1. China, India and the Future
China or India?
China, India and the Future
Ian Marcouse 2008

2. A few facts
Since 2005, Volkswagen has been selling more cars in China than in Germany
In the past five years, car sales in China have risen by 300%; in India by 60%, and in the UK by 0.2%
Britain is the world’s 5th largest economy; it has 5% of world trade, but only 0.9% of imports to China are from Britain

7. Why is China growing so fast?
China or India?
Why is China growing so fast?
Huge investment levels (an investment rate of 40%); Chinese investment in fixed assets is nearly 5 times higher than India’s
Spending on construction is nearly 8 times higher in China
Literacy level is much higher: 42% illiterate in India; 9% in China
… so the huge rural workforce can find jobs
Ian Marcouse 2008

8. What changed in China in 1990/91?
A freeing up of market access and the private sector; a major policy change to welcome FDI
The policy change to hugely increased capital spending, especially on infrastructure
Probably influenced by the political pressure for change after 1989

11. Can China outstrip America?
($trillions)
UK $2.34 $ $ $4.91
India $0.80 $ $ $6.08
America $13.22 $ $ $34.00
China $2.51 $ $ $33.36
Assumed average GDP growth: UK 2.5% US 3.2% China 9% India 7%

12. How fast is India growing?
In 2007 India was growing at nearly 10%
And although its longer-term growth has been rooted in services, firms such as Tata (with its £1,250 car) are pushing ahead in manufacturing
The big question is whether it can be sustained

13. Hitting the buffers? (2006 figs)
India China
Inflation % 2.3%
Interest rates % 4.5%
Unemployment 7.8% 4.2%
Current account ($) -26.4bn 179.1bn

14. Struggle in India? Man. Growth Inflation May/June 2004 6.6% 3.6%
February % %
February % %
February % %
Source: Indian Government data April 2007

15. What does it mean for business
Top firms should move into China: following VW, BMW, L’Oreal, Honda and McDonalds
From the UK, the main movers into China are Kingfisher (B&Q), Tesco and BP, but we are far behind Germany, the US and Japan
Britain has 5% of world trade, but less than 1% of all imports to China …. and
.. success in China takes time and influence

16. Implications and Issues
Can our firms think in a sufficiently long-term way? (When Sony started up in Britain in 1978, it said it would take 15 years to break even)
Can our firms cope with major risk-taking? (Tesco dips toe in China; misses out on India – so far)
What has held our Boardrooms back?

17. Constraints on British Boards
The grip of the stock market may be a factor; much more significant than in Germany or Japan
Low levels of manufacturing in Britain (only 15% of GDP) may mean the British opportunity is to come (when China develops services)
May have lacked government support

18. Longer-term issues
China will be the golden business opportunity of the next 20+ years
… so clever students will learn Mandarin…
… and clever firms will devise a China strategy (produce there? Buy there? Move there? Sell there?)

19. And India?
Less exciting in general, though with far better opportunities for Britain
… many English speakers, and a common link from the days of Empire
Firms such as Unilever are major employers in India
UK has a 5.5% share of Indian imports (but this figure is falling)

20. A classic strategic decision…
China or India?
A classic strategic decision…
Address a weakness by playing catch-up in fast-growing China (shareholders will probably applaud)
Or build on a UK strength by getting in early in India …
… perhaps India will experience the take-off enjoyed by China after 1990 – and growth will accelerate
Ian Marcouse 2008

21. What about the casualties?
2006 Data from the ILO
China India
Fatalities , ,176
Workforce m 418.6m
Fatal per 10,
Source: Chinese and Indian Government data and other sources

22. And the environment? Tonnes of CO2 Total CO2 per cap. p.a. M tonnes
India ,100
China ,700 UK
US ,800
Russia ,500
World ,000
Source: Energy Information International (The Guardian March )

23. Conclusions
China is set fair for many more years of sustained growth at 8-11%p.a.
India will continue to grow rapidly, but in a more cyclical way – it needs vast investment in education and transport – it isn’t clear that it can be afforded
China is the right horse – but it has already left Britain behind