INDUSTRIES AND

THEIR DEVELOPMENT
IN CHINA
`PREPARED

BY

KSHITIZ SHARMA (2013btechme016)

SUBMITTED TO
Principles of Economics Report

Department of MECHANICAL engineering

Institute of Engineering and Technology

(IET)
JK Lakshmipat University Jaipur

INDEX

Sr.
No.

TOPIC

1
2

INTRODUCTION
STRUCTURAL
TRANSFORMATION
3 MAJOR
INDUSTRIES
DRIVING CHINA
PROBLEMS FACED
INDUSTRIAL
POLICY OF CHINA
RECOMMENDATION
S
POTENTIAL TO
ENHANCE THE

3
4
5
6
7

Pag
e
no.
3
4
10
12
13
14
15
2

8
9

GROWTH
COMPARISON WITH
INDIA
CONCLUSION

17
20

INTRODUCTION
China is the world's largest emerging market economy, both in
terms of population and total economic product. The country is
arguably the world's most important manufacturer and
industrial producer, and those two sectors alone account for
more than 40% of China's gross domestic product, or GDP.
China is also the world's largest exporter and the second
largest importer, and it contains the fastest-growing consumer
market. Major industries include manufacturing, agriculture and
telecommunication services. As of 2015, the Asian giant is
among the most important economic powers on a global scale.
It was not always this way, however, and as little as 50 years
ago, China was a struggling nation of extreme hunger, poverty
and repression.
China's communist government began to institute capitalist
market reforms in 1978, and over subsequent years, the
Chinese have taken a sharp turn away from state-owned
enterprises, or SOEs. As of 2013, SOEs only accounted for 45%
of all Chinese industrial output. That figure was nearly 80% in
1978; the remaining 22% were "collectively owned"
enterprises. The result is an economic explosion that catapulted
China to the second largest economy in the world, trailing only
the United States.
Between 1978 and 2008, the size of the Chinese economy
multiplied nearly 50 times over, and average annual GDP
growth was approximately 10%. The initial reforms focused on
agriculture but soon spread to the services and light
3

manufacturing sectors. All of these were precursors to banking

reforms, which led to perhaps the most important
transformations in the Chinese economy in the 20th century.
Industry is 72.8% of Chinas gross domestic product (GDP) in
2005. Industry (including mining, manufacturing, construction,
and power) contributed 46.8 percent of GDP in 2010 and
occupied 27 percent of the workforce in 2007. As of 2015, the
manufacturing industrial sectors contribute 40% of China's GDP.
The manufacturing sector produced 44.1 percent of GDP in
2004 and accounted for 11.3 percent of total employment in
2006. China is the worlds leading manufacturer of chemical
fertilizers, cement, and steel. Prior to 1978, most output was
produced by state-owned enterprises. As a result of the
economic reforms that followed, there was a significant
increase in production by enterprises sponsored by local
governments, especially townships and villages, and,
increasingly, by private entrepreneurs and foreign investors,
but by 1990 the state sector accounted for about 70 percent of
output. By 2002 the share in gross industrial output by stateowned and state-holding industries had decreased with the
state-run enterprises themselves accounting for 46 percent of
Chinas industrial output. In November, 2012 the State Council
of the People's Republic of China mandated a "social risk
assessment" for all major industrial projects. This requirement
followed mass public protests in some locations for planned
projects or expansions.[1]

STRUCTURAL TRANSFORMATIONS
Shifting the growth model
A major priority laid out in the plan is to rebalance growth to
reduce the reliance on investment and exports and instead
increase the share of private consumption to GDP. This is seen
as necessary to ensure greater social stability by increasing the
benefits that accrue to the average household from Chinas
red-hot GDP growth. In addition, shifting away from a capitalintensive production structure is important for ameliorating the
destructive environmental consequences of rapid growth.

