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Unformatted text preview: The World Economy (2008) doi: 10.1111/j.1467-9701.2008.01128.x 2008 United Nations University Journal compilation 2008 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA 1277 Blackwel Publishing Ltd Oxford, UK TWEC World Economy 0378-5920 1467-9701 2008 The Author Journal compilation Blackwel Publishers Ltd. 2008 XXX Original Article DEVELOPMENT PATH OF CHINA AND INDIA YUEFEN LI AND BIN ZHANG Development Path of China and India and the Challenges for their Sustainable Growth Yuefen Li 1 and Bin Zhang 2 1 UNCTAD, Geneva, and 2 Chinese Academy of Social Sciences, Beijing Abstract The segmentation of global manufacturing and services provided China and subsequently India with a golden opportunity to make ful use of their absolute advantage low cost, yet educated labour to integrate into the world economy within a comparatively shorter period of time than some earlier industrialisers. Though international trade functioned as a vent of surplus in view of the nar ownes of their domestic markets at the beginning of their economic catch-up, the label of export-led model may not reflect the real picture as imports underwent dramatic increases during their respective growth periods, in particular for China. Foreign direct investment has played a pivotal role in their economic growth and has major presence in international trade and investment in leading sectors of both countries, giving rise to certain special features and weak links for their economic expansion and sustainability of fast economic growth. To maintain more broad-based, fast and balanced growth, it seems that both countries have to redres sectoral imbalances, encourage technology upgrading and cope with future changes in demographic profiles which constituted a trigger to fast economic growth at the time of their respective economic reform. 1. INTRODUCTION T HE outstanding economic growth of China since the 1980s and India since the late 1990s has been the subject of countless analyses. Compared with earlier industrialisation, these two populous countries began their catch-up process 1 from low starting points. In terms of per capita GDP (PPP-adjusted), China in 2006 reached a level comparable with Japan in the mid-1960s and the Republic of Korea in the mid-1980s. Meanwhile, India reached the same level as Japan in the mid-1950s and the Republic of Korea in the mid-1970s. However, as China and India together account for two-fifths of the world population, their achievements have had global repercussions on trade, economic growth and poverty reduction. Being the third largest importer and exporter, China has already been exerting considerable inuence on world prices of commodities and manufactured goods....
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