China-India Economy and International Policies Comparison

This essay provides a comprehensive comparison of the economies of China and India, focusing on their international trade policies and economic development since their independence. It explores the impact of industrialization, political stability, and trade practices on their respective growth trajectories. The essay also delves into the concept of balance of payments and trade policies, highlighting how these factors have shaped the economic landscape of both nations. It concludes by discussing the potential future roles of China and India in the global economy, emphasizing the importance of integrating domestic markets with international trade.

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Contents
Introduction.................................................................................................................................................3
Big scale industrialization changed the face of the market.....................................................................4
CHINDIA, two neighboring economies with sea differences....................................................................5
History of independence finds them on a neck to neck level still, there is a huge difference ................6
CHINDIA the current flavor of 21st-century world economy....................................................................6
The contrast in the terms of independence............................................................................................6
Both the economies presents a different kind of entry-level difficulties.................................................7
The prediction for both the economies as international trade looks at them.........................................8
Industry ready population, future ready population is an asset..............................................................9
Balance of payment has a bigger definition...........................................................................................10
Establishing a trade policy is an important task.....................................................................................12
Political stability of China also played a crucial role..............................................................................13
On a conclusive Note.................................................................................................................................14
Bibliography..............................................................................................................................................16
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Introduction
During the 21st century, international trade organizations started saying that the world is
converting into the small global village. It is old news by all standards, for the various trade
communities the world always was a global village. International trade was rampant during
ancient and medieval societies. Indians were selling spices and cloths to Romans and Chinese
traders. In return, these traders were bringing in silver coins and other ornaments. British people
were searching for a cheaper substitute of cotton in the world and their quest for cotton made
them the conqueror of the world. Passages, like Silk Route, were always there where traders
were paying various types of taxes in order to sell their goods in different markets. It means
taxes were always there, trade was always there, it was a global village, we can also say a slow
moving and less connected global village.
(Findlay, 2006)
Big scale industrialization changed the face of the market
The equations of International trade environments and economy were simple during that time.
They were dependent on the raw materials mainly. Things changed at the turn of the 16th and 17th
century when technology made an entry in the game. Means the raw material was available in a
different country and the processing unit or the technology was with another country.
The 17th century saw the emergence of industrialization, those who were owing technology
decided to practice the economy of the scale and this time they decided that they will sell their
goods in various countries of the world. This exercise changed the perception of the game
completely. In order to address the complexities of the international economy, we saw a gradual
introduction of various patent laws and other treaties. After the Second World War, it happened
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many times when all the major trading countries share various platforms. General Agreement on
Trade and Tariff or GATT is primary among them.
(Jackson, 2000)
With the help of GATT and other treaties, they tried to bring in a homogeneity in international
trade. However, they were unaware of the fact that just like any other trade practice, international
trade is dependent on many more factors. During the course of this essay compilation, we are
trying to check some of these practices with the help of two promising economies of a
contemporary world under the name of India and China.
CHINDIA, two neighboring economies with sea differences
In the current study, we are comparing two very promising economies of Asia. These two
economies are India and China. When we talk about the natural resources available in both the
countries then we find that there is a striking similarity or they are alike. It is the same with the
population as well. Both the countries are very rich in the terms of young population. It means
labor is not a problem with these countries and they have this power to challenge any other
economy of the world in the terms of production targets and working hours.
When we talk about the culture and traditions then we find that world's oldest civilizations
belong to these land masses. Both the countries have distinctive cultural values and they are very
proud of them and never misses any opportunity to protect them from the onslaught of western
culture and ways. In the economic terms, we can say that in the last sixty years the working
culture of both the economies has come a long way, they did learn their sweet lessons from the
assembly line working culture. Sixty years ago, both the economies were agriculture-based
economies primarily.
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(Cheru, 2010)
In the terms of economy, both these countries have the huge domestic market and are self-
dependent in many ways. For instance, the great recession of 2006 left no significant impacts on
both the economies. Indians economy became an apple of all eyes when the concept of “great
Indian middle class” emerged in the west.
Documentary films like “The Orient Access” are now projecting Chinese middle class” as a great
opportunity for international players of western market, it is a new face of China, which is
emerging.
