The Emergence of China and India in the global market Dr. Justin Paul, Professor, University of Puerto Rico, San Juan, PR, USA profjust@gmail.com, justin.paul@upr.edu

Overview Population: 1.36 billion (China), 1.25 (India). China has the fastest growing economy in the world. India, the 2nd fastest growing economy.

Overview China joined WTO in 2001 . India joined WTO in 1995. They specialize in different areas. China exports mainly manufactured goods and India focus in service-based exports such as software. Common- Agriculture & textiles.

Growth - Factors Growth in China = f (E, FDI, PC) where E stands for Exports, FDI for Foreign Direct Investment, PC for Price Competitiveness. Growth in India = f (E, E, E, OS, PC) where - 3Es stand for No of Engineers, No of Englis speaking workforce, Educated graduates

PATH China and India have shifted focus from an import substitution to an export promotion strategy. China had an avge GDP growth rate of 10% over the last decade although growth has declined very recently. On the other hand, avge GDP growth in India is about 6.7 percent.

PATH India is one of the top exporter of software, textiles and agricultural items. India’s manufacturing sector is not globally competitive and is geared toward domestic consumption. India’s reliance on commodity exports makes it vulnerable to boom and bust cycles that follow the volatile swings in global prices.

PATH Exports growth has been a major component contributing China’s rapid and exceptional economic growth. China’s exports have grown steadily over the past decade, except in 2009.

PATH China, being world leader in manufacturing, due to low priced and quality products, is known as factory of the world. During the last two decades, the higher economic growth in China was due to exports. However, GDP growth as well as exports growth have slowed down during last two years.

PACE EXPORTS GROWTH RATE (%) 2013 2014 2015 1996-2015 2013 2014 2015 1996-2015 China 7.82 6.03 -2.88 15.47 India 5.5 13.90 Between 1996 to 2015, the average rate of exports growth was 15.5 percent in China while growth rate has been 13.9 % in India.

PACE China recorded highest exports growth rates in 2003, 2004 and 2010 with around 30 percent annual growth rate and lowest growth rates of -16 % in 2009.

PATTERN Approx. 94% of China’s exports are manufactured goods, 3.2 percent - agricultural products. In 2015, the following product groups composed of china’s export basket in $ value. Electronic equipments (26.3%), Machines, engines and pumps (16%), Furniture, Lighting etc (4.3%), Clothing (3.4%), Medical & technical equipments (3.2%), Plastics (2.9%), Footware (2.3%)

PATTERN The Principal Exports Partners (Destinations) of China is United States, followed by Hongkong, Japan, Rep.Korea and Germany.

PATTERN China has competitiveness in in high- end technology exports. China produces almost half of the world’s shoes as well as cloths, toys, appliances, utensils, gadgets etc.

POTENTIAL IN MANUFACTURED PRODUCTS, CHINA has a total share of 90 percent of the world’s manufactured product exports while India’s share is very low. China has the potential to shape the global market for manufacturers – more in terms of variety than in terms of just lower costs, with investment for innovation, R & D etc.

POTENTIAL Transanational production is what defines the Chinese economy. About 60% of China’s exports are generated by foreign-owned or JVs. China has attracted maximum FDI compared to other countries in the world (Ref: Paul, Justin (2016) The Rise of China- What, Why, When and Where. The International Trade Journal.

PROPOSITIONS PROPOSITION 1: Knowledge and Entrepreneurial skills are important factors contributing to the competitiveness of an industry in a developing country. PROPOSITION 2: Price competitiveness is a critical variable contributing to the emergence of an industry/economy. (following Greenaway et.al, 2008; Khan et.al, 2003).

PROPOSITIONS Proposition 3: FDI and Export growth have causal effect on the process of emergence of a developing country. Proposition 4: The maximum number of the educated graduates and English- speaking workforce, the higher the likelihood of success of a country/state in this era of globalization.

CONCLUSION DIVERSIFICATION of destinations and products for exports was the key in the growth process of China with investments and sales all over the world from manufacturing, agriculture to services. To maintain a sustainable growth, both these countries will have to consider improving Quality and focus on education, to enhance Trade and Production. Entering new markets and diversification are also critical for growth.

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