Factors such as rising wages could help boost consumption

demand. Other fundamental reforms, including a stronger
social safety net and a better government-funded health care
system, are also necessary to shift consumption patterns of
Chinese households. [1] The plan recognizes these issues and
contains a number of proposed measures that would increase
the coverage and extent of government financing of health
care, pensions and the broader social safety net.
Growth also needs to become more balanced in terms of
reducing regional disparities in economic development,
especially when one compares the coastal versus the interior
provinces. In addition, rising income inequality coupled with
rising inflation that hits the poor especially hard can have
serious implications for social stability, especially in urban
areas where the urban poor are being hammered by high food
price inflation.
Hasnt the Chinese economys dramatic growth performance
during the crisis shown that it has become less dependent on
advanced economy export markets especially as GDP growth
remained strong despite a decline in the trade surplus during
2009?
Answering this question requires a retrospective look at the
Chinese growth model. There are two distinct features of the
Chinese growth process in the decade before the crisis, when
GDP growth averaged about 10 percent per annum. [2] First,
investment accounted for more than half of overall GDP growth
during the 2000s, with net exports playing an important role as
well from 2005 to 2007 (see Figure 3). Private consumption, by
contrast, has not been a key driver of growth. Second, even
high GDP growth has not translated into much employment
growth, with overall net employment growth averaging only
about 1 percent over the last decade. [3]

Composition of GDP growth (in percent)

Note: Shaded regions in each bar show the contributions (in
percentage points) of each component to total GDP growth.
2010 data are EIU estimates.
The growth model fostered by government policies has resulted
in a rising share of investment and a declining share of private
consumption in GDP (Figure 4). Moreover, weak employment
growth and high investment growth have resulted in labor
income falling as a share of national income and personal
disposable income falling as a share of GDP (Figures 5-6). Thus,
the Chinese government has had to cope with the twin
challenges of boosting domestic consumption in order to make
growth more welfare enhancing for its citizens and of
generating higher employment growth in order to maintain
social stability.

Shares of Private Consumption and Investment in GDP (in

percent)
6

Labor Income as Share of National Income (in percent)

. Personal Disposable Income as Share of GDP (in percent)

To counter the aftershocks of the crisis, the Chinese

government embarked on a massive fiscal and monetary
stimulus program in the latter half of 2008. In addition to an
increase in government spending, state-owned banks were
directed to make credit freely available. The banks went on an
unprecedented lending spree, amounting to nearly $1.5 trillion
(or about one-third of Chinas GDP) in 2009. With cheap and
plentiful money, along with subsidized inputs such as energy
and land, conditions were ripe for a massive investment boom,
which amounted to nearly 90 percent of GDP growth in
2009. [4]
7

This investment boom is to some extent feeding on itselfso

long as financing is available for construction and infrastructure
projects, investment in ancillary industries pays off. But a
slowdown in the investment machine as the government
tightens credit supply could result in excess capacity in
industries such as steel, aluminum and hard glass. Down the
road, this could dampen employment and household income
growth. Banks fear a resurgence of bad loans on their books if
consumption demand doesnt grow fast enough to soak up
output from the new factories. Moreover, the Chinese
household saving rate has trended upward in recent years; the
economic uncertainty associated with the crisis and the weak
global economic recovery are likely to increase savings for
precautionary purposes (Figure 7).
China has achieved a rapid increase in the gross value of
industrial
output
(used
before
China
switched
to GNP accounting in 1986), which, according to official Chinese
statistics, roseby 13.3% annually between 1950 and 1979. The
greatest sustained surge in growth occurred during the first
decade, with the rate averaging 22% annually during 194960.
During 196174, the yearly growth rate fell to about 6%, partly
as a result of the disruptions brought on by the collapse of
the Great Leap Forward (which accompanied the withdrawal
of Soviet technicians in mid-1960) and of work stoppages and
transportation disruptions during the Cultural Revolution.
Growth averaged 10% from 1970 to 1980 and 10.1% from 1979
to 1985. Major policy reforms of 1984 further accelerated the
paceof industrial growth, which reached 20.8% by 1988. After a
brief retrenchment period in 198990 as government policies
prioritized inflation control over other concerns, expansion of
the country'sindustrial sector resumed apace, exceeding 20%
in 1992 and 18% in 1994.Industrial output was officially up
13.4% in 1995, with state enterprises contributing the
majority.While approximately 50% of total industrial output still
derives from the state-owned factories, a notable feature of
China's recent industrial history has been the dynamic growth
of the collectively owned rural township and village
enterprise as well as private and foreign joint-venture sectors.
8

