But India could catch up if it successfully encouraged private companies to compete and survive, put a check on poorly performing financial institutions and those yielding to political compromises. These measures could help boost India's savings and investment. On the other hand, China also needed to catch up with India's institutional strength (Prime).
But both continue to be plagued with respective problems. China continues to suffer from serious situations, such as an uneven competition in the private sector, a very sluggish financial sector, and trade patterns, which enhanced foreign but not domestic markets. It appears ahead of India because of the time element. It instituted reforms more than a decade before India's. Nothing could tell when and how India could catch up or match China's phasing. Some critics assumed that China's successes became the basis of its regional leadership in the 21st century. Understanding the underlying forces behind the development of their respective economy could determine which was clearly ahead (Prime).
Different articles discussed the life sciences industry in China, outlook in India, a supportive environment for outsourcing in China and outsourcing to India (Business Editors 2007). The life sciences industry article tackled specific developments in China and changes in its biopharmaceutical industry, specifically biologics, pharmaceuticals, bio-services and chemicals. The outlook on India discussed market size, anticipated growth, therapeutic area, its top 10 companies, and the current position of the country. The supportive environment for outsourcing to China discussed the prospects of a strong government support, the establishment of an emerging middle class, lower research and development costs, higher talented and lower-costing human capital, and resources for the biotechnology, pharmaceutical and outsourcing sectors. And outsourcing to India considered cost advantage, research infrastructure, the clinical market and increase in outsourcing opportunities for Western investors and health service providers. Policy changes appeared necessary to handle stiff administrative price controls, high import tariffs and tax and current patent laws, which were problem areas in India's pharmaceutical industry. In China's case, protection of intellectual property, a strong capital market, better observance of regulations and the language barrier were the issues needing to be addressed. The articles would use business models for application in both countries in areas such as partnerships, mergers and acquisitions, joint ventures, and relocation with outsourcing links (Business Editors).
A study group investigated the feasibility of a foreign trade agreement for China and India in April 2005 (Srivastava 2006). Such an agreement, under the World Trade Organization, implied a zero duty on goods. But it did not cover services, FDI or movement of persons. The study recommended that both countries should identify and remove trade and non-tariff barriers, which actually hampered their expanding bilateral economic cooperation efforts. These problems could be solved without the need for a foreign trade agreement. As conditions indicated, bilateral competition between them tended to grow on account of their greater share of high-technology products and services. China has efficiently used FDI and domestic savings in establishing its world leadership for low-cost and low-specialization, manufactured goods. To a large extent, it has relied on exports as a strategy and with little attention to its domestic market.
Despite large national savings, its GDS fell from 52% in the 80s to 44% in 2003. Regulatory constraints seemed to be behind the lag in operational flexibility and productivity. In contrast, India's private sector has confronted limited regulatory impediments and improved the capacity of its scarce capital resources. They also continue to compete in the cottage and small industry sector and in textiles (Srivastava).
At this time, direct military conflict does not seem to threaten the relationship between China and India and thus the situation allows economic ties to grow (Srivastava
2006). Economic priorities in the present time take center stage. But China harbors the grand intention and strategy to dominate both the economic and security setup of Asia.
This puts India into a clear disadvantage and sharply contradicts the nation's goal of significantly extending its reach beyond South Asia. Critics estimate that both will increase efforts at strengthening relations with buffer states, such as Myanmar, Nepal and Bangladesh. India will want to limit China's relations with Sri Lanka, Bhutan and Maldives. For its part, China will suppress the links of India with Southeast and Central
There are as yet no clear indications if and when their economic differences would boil over to or affect security. But at this present time, mutual gains from their economic ties sufficiently prevent security problems from developing (Srivastava 2006). There has been no strong indication if economic competition itself would threaten their cooperation in the future and, in turn, swell into security grounds. In the overall, observers are agreed on the long-term scenario that China and India themselves would prevent a direct clash and opt for an environment of mutual influence, capability and position in the region and in the world (Srivastava).
Business Editors, 2007, Competitive outsourcing opportunities, Business Wire, Gale
Dahlman, Carl J., 2007, China and India: emerging technological powers. Issues in Science and Technology, ProQuest Information and Learning Company
Herd, Richard and Sean Dougherty, 2007, Growth prospects in China and India
Compared, European Journal of Comparative Economics, UniversitA Carlo Cattaneo
Biblioteca Marlo Rostoni
Kyodo, 2001, Musharraf seeks China's military help to counter India, Asian Political
News, Kyodo News International
Prime, Penelope B., 2006, interconnections and comparisons, Indian Journal of Economics and Business, Kennesaw State University and China Research Center
Sengupta, Somni, 2005, India, China may change the world, Deseret News (Salt Lake City), Deseret News Publishing…