China vs. India- Some Financial figures
Posted : May 24, 2005 at 9:29 pm [IST]
I have been writing, time and again, about the Chinas miracle. Idea is to see the possibility of emulating some of their good things. So do so many people in the country. Our Prime Minister is world wide respected for his performance as the father of Indian economy reform in 90s. How ever, people are still having a hope that in the remaining 4 years that he will be in chair, he will do something that will give India the capability to compete with China. Finance is his specialialization.I shall be giving here some data from a paper in McKinsey Quarterly, and hope PM makes India move forward with speed and confidence.
China’s $1.4 trillion economy has grown at 8-9 percent a year for the past decade, while India’s $600 billion economy has averaged only 6 percent and attracts about as much foreign direct investment in a year as China gets in a month. Here are some observations;
India’s stock of financial assets, reflecting the degree of monetization in an economy and its supply of intermediated capital, is just one-sixth the size of China’s total.
China accounts for more than 4 percent of the world’s financial assets, India holds less than 1 percent.
· India’s financial depth, a measure comparing a country’s financial stock with its GDP, is just 137 percentfar below China’s 323 percent.In the decade to 2003, India’s financial stock increased by 12 percent annually, well below China’s growth rate of 14.5 percent. If these trends hold, by 2010 China will have a financial stock of $14 trillion. India, however, will remain a minor player.
Nearly two-thirds of China’s financial stock is held in bank deposits, compared with less than half of India’s total
Chinese banks have an estimated non-performing loans range from 25 percent to 60 percent of the value of all outstanding loans. In India, non-performing loans are estimated at around 15 to 20 percent of the total.
In equity markets, Indias Bombay Stock Exchange (BSE) was established in 1875 and is the oldest in Asia; China didn’t even have a stock exchange until 1990.
Four times as many corporations are listed on India’s exchanges as on those in China, where most companies are state-owned enterprises and the government holds up to three-quarters of all outstanding shares.
Corporate-debt securities constitute only 5 percent of China’s total financial stock and a mere 1 percent in India. China’s corporate-debt stock has grown by 18 percent annually during the past decade. India’s has averaged zero growth.
Even if China’s bank deposits were discounted by 25 percent to reflect the country’s non-performing loans, its financial stock would still be more than $4 trillionnearly five times as large as India’s. (One could argue that since India’s $200 billion government debt is not an instrument to transfer capital from savers to borrowers, it should be excluded from consideration. Doing so would reduce India’s financial stock to just $700 billion.)
Indias national savings rate is only half of China’s rate of 40 percent. In 2003 foreign direct investment in China equaled 3.7 percent of GDP, but just 0.9 percent in India.
In 2002, Indias investment in physical capital was 23 percent of GDP, compared with 40 percent for China.
China has invested more in heavy industry and manufacturing, while India has had success in the less capital-intensive business-service-outsourcing sector.
And you may read some more views on China-India.
- Indra
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