Also apparent has been the spatial unevenness of recent

industrial development, with growth concentrated mainly
in Shanghai, the traditional hub of China's industrial activity,
and, increasingly, a number of new economic centers along the
southern
coast.provincesof Jiangsu, Guangdong, Shandong, Shanghai an
d Zhejiang provinces together account for close to 33% of the
country's total industrial output and most of its merchandise
exports. One key factor in this industrial geography has been
the government's establishment of several Special Economic
Zones in Guangdong, Fujian and Hainan provinces, and its
designation of over 14 "open coastal cities" where foreign
investment in export-oriented industries was actively
encouraged during the 1980s.
China's cotton textile industry is the largest in the world,
producing yarn, cloth, woolen piece goods, knitting wool, silk,
jute
bags,
and
synthetic
fibers. Labor-intensive light
industries played a prominent role in the industrial boom of the
late 1980s and early 1990s, accounting for 49% of total
industrial output, but heavy industry and high technology took
over in the late 1990s. In addition to garments and textiles,
output from light industry includes footwear, toys, food
processing, and consumer electronics. Heavy industries include
iron and steel, coal, machine building, armaments, petroleum,
cement,
chemical
fertilizers,
and
autos. High
technology industries produce high-speed computers, 600
types of semiconductors, specialized electronic measuring
instruments, and telecommunications equipment.
Since 1963, great emphasis has been placed on the
manufacture of transportation equipment, and China now
produces varied lines of passenger cars, trucks, buses, and
bicycles. In 1995, output included 1,452,697 motor vehicles
(more than double the 1991 figure). Output for 2009 was over
13.7 million units. The industry underwent a major overhaul in
the late 1990s in order to stimulate efficiency and production.
Large numbers of joint ventures with foreign firms helped
introduce new technology and management to the industry.

Since initiating market reforms in 1978, China has shifted from

a centrally-planned to a market-based economy and has
experienced rapid economic and social development. GDP
growth has averaged nearly 10 percent a yearthe fastest
sustained expansion by a major economy in historyand has
lifted more than 800 million people out of poverty. China
reached all the Millennium Development Goals (MDGs) by 2015
and made a major contribution to the achievement of the MDGs
globally. With a population of 1.3 billion, China recently became
the second largest economy and is increasingly playing an
important and influential role in the global economy. Yet China
remains a developing country (its per capita income is still a
fraction of that in advanced countries) and its market reforms
are incomplete. According to Chinas current poverty standard
(per capita rural net income of RMB 2,300 per year in 2010
constant prices), there were 70.17 million poor in rural areas in
2014.
Rapid economic ascendance has brought on many challenges
as well, including high inequality; rapid urbanization; challenges
to environmental sustainability; and external imbalances. China
also faces demographic pressures related to an aging
population and the internal migration of labour.Significant
policy adjustments are required in order for Chinas growth to
be sustainable. Experience shows that transitioning from
middle-income to high-income status can be more difficult than
moving up from low to middle income.
Chinas 12th Five-Year Plan (2011-2015) and the newly
approved 13th Five-Year Plan (2016-2020) forcefully address
these issues. They highlight the development of services and
measures to address environmental and social imbalances,
setting targets to reduce pollution, to increase energy
efficiency, to improve access to education and healthcare, and
to expand social protection. The annual growth target in the
12th Five-Year Plan was 7 percent and the growth target in the
13th Five-Year Plan is 6.5 percent, reflecting the rebalancing of
the economy and the focus on the quality of growth while still
maintaining the objective of achieving a moderately
prosperous society by 2020 (doubling GDP for 2010-2020).