History of independence finds them on a neck to neck level still, there is a
huge difference
India got its freedom from British from 1947; China won its real freedom in the year 1949. Still,
China is far ahead of India in many respects. In the current study, we will compare and contrast
both the economies and their international trade relations. We try to understand them on the
touchstones of various trade policies and practices and try to figure out that how these policies
changed the fate of both these countries in a positive or negative fashion.
CHINDIA the current flavor of 21st-century world economy
Most of the experts believe that 21st century belongs to Asian countries, especially it belongs to
CHINDIA or China India. They have strong reasons behind it. Both the countries have strong
domestic markets backing up their industries. Secondly, last two centenaries quite clearly
established it that a developed economy can find itself on the brim of saturation a little too early.
It happened with Germany, it happened in many other European countries and now the USA is
heading towards the same fate.
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CHINDIA, on the other hand, is an ambitious economy where youngsters have immense
possibilities not only in the terms of performing economic tasks but also in the terms of spending
capacity as well. Under current conditions, these countries are poised to rule the world markets
in every possible term provided they are ready to interact with the international business
environments and trade practices.
(Seth, 2011)
The contrast in the terms of independence
It is true that from a distance both China and India looks identical in the terms of economy and
possibilities. However, they are different. China proved its worth during the days when
businesses were manufacturing driven. India is proving its worth in an economy where soft
powers are ruling the roost, many economists are predicting that Chinese economy is on the
verge of collapse because the world economy is shifting gears.
It is very important to understand the needs and moods of the international market, the GDP of
any economy will increase only during the conditions when the economy and the components of
the economy are serving for international demands. China opted for a path where they focused
more on production facilities and India remained clueless about the development of their own
resources. This made a big difference in the economic story of both the countries.
Here we would like to mention about the practice of synchronization between the working
cultures of various international markets. Labor behavior is very different. In China, they
motivate labor forces by bringing in the feeling of patriotism in them. The Chinese economy was
working in the direction of Common efforts fetching in powerful returns for the country.
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Indian economy, on the other hand, failed to organize many industry sectors on a basic level.
Labor forces were disjointed; industries always felt that they are reeling under the pressure of the
undue demands of labor unions. In other words, we can also say that political environment was
very unstable in the country.
(Ren, 2015),
Both the economies presents a different kind of entry-level difficulties
When an international trader makes an entry into the economy of a new country then he faces
some challenges on two levels. The first level is the official level where trade negotiations take
place.
The second level is the level where an international firm interacts with the locals. Means when
they hire local labors and deal with them on a day-to-day business.
When we compare India and China on the same scale from the point of view of an international
investor then we find that making an entry in India is a very easy task. Indians invite foreigners
to invest in India. However, things can become tricky once you start moving ahead with the
work. The political environment is not friendly in India.
On the same scale when we check China’s stand then we find that they are tough bargainers.
They do not want a part of the deal, they want a complete deal. They also force you to practice a
policy of the balance of the payments. During this negotiation, they try to keep an upper hand
with the Chinese currency. However, once you are done with this entry level difficulties then
things can start falling at the right place for you in China.
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The prediction for both the economies as international trade looks at them
Business fraternities of the world are battling it out against the absence of obsolescence. It means
that a successful business model demands a repeat order for the sake of profits. Americans tried
to bring in this obsolescence by improving the quality of their products in each generation. They
started phasing out previous products and cut down their own business lines.
China, on the other hand, introduced a different kind of obsolescence. They compromised on the
durability of the products and make them cheaper for their target markets. Now many experts
believe that it is not a sustainable model and prices have reached on to a level where production
facilities will collapse because of the price war and lack of profit. It is true that they will move
back in order but an international firm has to start it afresh in this condition.
(Yi, 1999)
Economists are saying it because Chinese economy rolled its dice with the help of economy of
scale. Now the scale has reached its zenith. The supply is exceeding the demands many folds,
manufacturing units are shutting down because no further demand is available in the market.
