The Hindu Business Line : India beware: The dragon is moving, and fast

The economic and trade intercourse between the two countries is not commensurate with their economic strengths and populations. For the trade between the two ancient civilisations to be more equitable, India must catch up with China's competitive strengths.

SIX South and South-East Asian countries, including India, issued a joint declaration in Bangkok on January 8 on signing the framework agreement for establishing a free trade area. The agreement stipulates that a free trade area will be formed among the signing countries by 2017. But now China is negotiating with ASEAN on a free trade agreement and this gives rise to the question whether there will be a free trade agreement between China and India.

The economic and trade intercourse between the two countries is not commensurate with their economic strengths and populations. In fiscal 2001-2002, for instance, bilateral Sino-Indian trade amounted to $4.946 billion — an increase of 37.5 per cent over the previous year. Its proportion in Chinese and Indian foreign trade was, however, just 0.79 per cent and 5 per cent respectively. There is, thus, still has room for expansion in trade between the two countries, though it is curbed by objective conditions.

Chinese products, for instance, have a minor share in the Indian market, though they enjoy the reputation of being inexpensive but good in quality. Indian companies, particularly small and medium firms, drove up production costs with their low productivity, making their goods less competitive.

This led to the Government conducting frequent anti-dumping investigations on Chinese goods. In 2002-2003, India filed 30 anti-dumping cases. Of these, Chinese products were regarded as the main targets, taking up half the number — 15 cases.

Comparisons between China and India, two ancient civilisations with huge populations, have become common. But until India sheds its wariness of China and the latter's competitive strengths, it cannot compete with it on an equal basis. For this, Indian business should get an idea of what it is up against.

A brief summary of an article from the People's Daily dated March 9 is given below. The article gives the data on the Chinese economy for the year 2003. Should we envy that country, be wary of it, learn from it or ridicule it?

China's GDP grew 9.1 per cent, the greatest growth since 1997 — a new signal of China's economic development. Accompanying the rapid economic growth, China's per capita GDP of the urban population was $1,000-1,090.

In 2003, China's auto industry grew firmly and forcefully. The nation manufactured 4,443,700 vehicles and sold 4,390,800 — 1,193,000 and 1,142,700 higher than 2001 and 2002 respectively, or 35.20 per cent and 34.21 per cent up. The net growth of production and sales registered at over 1 million for the year alone — a figure rarely seen in world auto history.

As for vehicle types, in 2003 China manufactured a total number of 2,018,900 sedan cars, or 83.25 per cent year-on-year growth; sold a total of 1,971,600 sedans, or 75.28 per cent growth. The net growth of production and sales registered at 928,100 and 845,600 respectively over the previous year.

The bus sector saw dramatic changes. A total of 443,400 light buses were made and 440,200 sold, up 32.45 per cent and 29.89 per cent respectively; growth of minibus saw noticeable decline.

Growth of freight cars saw an overall decrease, with a total production and sales of 1,229,600 and 1,211,400 respectively, up just 10.04 and 10.35 per cent respectively over the previous year, of which growth for heavy trucks was the lowest, only up 3.62 and 4.30 per cent respectively.

China's number of telephone users maintained high-speed growth — 530 million telephone users, including 263 million fixed line users and 269 million mobile users. After two successive years of user increase of over 90 million each, 2003 saw the number of new users exceed 100 million again to reach 112 million, including 49.08 million fixed line users and 62.69 million mobile users.

The national telephone density had reached 42 sets per one hundred people, almost equal the world average. Besides, China's Internet surfers reached 78 million people, ranking world second.

China's information industry realised an added value of 709 billion yuan ($85.63 billion), accounting for 6 per cent of GDP, not only maintaining its position as the top pillar of the national economy, but with its exports nearing one-third the national total. Its electronic information industry scored a sales income up to 1.88 trillion yuan ($227.05 billion) in 2003, up 34 per cent, and profit and tax 100 billion yuan ($12.08 billion), up 16 per cent, achieving balanced development of a scale economy.

China's foreign trade in the last year reached $851.2 billion with an increase of 37.1 per cent as the fourth in the world, after the US, Germany and Japan. China's foreign exchange reserves till the end of 2003 were $403.3 billion, the second highest in the world was, with an increase of $116.8 billion.

