development of this unfamiliar neighbour,” it said.
It bemoaned the fact that few Chinese think-tanks or experts were taking India seriously enough. “It should be pointed out that China has not conducted enough studies on India,” the think-tank said. “From the perspective of think tanks, China cannot wait until India grows into an apparently promising competitor before discussing how to deal with the situation.
As such, China should develop a more effective growth strategy for the new era or it may become an unfortunate bystander watching India’s success. China needs to ponder and study the rise of the Indian economy carefully. With a young population, it is entirely possible for the emerging market economy to become China 2.0 to gain the attention of world capital.”
Moreover, there are growing signs that India is succeeding in attracting more and more investment, which China should take seriously.
The Indian government appears confident about attracting investment. At present, India is committed to solar energy development, which attracts a large number of foreign investors.
Prime Minister Modi hopes to boost the usage of clean energy over fossil fuels by building massive solar parks and is targeting $100 billion in investment in solar energy in the next five years, with the backing of loans from the World Bank. No other country could compete with India in supporting investors in the solar economy.
“A survey by Ernst and Young (EY) ranked India as the most attractive investment destination in the world. Among 500 executives from multinational companies involved in the survey, 60 per cent considered India one of the top three investment destinations in 2015. The country’s vast domestic market, low labour costs and skilled labour market are its most attractive features,” it said.