Preview

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Case Study 3

• Preview
• Focusing on the Issue
• China and India
• Exploring the Issue
• Chinese Capitalism Takes Hold
• Surge in Economic Growth
• Indias Closed Economy
• India Opens Its Doors
• Barriers to Success

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Case Study 3

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• Investigating the Issue Document 1
• Investigating the Issue Document 2
• Investigating the Issue Document 3
• Investigating the Issue Document 4
• Investigating the Issue Document 5
• Investigating the Issue Document 6

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Case Study 3
Building Economic Powerhouses China and India

• Focusing on the Issue
• How are the giant emerging economies of India and
  China affecting the world?

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China and India

• The question is not whether India and China will
  bump the United States from its position as the
  worlds largest economy.
• The question is when and which country will get
  there first.
• Two most populous nations have ambitious programs
• Move from planned or semi-planned economies
• Develop vibrant market economies
• Different pathways with different challenges
• China with one-party Communist dictatorship
• India with thriving democracy and religious
  conflicts

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China and India

• China began limited economic reforms in the late
  1970s
• Opened doors to private enterprise in 1990s
• Wants to be worlds manufacturing capital
• India opened its economy in the 1990s
• Seized the opportunities of the
  telecommunications revolution
• High-speed Internet connections provides
  opportunities for both
• Connect large labor pools with potential
  employers and customers around the globe
• Their vigorous moves on the worlds stage affect
  economic planning, markets, and wages in other
  countries
• No one knows how scenario will play out
• India and China share disputed border
• The 21st century is new era of global economic
  interdependence

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Exploring the Issue

• The rise of Asian economies began in the 1960s
• Japan, South Korea, and other so-called Asian
  tigers
• Industrialized at a breathtaking rate
• Developed efficient, streamlined manufacturing
  processes
• Were able to flood global markets with
  inexpensive export goods

• Todays Asian tigers India and China
• May not yet match Japans GDP
• Promising future based on rapid economic growth
• China emphasizing traditional manufacturing
  industries
• India focusing on service industries provided via
  the Internet
• From tax preparation to computer technical support

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Exploring the Issue
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Chinese Capitalism Takes Hold

• Deng Xiaoping
• Rose to power in 1978 and started China down new
  economic path with slow agricultural, industrial,
  and market reforms
• Some free market sales, relaxed centralized
  economic planning, regional officials could make
  free-market decisions on some issues

• Foreign Investment
• Was encouraged, but not on scale India later
  embraced
• Special economic zones tested Chinas limited
  capitalism
• Impressive results, with farm output doubling and
  increase in industrial growth and investment

• Market Reforms and Strict Curbs
• Late 1990s saw socialist market economy reforms
• Population growth restricted to a rate of 13 per
  1,000 people
• Helped to ease poverty, but created controversy
  at home and abroad

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Surge in Economic Growth
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Indias Closed Economy

• Poverty
• Since achieving independence in 1948, has
  struggled to overcome desperate, grinding poverty
• Inspired by Mohandas K. Gandhis philosophy,
  India adopted a socialist economy

• Closed Economy
• Indias government strove for economic
  self-sufficiency, with limits on imports and
  foreign investment
• For more than four decades, Indias economy was
  largely closed

• Regulation
• Government embarked on large-scale
  industrialization to limit dependence on foreign
  investment and imports
• But heavy government regulation resulted in
  decades of inefficiency, overregulation, poor
  output, and quality goods

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India Opens Its Doors

• Capitalism
• In the 1990s India embraced capitalism, moved to
  a market economy
• Increased privatization allowed, with limited
  private investment
• More foreign companies were allowed to operate in
  India

• From Joint to Direct
• Initially with joint ventures with Indian
  companies, by 2000s was direct foreign
  investment, particularly in telecommunications
• Economy has grown at an impressive rate of 7
  percent a year since 1991

