'Mumbai need not be a Shanghai'
A Chinese expert underlines India's many strengths that he insists would one day blossom into success.india Updated: Jul 06, 2006 13:25 IST
Mumbai does not have to be a Shanghai and India need not feel bad because it doesn't possess the kind of expressways and hotels China has, says a Chinese expert.
The Chinese expert underlined India's many strengths that he insisted will one day blossom into success.
Saying he wanted to get China's story right, Yasheng Huang, associate professor at the MIT Sloan School of Management and author of "Selling China", marshalled statistics to show that India was not doing as badly as many Indian and Western analysts thought.
"People refer to China's world class infrastructure, impressive highways, skyscrapers and airports," Huang said on Wednesday evening, speaking on policy frameworks and development strategies of the two Asian giants. "That is an extremely harmful and misleading way of understanding China's success."
He also spoke about Indian despair over the huge volumes of foreign direct investment (FDI) China receives. "This view too is extremely misleading, harmful and incorrect."
Huang, a former consultant to the World Bank and a frequent visitor to India, said that while China's macro economic indicators were good, its micro index was not, and so there were doubts how long Beijing could sustain its growth path.
He referred in this connection to the huge disparity that existed in 1989 between the Soviet Union and China over telephone sets and paved roads, just as there was a huge gulf between China and India now. "But in just three years after those statistics were published, the Soviet Union simply collapsed!"
Huang hastened to add that he was not predicting China's collapse, but merely underlining that a nation's strength cannot be measured merely in terms of overt although impressive economic assets.
He pointed out that most grandiose buildings in China - that impress visitors without fail - were built by local governments and could even be called a drain because they diverted valuable resources from more pressing needs such as rural education and private sector financing.
Very few Chinese companies, he said, made money, unlike in India. Again, India had a private sector driven economy while the successful companies in China were all state owned.
Huang also pointed out that foreign companies controlled over 50 percent of the export market in China, as was the case in Latin America once upon a time before the boom turned into bust.
This, he added, was not the case with India, where he said there was rule of law, a vibrant private sector and an efficient legal system. But several Western analysts overlooked these while comparing China and India.
And in contrast to the Mumbai stock exchange, the Shanghai stock exchange was in a poor shape - although its roads were world class.
"India has a definite advantage in that it has a private sector driven economy."
Huang urged the audience, invited by the Confederation of Indian Industry (CII), not to feel bad about the low volumes of FDI, saying foreign capital took time to judge a home country before parking itself. FDI would first come in trickle and then like a thunderstorm. That, he forecast, was about to happen in India.
He also referred to large-scale land acquisition from farmers all over China, like it is happening in tribal areas in India now.
"This has become a virtual social crisis, so much so that the Chinese prime minister had to warn that local governments were endangering the rule of the communist party by taking away land from farmers forcibly."
While China's GDP growth was a consistent nine per cent from 1991 to 2005, India achieved a 5-8 per cent growth in 1991-2003 and near to eight per cent later.
Huang said China succeeded in undertaking sweeping industrialisation of rural areas. "That is why China is what it is today, not because of infrastructure. That happened later."
China also succeeded because it went for labour market reforms by setting up industries in rural areas. Also, women in China played a very important role in creating the manufacturing industry's success.
India's main disadvantage, he said, was lack of focus on basic education. Improving social performance, such as health and education, was more important than visible infrastructure.
"Many in India may say that China can impose economic reforms. The exact opposite is true," he said, emphasising that gradual but significant political reforms were taking place in his home country.
Huang asked Indians not to emulate China blindly without knowing its drawbacks. He had one final advise: "Do not convert Mumbai into Shanghai!"