The economies of China and India have grown rapidly over the recent past, which leads to the prediction that the two emerging giants will transform the international economy in various ways in the future. Despite the gross domestic product (GDP) growth in both countries, China has been experiencing a slow economic growth compared to the economic growth in India. Using capital accumulation, TPF growth and convergence, the economic growth prospects of China and India show a slower growth of the former compared to the latter.
China’s economic growth is bound to increase but at a slower pace in the near future. Statistics highlight that the Chinese economy has been growing rapidly at a rate of 10 percent higher with each year on average since the 1990s to the financial crisis period. Despite having declined to a single digit since the global financial crisis, the economic growth in China is still leading and expected to grow further in the future. The economic growth is supported by TPF growth in the nation. Notably, there has been a continuous decline in the proportion of low productivity in state-owned enterprises (SOEs) with high productivity companies enter into the Chinese market. The government has become more proactive in eliminating unprofitable SOEs (Zheng & Zhao 2017, 240). The government has also expanded huge tax reductions for venture organizations. In effect, a continuous influx of very competent start-ups, innovation in research and development activities, and reducing the number of low productivity SOEs contribute to its aggregate TPF, which contributes to the possibility of a higher economic growth prospect.
Nonetheless, the economic growth in China is less likely to increase further due to the over-reliance on capital accumulation and convergence effects. China’s economy was primarily driven by capital accumulation through large scale investments evident through the “four trillion yuan stimulus” package that focused on promoting infrastructure projects on a large scale basis ((Zheng & Zhao 2017, 231). Investment-driven economies such as that of China are less likely to have long-lasting effects because of two reasons. The actual investment growth rate in the nation has been declining since 2012, which means that it is experiencing problems relating to debt overhand. In addition, the saving rate is bound to decline since the country is slowly becoming an aging society. The presence of sound policy factors and low per capita income will enable the convergence of its economy in terms of income levels, which will lead to slower economic growth (Lee 2017, 2456). Therefore, the economic growth in China is less likely to be as high as the rate in the past since it currently depends on TPF growth only.
Contrastingly, India has a better prospect at experiencing a higher economic growth rate in the future. India’s net capital has improved from about US $500 million in 1990 to US $25.38 billion in 2017 (OECD Development Center 2019). The significant economy growth is still expected to grow further as supported by the growth of TPF, capital accumulation and less convergence of the capital resources. The country has incorporated economic reforms that have made it more open for business with other nations. It is expected that through the financial returns and benefits that India has experienced from it economic reforms, it will continue to expand more reforms and expand them in the future. India has also made large-scale structural transformations that are expected to grow further in the future (Singh 2019). The level of exports have more than doubled though the ratio of exports to GDP are still low. Despite its low export to GDP ratio compared to that of China, India still has the ability to adapt fast as seen through the telecommunication revolution in the country. Furthermore, India has a younger generation compared to that of China. This means that its personal savings rate is more likely to increase in the future. All factors indicate that the growth of India’s economy would be supported in the growth of its TPF and capital accumulation with low convergence rates since the country is slowly improving in terms of its income levels.
A new global economic order is in the making as emerging markets such as China and India are making progress steps. China has been on the forefront of economic progress for several years. However, its economic growth rate is slowing down due to its over-reliance on capital accumulation and convergence effects. Contrastingly, India shows great potential for economic growth in the future.
- Lee, J.-W., 2017. China’s economic growth and convergence. World Economy, 40(11), pp. 2455-2474.
- OECD Development Center, 2019. Economic Outlook for Southeast Asia, China and India 2019 [Online] Available at :< https://www.oecd.org/development/asia-pacific/01_SAEO2019_Overview_WEB.pdf> [Accessed 9 Jul. 2019].
- Singh, K. 9 Jan. 2019. India will overtake the US economy by 2030. World Economic Forum [Online] Available at :
- Zheng, L., & Zhao, Z., 2017. What drives spatial clusters of entrepreneurship in China? Evidence from economic census data. China Economic Review, 46, pp. 229-248.
