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Surjit S. Bhalla*
Surjit S. Bhalla*
Surjit S. Bhalla*
Objectives
Compare China and India performance on a variety of indicators past, present, and future
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China
India
-5
1962
1967
1972
1977
1982 Year
1987
1992
1997
2002
Undervaluation
-5
1950
1960
1970
1980 year...
20
7
40
60
80
TFPGIndia, China
Productivity Growth
5 Yr Avg, 1962-02
6.0
2.0
4.0
China
India
-4.0 -2.0
1962
0.0
1967
1972
1977
1982 Year
1987
1992
1997
2002
Investment/GDPIndia, China
Investment-GDP Ratio
5 Yr Avg, 1962-02
35
40
China
25 % 30
India
15
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 Year
Source: WDI 2004
20
15
10
China
India
-10
1962
-5
1967
1972
1977
1982 Year
1987
1992
1997
2002
10
10
India
China
-5
1977
1982
1987 Year
1992
1997
2002
11
InflationIndia, China
Inflation, CPI (1993)
1962-2002
20
30
India
10
China
-10
1962
1967
1972
1977
1992
1997
2002
12
SavingIndia, China
Savings Rate
5 Yr Avg, 1962-02
40
China
% of GDP
25
30
35
15
20
India
1962
1967
1972
1977
1982 Year
1987
1992
1997
2002
13
India
1997 0.26 0.10 -0.14 -0.44 -0.11 -0.23 2002 0.36 0.07 -0.07 -0.67 -0.36 -0.26
Change
China -0.1 0.0 0.0 -0.1 -0.3 -0.3 India 0.1 0.0 0.1 -0.2 -0.3 0.0
14
India
1997 2002
Change
China India
Voice
Rule of Law Govt. Efficiency Political Stability Regulation Corruption
83
44 21 25 52 28
85
36 20 30 56 45
18
27 34 61 53 36
14
23 28 60 57 32
-2.0
8.0 1.0 -5.0 - 4.0 -17.0
4.0
4.0 6.0 1.0 - 4.0 4.0
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Rank in 2002
CO
GE
PS China
RL
RQ
VA India
0
CO
GE
PS China
RL
RQ
VA India
10
GE
PS China
RL
RQ
VA India
16
20
China
% 10
15
India
0
1990
1992
1994
2000
2002
2004
Source: Datastream
17
China
% 1 2
India
0
1972
1977
1982
1987 Year
1992
1997
2002
18
15
China
% 5
10
India
0
1972
1977
1982
1987 Year
1992
1997
2002
19
Undervaluation of Currencies
Undervaluation is defined as the ratio of per capita GDP in current US dollars to per capita GDP in current international PPP dollars.
20
Undervaluation of Currencies
Undervaluation w.r.t USD
100
5 Yr Avg, 1962-02
Yuan
40
60
80
Re
20
1962
1967
1972
1977
1982 Year
1987
1992
1997
2002
21
Undervaluation of Currencies
Undervaluation w.r.t USD
5 Yr Avg, 1962-02
10
Yuan
Re
-10
1962
-5
1967
1972
1977
1982 Year
1987
1992
1997
2002
22
Undervaluation of Currencies
Undervaluation w.r.t US$
150 40 60 80
1950 1960 1970 1980 Year 1990 2000 Japan 1950
50
100
100120
1960
1970 Korea
1980 Year
1990
2000
Malaysia
Singapore
100
1950
1960
1970 Chile
1980 Year
1990 Brazil
2000
25 30 35 40 45 50
1950
40
60
80
1960
1980 Year
1990 Hungary
2000
Mexico
Note: Undervaluation value of 100 means fair valuation. Undervaluation of 20 means that the productivity level is 5 times the cost.
23
The growth model uses the following variables for the period 1980 2003; data arranged in five-year periods. Log Initial Per Capita Income, Log Initial Years of Education, Latitude (proxy for Geography), Log Change in Undervaluation, and Share of Investment in GDP are the independent variables.
24
Poverty Levels Infant Mortality Fertility Rate Dependency Ratio Education Attainment, All Education Attainment, Females
25
60
80
20
40
China
India 1962 1967 1972 1977 1982 Year 1987 1992 1997 2002
Source: XX
26
60
80
India
40
China
20
1962
1967
1972
1977
1982 Year
1987
1992
1997
2002
Source: XX
27
HCR 30.0
10.0
20.0
1980
HCR 40.0
1985
1990 Year
1995
2000
0.0
HCR 20.040.060.0
1980
1985
2000
2005
China
28
Poverty levels in India and China in the year 2003 are the same.
29
200
China
Levels
100
150
India
50
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 Year
Source: WDI 2004
30
-1
India
-4 -6 -5
-3
China 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 Year
Source: WDI 2004
-2
31
India
China 1962 1967 1972 1977 1982 Year 1987 1992 1997 2002
32
70
China
65
55
60
India
1962
1967
1972
1977
1982 Year
1987
1992
1997
2002
33
India
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 Year
Source: WDI 2004
34
India
1
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 Year
Source: WDI 2004
35
Conclusion
Undervaluation of exchange rate is a very important theoretical and empirical contributor to the Chinese growth performance. Each 10 percent appreciation of the yuan would lower Chinas growth rate by 1.4 percent per annum. India growth rate is expected to be higher than China by 2010. Poverty levels ($ a day poverty line) are the same in India and China (circa 2003).
36