The country made great headway in employment in 2003: newly increased jobs 8.50 million, urban registered unemployment rate 4.3 and the goal of no higher than 4.5 per cent unemployment all year round was realised.

At the end of 2003, there were 2.60 million laid off from State-owned enterprises, 1.50 million fewer than the previous year.

China made a breakthrough in social security as pension insurance, medical and unemployment insurance covered more than 100 million people.

Over 80 per cent of the employed in various kinds of enterprises were included in pension insurance, and people covered by the insurance exceeded 150 million, including self-employed and casual labourers 11.77 million.

All year round, the income of the pension insurance fund totalled 358 billion yuan ($43.24 billion) with the increased income over 14 billion yuan ($16.91 billion) more than the increased expenditure during the same period.

The population covered by medical insurance exceeded for the first time 100 million to 108.95 million at the end of 2003. Unemployment insurance developed steadily: totally, 103.73 million were covered, 1.91 million more than the end of the previous year.

Last year, China totally issued basic pension 263 billion yuan ($31.76 billion) and over 38 million retired received timely and adequate pension and 29.33 million retired were provided with social management services.

Rural residents' — farmers' — net income nationwide totalled 2,622 yuan ($316.67), an increase of 4.3 per cent. The development of rural economy suffered much last year. The SARS (Severe Acute Respiratory Syndrome) outbreak blocked the sales of agricultural products and the export of husbandry products. Numerous farmers, therefore, headed to the towns and cities and agricultural and rural economic development was seriously undermined.

Frequent floods, droughts, typhoon, earthquake and other natural disasters also exacerbated the situation. Against such difficulties, however, agricultural and rural economies gradually recovered and farmers' incomes did realise a small growth rate of 4.3 per cent.

China realises that the farmers' income has been growing slowly. With a four-per cent average, only half of the increase of that of city residents, none of the past seven consecutive years saw a growth rate higher than five per cent.

The gap between the income of farmers and city dwellers keeps widening. Some grain-planting farmers' income was static and even decreased. Additionally, till the end of last year, there were still 29 million impoverished under the poverty line, the increase of whose incomes is especially difficult.

State-owned enterprises and state-holding enterprises realised 750 billion yuan ($90.60 billion), 23.6-per cent over 2002; profits realised was preliminarily estimated as 461 billion yuan ($55.67 billion), a record high increase of 21 per cent.

Among the State-owned enterprises, central enterprises formed the backbone. Last year, the sales and profits realised exceeded four trillion yuan ($483.09 billion) and 300 billion yuan ($36.23 billion), both new highs.

China's gross enrolment rate for higher education reached 17 per cent in 2003.

This is the first time that China's higher learning reached world average level, following the new measures in mass higher education in 2002. Gross enrolment rate of higher education is an important index measuring a country's education level.

According to international practice, higher education is accessible to the masses when the figure reaches 15 per cent, and enters popularity stage when the figure reaches 50 per cent.

Currently, there are more than 70 countries whose gross enrolment rate exceeds 15 per cent, and those of Canada, US, Australia, Finland, New Zealand, Norway and RoK go beyond 50 per cent.

In 2003 Beijing and Shanghai's higher education gross enrolment rates stood at 53 and 52 per cent respectively, that is to say, in the two cities, half people aged between 18 and 22 can enjoy higher education of various types.

The third Chinese city hopefully to join the rank is Tianjin, whose figure was 44 per cent in the past year. By now areas with a figure above 20 per cent also include Jiangsu Province and Liaoning Province. During the whole of 2003, China spent a total fund of 152.01 billion yuan ($18.36 billion) on research and development (R&D), or 1.3 per cent of GDP, further narrowing its sci-tech input gap with developed countries. The input was 18.1 per cent higher than the previous year, much higher than the growth of 2001 (7.1 per cent) and 2002 (11.3 per cent).

And, finally, in 2003, Chinese athletes reaped altogether 87 world titles in 17 games of the World Championships and the World Cup. Out of them 38 were Olympic sub-games titles, or 43.7 per cent, including 32 summer Olympic sub-game titles and six winter Olympic titles.

In that year, China created 16 world records, including five Olympic ones.

(The author, a freelance writer, can be reached at paddy8@vsnl.com)