10

3 major industries driving china economy.

1. Manufacturing
China makes and sells more manufacturing goods than any
other country on the planet. The range of Chinese goods
includes iron, steel, aluminum, textiles, cement, chemicals,
toys, electronics, rail cars, ships, aircraft and many other
products. As of 2015, manufacturing is the largest and most
diverse sector in the country.
China is a world leader in many types of goods. For example,
almost 80% of all air conditioner units are created by
Chinese businesses. China manufactures more than 45 times as
many personal computers per person than the rest of the world
combined. It is also the biggest producer of solar cells, shoes,
cellphones and ships.
Though it does not receive the same kind of credit as Sweden,
Germany, Japan or the U.S., China has a thriving automobile
manufacturing industry. Most investors are surprised to learn
China is the world's third-largest car manufacturer, though the
Chinese government claims it is the world leader.
The Chinese car industry grew out of a national focus on
automobiles in the 1990s, a decade when Chinese
manufacturers nearly tripled total car output. Though car
consumption eventually caught up after 2005, most of these
early cars were destined for the export markets because the
vast majority of Chinese citizens were too poor to purchase the
products themselves.
This is a common theme in the Chinese manufacturing sector.
Products are frequently churned out for government use or are
11

immediately put on boats and shipped to foreign consumers.

Compared to other nations, Chinese workers historically buy
relatively little of their own high-end manufactured products,
which is a problem exacerbated when the government devalues
the Chinese currency, having the effect of lowering real Chinese
wages.

2. Services
As of 2013, only the United States and Japan boasted a higher
services output than China, which represents a significant shift
for the country. A healthy services sector is a sign of healthy
domestic consumption and per capita wealth increases; in other
words, the Chinese people are gaining the capacity to afford
their own output.
A 2010 world study found the services sector accounted for
43% of total Chinese production, slightly less than its
manufacturing sector. However, there are still more Chinese
employed in agriculture than in services, which is a rarity for
more developed countries.
Before economic reform in 1978, shopping malls and private
retail markets did not exist in China. As of 2015, however, there
is a young and burgeoning services market. This has bolstered
tourism and led to a proliferation of Internet and phone
products.
Large foreign companies, such as Microsoft and IBM, have even
entered the Chinese service markets. These kinds of moves
help to jumpstart the telecommunications industry, cloud
computing and e-commerce.

3. Agriculture
Another area where the Chinese set the global standard is in
agriculture. There are nearly 300 million Chinese farmers,
larger than the entire population of every country except China,
India and the U.S. Rice is the dominant agricultural product in
China, but the country is also very competitive in wheat,
tobacco, potatoes, peanuts, millet, pork, fish, soybeans, corn,
tea and oilseeds. Farmers also export large amounts of

12

vegetables, fruits and novel meats to nearby countries, Hong

Kong in particular.
As productive as the aggregate agricultural industry in China is,
comparative statistics show that Chinese farms are among the
least productive in the world on a per capita basis.
Some analysts attribute this, in part, to unfavorable climate.
Yet, a 2012 Deutsche Bank study concluded that South Korean
farmers are 40 times more productive than Chinese farmers
despite facing similar topographical and environmental
conditions.
Others point to a large degree of state control over Chinese
farms as the problem. Farmers are not allowed to own
and mortgage farmland and cannot get credit to purchase
better capital equipment, two functions which promote
innovation and development.

