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ft_asia1 - Asia's giants take different routes By Martin...

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Asia's giants take different routes By Martin Wolf Published: February 22 2005 20:36 | Last updated: February 22 2005 20:36 Almost two out of every five people on the planet are either Chinese or Indian. China alone has more people than Latin America and sub-Saharan Africa combined. The economic rise of Asia's giants is, therefore, the most important story of our age. It heralds the end, in the not too distant future, of as much as five centuries of domination by the Europeans and their colonial offshoots. What sort of economic performance have the two giants shown in the past quarter-century? Why did growth accelerate at much the same time in both? Why has China performed so much better than India? Will both continue to grow rapidly? Will India even catch up on China? These five questions need to be addressed if we are to understand the world of tomorrow and, even more, of the day after. Let us start with what has happened. During the 19th and 20th centuries, the two Asian colossi fell far behind the rapidly growing economies of western Europe and North America. In 1820, China generated about a third of world output (measured at common international prices) and India about another 16 per cent (see chart); by the mid-20th century, China's share in world output was 5 per cent and India's 3 per cent. After both of these giants gained independence in the 1940s, India became the world's largest democracy and China a communist despotism. Yet, though they differed in their politics, both embraced similar economic ideas. Scarred by their countries' experience with 19th century imperialism, their leaders feared renewed subordination to foreign economic interests. Both saw capitalism as both unjust and inefficient. Both, as a result, embraced socialist economics. The pursuit of socialist self-sufficiency failed. By the 1970s, neither had begun to regain its historic position. Since then, however, a transformation has occurred. Both economies have begun the journey from state controls to the market and from would-be autarky to international economic integration. Both have begun to catch up on the world's leading economies. But China has done far better than its rival. In the mid-1970s, the gross domestic products per head of the two giants, at common international prices, were similar, at roughly a twentieth of that of the US (see chart). By last year, however, China's real income per head had reached 15 per cent of US levels, while India's was roughly half of China's level. If both have done well, China has done far better. Between 1980 and 2003, China's economy grew at an
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average rate of 9.5 per cent a year, against 5.7 per cent in India. China's real GDP per head (in constant domestic prices) rose faster than that of any other economy, while India's was ninth-fastest. At common international prices, China's real incomeper head rose by 300 per cent over this period, while India's increased by 125 per cent. Since the beginning of its take-off into accelerated growth, in 1978, China's GDP per head has risen relative
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ft_asia1 - Asia's giants take different routes By Martin...

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