1. The cases of China and India
Emerging economies
The cases of China and India

2. Emerging Economies (1)
The terms ‘emerging’ or ‘transition’ economies imply that some form of change is underway.
Emerging economies are usually low or middle economies and may be big or small in size, such as BRIC economies.
Common characteristics:
They are all experiencing the transition from developing to developed country status and/or from state dominated to a freer, more liberal market economy.

3. Emerging Economies (2) Other characteristics:
Emerging economies are engaged in opening up their economies.
Emerging economies tend to exhibit common economic and structural performance characteristics.
Compared to developed countries, emerging economies retain relatively large agricultural sectors.
As the constraints on business ease up, emerging economies all face FDI inflow increase.
Growth in emerging economies has been stronger and more buoyant than in most OECD countries since the 1990s.

4. Changing role of China and India in the world economy

5. The top 10 economies in 2013 (Source: Peng & Meyer, 19)
Changes in the Fortune (Source: Peng & Meyer, 22)

6. Real GDP growth (%) in the BRIC and US economies
Source: IMF, World Economic Outlook

7. Economic structure – 2015 (%GDP)US
India
China
Agriculture
1.0
17.0
9.0
Industry
19.0
30.0
41.0
Services
80.0
53.0
50.0
Source: World Bank

8. Emergence of China 1978 onwards – reforms to modernise China
Guiding principles
Increase role of the market
Reduce direct role of government and central planning
Gradually phased in – pragmatism wins over ideology

9. Key reforms – 1980s Agriculture – household responsibility:
farmers able to sell surplus crops on open market – market incentives
Promotion of FDI to obtain technology and foreign exchange
Opening of trade – by 1986 – trade reached 35% GDP. Pre- reform – 1%
Greater power for managers
Growth of consumer and services

10. 1990s → Greater use of price mechanism Creation of market institutions
Reduced role of the state
Legalisation and encouragement of private entrepreneurship
Beginning of banking sector reform
Address deficiencies of state-owned enterprises (SOEs)
External liberalisation – e.g WTO membership

11. Emergence of India Pre-reform:
ideology of self-sufficiency → closed economy with high tariffs
dirigiste
‘licence raj’
Limited reform in 1980s
1991 financial and balance of payments crisis made reform inevitable

12. Post-1991 India Trade liberalised – further opening possible
Opening of investment but restrictions remain in some sectors, e.g. retail
Tax reform
Financial sector reform – cautious efforts to privatise and open banks to competition
Privatisation and industrial reform
Resurgence of large family conglomerates (e.g. Tata, Birla, Ambani and Moda families)
Dismantling of licence raj – red tape still high

13. China v. India Chinese reforms began earlier and more consistent
Faster growth in GDP, trade, investment in China
Regional disparities in both

14. China
India
Authoritarian, one party rule
Democratic, weak coalitions
Strong industry – range and sophistication
Strong services – ICT, pharma and auto parts
Many out of poverty
Some poverty reduction
Big infrastructure investment
Poor infrastructure
Ageing population
Young population
Heavy investment in basic education – higher later
Heavy investment in higher education – basic later

15. Challenges China India Environment – could hinder growth
Increase in inequality – destabilising?
Tension between market and political system?
Weak coalitions – difficulties in reform
Dependent on trade – problems if turn to protectionism
Growth undermined by weak infrastructure and weak basic education
Economic imbalances

16. Factors in China’s success
Strong government – able to implement
Pragmatic approach
High savings and investment
Access to foreign knowledge via trade, FDI, licensing, foreign education
Large market – attracts FDI and good export platform
Investment in education and infrastructure

17. Factors in India’s success
Early investment in technical education
English language
New ICT sector not over-regulated
Relative FDI opening
Far behind – initial easy catch-up

18. The Future? Mexico Indonesia Nigeria Turkey The rise of BRICS?
●Emergence of the MINT?
Mexico
Indonesia
Nigeria
Turkey
The rise of BRICS?

19. Impact of BRICS Economies on International Business
Together, BRICS represents 26% of the planet's land mass, and is home to 46% of the world's population.
Regarding economic growth, BRICs are 8% of the world's GDP.
According to statistics of the World Trade Organization (WTO), the participation of BRICS in global exports more than doubled between 2001 and 2011, from 8% to 16%. In those eleven years, their total exports have grown more than 500%, while total global exports grew 195% in the same period. Between 2002 and 2012, intra-BRICS trade increased 922%, from US$ 27 to 276 billion, while between , BRICS´ international trade rose 29%, from US$ 4.7 to 6.1 trillion dollars.

20. Impact of BRICS Economies on International Business
BRICS have emerged as major recipients of FDI and important outward investors.
Over the past decade, FDI inflows to BRICS more than tripled to an estimated US$263 billion in As a result, their share in world FDI flows kept rising even during the crisis, reaching 20% in 2012, up from 6% in 2000.
BRICS countries have also become important investors, their outward FDI has risen from US$7 billion in 2000 to US$126 billion in 2012, or 9% of world flows - ten years before that share was only 1%.

21. Summary The meaning of ‘emerging’ economy or ‘transition’ economy.
Business environment of China and India
The impact of emerging economies on international business
Inside Story - Building BRICS (
What Are The BRICS Countries (