PROBLEMS FACED BY UPCOMING INDUSTRIES OF

CHINA
Product reputation and safety.
In the past, China has concentrated on making cheap
copies of products but now it is looking to spend money on
research and development.
China has many large companies that are well known in
China but now it wants to get its brand names known
overseas.
China's environmental crises seem to arise on a scale as
sweeping and epic as the vast nation itself:
Thousands of dead, bloated pigs floating down the river
that supplies Shanghai with its drinking water.
Air pollution in Beijing so impenetrable the U.S. Embassy's
air quality measuring station can only call it "beyond
13

index." Industrial towns where rates of cancer are so high

they're known as "cancer villages."
Compounding these problems is the Chinese government's
stony silence about anything that might imperil the
country's
economic
development

including
environmental regulation.

Industrial Policy of China

The plan lays out two sets of objectives in this area. The first is
to upgrade and restructure a group of traditional industries. The
second is to foster and develop seven strategic emerging
industries.
The traditional industries highlighted in the plan include (i)
equipment manufacturing, (ii) shipbuilding, (iii) automobiles,
(iv) iron and steel, (v) nonferrous metals, (vi) building materials,
(vii) petrochemicals, (viii) light industry, and (ix) textiles. These
industries are identified as needing technical upgrading as well
as consolidation to benefit from scale efficiencies.
The industries that the government wants to develop into
14

future pillars of the economy have a hi-tech or environmental

focus. They include (i) energy conservation and environmental
protection, (ii) new-generation IT, (iii) bio-tech, (iv) high-end
manufacturing equipment, (v) new energy (including nuclear
and renewable energy), (vi) new materials, and (vii) newenergy automobiles. The government intends to set up special
funds to develop these new strategic industries. These funds
will encourage start-ups and also complement private
investment in these industries.
There are two important issues that will need to be tracked
carefully as these objectives are transformed into concrete
policy measures. The first is whether these measures will shift
industry dynamics in a way that favors state-owned firms,
thereby rolling back some of the gradual shift in the last two
decades towards a more private sector-led industrial structure.
The second issue, which has an international dimension, is
whether some measures could take the form of explicit or
implicit subsidies that are in violation of WTO guidelines.
In any event, China is clearly taking some important steps
towards upgrading its industries and moving towards more hitech and high value added production. With various incentives
and explicit government support, China is likely to make quick
progress in clean energy and information technologies. The U.S.
and other advanced economies could start losing ground in new
technologies if China successfully implements its strategy of
technology leap-frogging.

RECOMMENDATIONS
China has faced a continuous shift of challenges over the
past 50 years: from poverty in the 1950s, ecological
degradation in the 1970s, environmental pollution in the
1990s, to global warming in the new century.

15

 Before the founding of the Peoples Republic in 1949,

China was trapped in poverty. Agricultural development
was therefore one of the first priorities.
But there was only a partial success because traditional
technologies were unable to increase agricultural
productivity substantially. And ecological degradation also
became an increasing concern due to deforestation,
overgrazing and drainage of wetland areas.
Industrial development was then seen as a solution for
improving
agricultural
productivity
through
infrastructural projects such as dams and irrigation
facilities, and supply of agro-chemicals such as inorganic
fertilizers and pesticides.
These measures undoubtedly helped to resolve the
problems of food shortage and ecological degradation,
and since the mid-1980s, famine has disappeared and
forest cover has started to increase.
Large scale industrial development has helped generate
more employment and improved living standards. But it
has brought with it new problems: local environmental
quality has deteriorated at an accelerating pace, rivers are
being polluted, and soil contaminated. In addition, acid
rain has been recorded over one third of the country. In
Chinas 10th five year plan (2001-2005), the target was to
reduce sulphur dioxide emissions by 10 per cent, but in
reality there was a 27 per cent increase.
So what is the solution? One possibility is to shut down all
the sources of pollution. But this would create more
problems such as unemployment at home and economic
crisis around the world. Development clearly has to
continue but it has to be sustainable, and investment in
environmental infrastructure is an essential part of this.
In Chinas 11th five year plan (2006-2010), a more
ambitious environmental target is set to reduce key
pollutants by 10 per cent while keeping the economy
growing at a relatively fast rate of eight per cent or more.
Recent statistics show that China is well on track to meet
the environmental targets set in this plan.
However, global climate change has increasingly become
an even more serious challenge because Chinas current
development is highly carbon intensive. However, there is
16

a firm belief that more sustainable development can be

highly consistent with climate change mitigation through
improvement in energy efficiency, development of zero
carbon energy sources, increase in forest sinks, and high
quality but climate-friendly living.

