Reasons For Rapid Expansion Of Chinese Economy

Running head: MANAGERIAL ECONOMICS
Managerial Economics
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MANAGERIAL ECONOMICS Introduction
India and China are two largest economies of the world. According to World Bank
(2019), China and India hold the 2nd and 5th positions among the biggest nations of the world as
of 2019. The countries are emerging economies and together they share around 19.46% and
27.18% of the total global wealth in nominal and PPP terms, respectively (Naseem, 2017). In the
past 30 years, there have been significant changes in these Asian economies and China has made
exceptional progress than India. The paper will present a discussion on the comparison of the
GDP per capita and economic growth rates of these two countries over the past 30 years, reasons
for rapid expansion of Chinese economy compared to India for the past 30 years, important
factors distinguishing these two economies from population growth, human capital, political
systems and so forth and the future potentials.
Comparison between the Chinese and Indian economy
According to the data from World Bank (2019), the nominal GDP and GDP per capita in
current USD were almost equal for both India and China. However, in 2019, GDP of China is
4.78 times more than that of India. In terms of PPP, China’s GDP is 2.38 times higher than GDP
of India (Siddiqui, 2019). In 1998, China achieved more than $1 trillion worth of GDP, while
India was able to achieve that in 2007 at the basis of exchange rate. The following images show
the changes in the GDP per capita (current USD) and economic growth rates for India and China
over the past 30 years.

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MANAGERIAL ECONOMICS
Figure 1: GDP per capita, India and China, 1988-2018
(Source: World Bank, 2019)
Both the nations had almost same GDP per capita before 1990s. However, China
improved 1993-94 onwards and since 2004-05, the rate of increase in GDP per capita was
exponentially higher for China. In 2019, China’s nominal GDP per capita was almost 4.61 times
and in PPP terms, 2.30 times more than India (Siddiqui, 2019).
Figure 2: Economic Growth comparison, India and China, 1988-2018
(Source: World Bank, 2019)