China should take competition from India seriously

Source:Global Times Published: 2017/5/10 22:28:39

China should be wary of Indian competition

Illustration: Peter C. Espina/GT

China and India are two neighboring 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.

While Indian GDP may lag far behind, the country remains a potential emerging market that has high attractiveness for global capital. A survey by Ernst & Young (EY) ranked India as the most attractive investment destination in the world. Among 500 executives from multinational companies involved in the survey, 60 percent considered India one of the top three investment destinations in 2015. The country's vast domestic market, low labor costs and skilled labor market are its most attractive features. As China's demographic dividend diminishes, India, with half of its population below the age of 25, is poised to take advantage.

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.

Just as what happened with China in the past, the changes that are taking place in India may also point to great potential for development. With a large population of young people, which is not only the labor 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 neighbor.

One of our researchers raised a question: If India decided to copy China, what impact would it have and what should China do? By copying China, India may also develop an Internet economy and boost its infrastructure construction, along with investment-driven growth. In other words, India may turn itself into China 2.0, and let global investors decide whether to invest in China or India.

In our opinion, if India intentionally creates a competitive situation in front of global investors, it will pose a challenge for China. Because generally speaking, India does have the conditions to copy China's economic growth model thanks to its vast size and market, low labor costs and large population, which are all similar to China's conditions. In fact, based on the EY report, 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.

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.

It should be pointed out that China has not conducted enough studies on India. 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.

The article was compiled based on a report by Beijing-based private strategic think tank Anbound.
Newspaper headline: China should be wary of Indian competition


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