POTENTIAL TO ENHANCE THE GROWTH

The 35 years since Chinas transition to a market

economy began, the country has grown at an average rate
of 9.8 percent per yearan explosive and unprecedented
rise. While it is unlikely to experience that level of growth
going forward, taking steps to ensure that China meets its
full potential presents an enormous opportunity.
Chinas economic growth has been slowing over the past
five years. In the third quarter of 2014, it was just 7.3
percent, and the country is likely to continue to face stiff
headwinds, at least when compared with previous
decades. As policy makers in 2015 draw up the countrys
13th Five-Year Plan (201620), they will grapple with two
fundamental questions: how fast can China expect to
grow, and what should they do to support that growth?
As Adam Smith discussed in An Inquiry into the Nature
and Causes of the Wealth of Nations, economic growth
depends on improvements in labor productivity, which
today result from either technological innovation or
industrial upgrading. Here, China should be able to benefit
from the latecomer advantage. Unlike developed
countries that are already fully exploiting advanced
technology, China can achieve technological advances
through imitation, importation, integration, and licensing
a lower-cost and lower-risk avenue to productivity
improvement.
That helps to explain how developing countries have
sometimes been able to sustain annual growth rates of 7
percent or higher for periods of 20 years or longer. Weak
conditions elsewhere in the world, however, are likely to
17

diminish exports and thus lower that rate to between 7 to

7.5 percent.
But potential growth is just one part of the story. Actually
achieving it depends on domestic conditions and the
international environment. To exploit the latecomer
advantage, China must deepen its reforms and eliminate
its economys residual distortionsfor instance,
liberalizing the financial market; removing the Hukou
(household registration) system, which restricts labor
mobility; and enhancing the social safety net, to name just
a few things. Meanwhile, the government should play a
proactive role in overcoming the market failures, such as
externalities, that are certain to accompany technological
innovation and industrial upgrading.
China has a second advantage. It has the potential to fuel
robust growth with domestic demandand not only
household consumption. The country suffers no lack of
investment opportunities, with significant scope for
industrial upgrading and plenty of potential for
improvement in urban infrastructure, public housing, and
environmental management. Moreover, with low
government debt and private savings that amount to 50
percent of GDP as well as $4 trillion of foreign reserves, it
has the resources to fund those investments. Even under
comparatively unfavorable external conditions, China can
rely on investment to create jobs in the short term; and as
the number of jobs grows, so will consumption.
As policy makers plan for the next five years, they should
set Chinas growth targets at 7 to 7.5 percent, adjusting
them within that range as changes in the international
climate dictate. Such a growth target can help to stabilize
employment, lower financial risks, and achieve the
countrys goal of doubling incomes by 2020.

