Contrasting models of the two Asian giants

As recently as 1991, China and India stood at similar levels of economic development.

by Morgan Stanley Global Economic Forum
Last Updated: 23 Jul 2013

Since then China has outperformed India by a wide margin - making it a tempting model for the rest of Asia to follow - though there is no guarantee this outperformance will continue.

China's manufacturing-led growth has contrasted with India's services-based development model, but for both the future may involve emulating each other. China's export orientation is leading to Western protectionism, while its investment binge risks oversupply. It wants to expand its labour-intensive services to encourage consumerism and therefore domestic demand.

China also lacks world-class companies and the well-developed capital markets of its south Asian neighbour. In contrast, India sees manufacturing, particularly in food, textiles and leather, as a solution to high rural unemployment.

But as these economic giants broaden their development, the industrial economies are likely to become even more squeezed - resulting in increased protectionism.

A tale of two Asias,
Stephen Roach,
Morgan Stanley Global Economic Forum, 22 May 2006

Review by Steve Lodge

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