We analyze and compare the social, cultural and historical determinants that influence the international competitiveness of China and India. Starting with the discussion why pure economic determinants cannot solely explain a country's competitiveness, we will analyze previous qualitative research and evaluate quantitative data to assess which country has more favorable socio-economic factors influencing its economic performance in the long run.
1. Introduction
Few days pass without a headline on China and India in the global press. The Economist stands not alone asking “What's to stop China and India?” (Edition of 27.10.2005). The world's workbench and its research laboratory do not only fascinate investors, politicians, or scientists, but also the general public.
The People's Republic of China and the Republic of India are not only the two most populous states in the world, but also two of the fastest growing economies in the last years—and increasingly important engines of the globalized economy. China has been growing with nearly two-digit rates since the first reforms in 1978 and is the world-leading receiver of foreign direct investment today. Since 1980, India has been generating an average real growth of 6% per year, constantly surpassing the 8% landmark since 2003. In the years to come, economists still expect growth rates above the global average. Wilson and Purushothaman [1] in their famous BRIC study for Goldman Sachs even estimate China to be the world's largest economy by 2039, followed by the United States and India.
For these reasons, there is a large and steadily growing number of (popular) scientific publications on China and India asking why both countries have become increasingly competitive, denoting them as giants on the rise. Communalities as their immense population, economic dynamics, or geography are seductive to pigeonholing both countries and looking at them without sufficiently taking into account the complexity of such a comparison. The apparent differences between both countries and their unique characteristics can teach important lessons though. In addition, discussion is largely focussed on the prognosis of growth rates.