18

COMPARISON OF INDUSTRIES BETWEEN INDIA

AND CHINA
China and India is the two emerging economy of the world.
China and India is 2nd and 9th largest country of the world,
respectively in nominal basis. On PPP basis, China is at 1st and
India is at 3rd place in 2014. Both country together shares
16.08% and 23.16% of total global wealth in nominal and PPP
terms, respectively. Among Asian countries, China and India
together account for 52.77% (PPP) and 48.99% (Nominal) of
total Asia's GDP.
GDP of China is 5.06 and 2.39 times more than India at nominal
and ppp terms, respectively. China crossed $1 trillion mark in
1998 while India in 2007 at exchange rate basis. Now in 2014,
India crossed 2 trillion mark and China crossed 10 trillion. In
1980, size of economy of China and India was $309 and $181,
respectively.
GDP of China at ppp terms is 1.7 times more than compare to
nominal basis. This ratio of India is 3.60.
According to CIA Fackbook sector wise GDP composition of India
in 2014 are as follows : Agriculture (17.9%), Industry (24.2%)
and Services (57.9%). Sector wise GDP composition of China in
2014 are : Agriculture (9.7%), Industry (43.9%) and Services
(46.4%).
In nominal terms, per capita gdp of China is $7,589, 80th
position in world and 19th in Asia. India's gdp per capita is
around of $1,627. India's rank in world and Asia is 145 and 33,
respectively. On PPP basis, gdp per capita of China is $12,880
and of India is $5,855. China is 4.66 times richer than India in
nominal method and 2.20 times richer in ppp method.
Growth rate of China is estimated at 7.38% in 2014. India's
growth rate is estimated at 7.17% in 2014. During period 19802014, Average GDP growth of China was 9.8% compare to
19

India's 6.23% in same period. China attains maximum growth of

15.20% in year 1984 and minimum 3.80% in 1990. Out of 35
years from 1980 to 2014, China grew by more than 10% in 16
years while India in only one. India reached an all time high of
10.26% in 2010 and a record low of 1.06% in 1991. India's
growth rate was 9-10% in 4 years, while China in 7 years.
Indian rupee was at 4.23 INR per Chinese yuan (CNY) on 2 Jan
1996. Value of Indian rupees has fallen to 10.18 INR per 1 CNY
in 1 Jan 2015
CHINA
Since the late 1970s China has moved from a closed, centrally
planned system to a more market-oriented one that plays a
major global role - in 2010 China became the world's largest
exporter. Reforms began with the phasing out of collectivized
agriculture, and expanded to include the gradual liberalization
of prices, fiscal decentralization, increased autonomy for state
enterprises, growth of the private sector, development of stock
markets and a modern banking system, and opening to foreign
trade and investment. China has implemented reforms in a
gradualist fashion. In recent years, China has renewed its
support for state-owned enterprises in sectors considered
important to "economic security," explicitly looking to foster
globally competitive industries. After keeping its currency
tightly linked to the US dollar for years, in July 2005 China
moved to an exchange rate system that references a basket of
currencies.
INDIA
India is developing into an open-market economy, yet traces of
its past autarkic policies remain. Economic liberalization
measures, including industrial deregulation, privatization of
state-owned enterprises, and reduced controls on foreign trade
and investment, began in the early 1990s and served to
accelerate the country's growth, which averaged under 7% per
year from 1997 to 2011. India's diverse economy encompasses
traditional village farming, modern agriculture, handicrafts, a
wide range of modern industries, and a multitude of services.
Slightly less than half of the work force is in agriculture, but,
services are the major source of economic growth, accounting
for nearly two-thirds of India's output with less than one-third of
its labor force.
20

INDIA AND CHINA COMPARISON OF KEY INDICATORS:INDICATORS

INDIA

CHINA

Size of
population

1.1 billion

1.3 billion

Type of
government
GDP
Growth(2007)

Democracy

Communist State

9.3%

11.4%

Manufacturing as
% of GDP
Services as % of
GDP

16%

53.3%

51.5%

41.2%

FDI Inflows(2006- $67.72 billion

07)

$699.5 billion

21

Conclusion
Chinas twelfth five-year plan could represent a watershed in
the countrys pattern of economic development. The broad
objective of the plan is to reorient growth to make it more
balanced and sustainable from different perspectives
economic, social and environmental. The challenge for the
government is to break down the opposition of interest groups
that prefer the status quo and to implement reforms needed to
attain the plans objectives. With a leadership transition
looming in 2012-13, it is possible that the window for reforms
will shut for the time being and the medium-term elements of
the plan will not be acted upon forcefully until the new leaders
have found their footing and consolidated their power bases.

22