• Two factors
• India a world leader in providing high-tech
  services to businesses worldwide
• Large pool of highly skilled workers and large
  number of English speakers
• Democratic government provides flexibility to
  meet the challenges ahead

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Barriers to Success

• Obstacles
• India still faces formidable obstacles to
  economic success
• High import tariffs and restrictions on direct
  foreign investment
• Sparking national debate on how far to
  liberalize, or open up, the economy

• Two Indias
• Indias huge population, most of whom still work
  on farms and in small, traditional businesses,
  can be an economic asset
• The country is expected to become the most
  populous nation within the next 50 years
• The rapid creation of vast wealth has further
  highlighted the two Indias one largely rural
  and poor the other urban and prosperous

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Investigating the Issue Document 1

• In The World Is Flat, author Thomas Friedman
  argues
• India and China are leveling, or flattening, the
  economic playing field
• Western industrialized countries are losing their
  advantages
• Other developing countries risk falling farther
  behind
• Friedman lists reasons why China is unparalleled
  zone for offshoring
• Low-wage workers at the unskilled, semiskilled,
  and skilled levels
• Huge appetite for factory, equipment, and
  knowledge jobs to keep its people employed
• Massive and growing consumer market
• Other developed and developing countries
  competing with it have to make themselves
  attractive to offshoring
• Who can provide the best tax breaks, education
  incentives, and subsidies, on top of their cheap
  labor

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Analyzing Document 1 Why, according to Friedman,
does China pose a problem for developing
countries like Mexico and Brazil?
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Investigating the Issue Document 2
As China industrializes and modernizes, its
demand for energy is soaring, as shown in the
graph. The increasing need causes concern about
the possible effect on global energy prices and
supplies.
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Analyzing Document 2 By roughly how much did
Chinas energy consumption increase between 1980
and 2005? Explain the gap between the two lines
since about 1995. What effect could that have on
the rest of the world?
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Investigating the Issue Document 3
The U.S. has promoted free trade and capitalism
around the world. In the early years of the
twenty-first century, however, the United States
ran up large budget and trade deficits.
MORIN / The Miami Herald
CWS / CARTOONARTS INTERNATIONAL
http//cartoonweb.com/
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Analyzing Document 3 Who are the characters in
this cartoon? What are they concerned about? How
does the cartoonist depict China, and why?
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Investigating the Issue Document 4
Economic change is transforming India and China.
In this article, the writer describes some of
the changes observed during a visit and remarks
on reactions to those changes.
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Analyzing Document 4 What kinds of changes does
the writer identify? How do you think the writer
feels about the changes?
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Investigating the Issue Document 5
INDIAS GDP BY SECTOR, 2005 LABOR FORCE BY
SECTOR, 1999
SOURCE CIA WORLD FACTBOOK 2006
Today, a relatively small segment of Indias
labor force generates the largest share of its
income, as measured in gross domestic product
(GDP). These pie graphs illustrate that fact.
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Analyzing Document 5 What proportion of Indias
labor force produces the largest share of its
wealth, as measured in GDP ? What do you think
accounts for this fact?
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Investigating the Issue Document 6

• The writer is a former governor of Hong Kong and
  former European Commissioner for External
  Relations. Noting the high stakes in the
  India-China competition
• India now trains a million engineering graduates
  a year (against 100,000 each in America and
  Europe) and stands third in technical and
  scientific capacitybehind America and Japan but
  ahead of China.
• In the geopolitical game of domination add India
  to the stand-off between America and China.
  Should businessmen and politicians place bets?
• Chinas authoritarian model of development
• Indias democratic approach
• The question is given more edge if you accept
  (which I dont) the old Chinese adage, No
  mountain can accommodate two tigers.
• Chris Patten, Mystery Candidate, Financial
  Times, August 4, 2006

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Analyzing Document 6 According to Patten, in
what way is the competition more than an economic
one? Rewrite the last sentence in your own words.
What is Pattens view of the issue?