Experts are also predicting that Indian economy, on the other hand, has bright future ahead of it
because soft powers are in vogue. The culture of business process outsourcing is prevailing and
to top the list, India has a huge number of English speaking populations and this population can
serve as an asset for them in the coming future. It will serve as a great left-hand compliment
when we will say that certain countries of the world are discouraging local industries to go for
business process outsourcing in India. This denotes a clear-cut success and it can certainly give a
new boost of Indian economy which lost its way completely because it failed to join the
bandwagon of organized trade sector of international trade.
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(Kapila, 2009)
Industry ready population, future ready population is an asset
The basic concepts of international business environment clearly tell us that the economic
environment remains the same. The fundamentals of the game remain the same. Only the face of
the market changes a bit. Sometimes powerful countries change a few rules in their favor.
China is a phenomenal story of growth. Unlike India, the Chinese economy is an independent
economy, Indian economy looks up for FDI and other ventures. The Chinese economy, on the
other hand, bargains for the same. They were able to do so because they invested in the technical
education of their people and made them industry ready.
The current democratically elected government of India is now following the same footsteps.
They are inviting foreign investors and requesting them to set the benchmarks for an industry
ready population.
When we check out this move on a theoretical level then we find that greatly enriched economies
often try earning double advantage from a given deal, first they want to capitalize on product
differentiation in an imperfectly competitive environment and second they try to capitalize on
this comparative advantage as well where they can bargain for cheap labor.
Here we can see the contrast between the approaches of China and India, China readily accepted
the challenges where they practiced the counter-economy of scale. For instance, if a mobile
company go to China and say that they want labor to assemble Mobile phones then instead of
readily accepting it China prefer to bargain the labor cost by increasing the number of the
products. However, while doing so they make sure that the balance of payment remains in their
favor.
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Balance of payment has a bigger definition
In general, terms people think that balance of payment is a term, which is connected with the
power of the currency. Yes, it is connected, Dollar is a powerful currency because it has an
economic backing up of American industries especially the patents and their control over the
petroleum resources of the world.
When China earned its liberation from the colonial powers then at that point time this country
was standing on a big zero, as it happens with most of the rulers they left the country with an
attitude where they said that now this country is on its own. India, on the other hand, earned a
conditional liberation where British people set some rules for them, for instance, they forced
India to carry a gold base currency.
Both China and India at that point of time were following the principles of communism, China
was a hard-core communist and Indians were liberal communists.
China never compromised on its status of being a communist country; they kept the equation of
the balance of payments in their favor all the time. It means they never paid in dollars, if China
purchased a technology from any part of the world then instead of paying it back in dollars or
any other currency, they paid it back in Chinese currency, in order to compensate this balance of
payment they created services and manufacturing units in accordance with the desires of
international markets.
(Soukiazis, 2012)
India, on the other hand, remained liberal and accepted the regime of dollar payments. The result
is right in front of us, the Chinese currency is much more powerful, Indian currency on the other
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way lost its sheen because of the restriction, not only in the terms of currency but in the terms of
trade.
The moral of the story is quite clear, any economy wants a restriction-free environment to get
flourish where it can enjoy its comparative advantages. Here we can take this very simple
example of Nokia, Finland may have all the licenses and patents related to a mobile phone
making, however, if they wish to practice the economy of scales then they need numbers.
Countries like China or India can give numbers and this can help them in realizing the economy
of the scale.
In spite of the backing of the gold and many more trade agreements, India never made it to the
top list. At the turn of independence, their leaders failed to understand the future sentiment of the
international markets. China, on the other hand, dictated its own terms and capitalized on its
strengths and converted them into the strength of their currency quite effectively.
(Mehta, 1974)
Establishing a trade policy is an important task
The economy of China gained momentum early and crossed the limits of development. The
economy of India is now all set to gain momentum. The international trade policies of both the
countries were very different, China was playing under a kind of free trade agreement, and India,
on the other hand, was burdened with sanctions. It is very important for an upcoming economy to
set its trade policy with great precision. USA and China are archrivals, in the 21st century, China
is emerging as a big market for American goods, here we can take the example of Hollywood
films or theater technology. Chinese people are spending heavily on software coming from the
side of USA.
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