238) China e India: dois gigantes da economia mundial

The McKinsey Quarterly, 2004

China and India: The race to growth
The world’s two biggest developing countries are taking different paths to economic prosperity. Which is the better one?
Diana Farrell, Tarun Khanna, Jayant Sinha, and Jonathan R. Woetzel
2004 Special Edition: China today

First it was China. The rest of the world looked on in disbelief, then awe, as the Chinese economy began to take off in the 1980s at what seemed like lightning speed and the country positioned itself as a global economic power. GDP growth, driven largely by manufacturing, rose to 9 percent in 2003 after reaching 8 percent in 2002. China used its vast reservoirs of domestic savings to build an impressive infrastructure and sucked in huge amounts of foreign money to build factories and to acquire the expertise it needed. In 2003 it received $53 billion in foreign direct investment, or 8.2 percent1 of the world's total—more than any other country.

India began its economic transformation almost a decade after China did but has recently grabbed just as much attention, prompted largely by the number of jobs transferred to it from the West. At the same time, the country is rapidly creating world-class businesses in knowledge-based industries such as software, IT services, and pharmaceuticals. These companies, which emerged with little government assistance, have helped propel the economy: GDP growth stood at 8.3 percent in 2003, up from 4.3 percent in 2002. But India's level of foreign direct investment—$4.7 billion in 2003, up from $3 billion in 2002—is a fraction of China's.

Both countries still have serious problems: India has poor roads and insufficient water and electricity supplies, all of which could thwart its development; China has massive bad bank loans that will have to be accounted for. The contrasting ways in which China and India are developing, and the particular difficulties each still faces, prompt debate about whether one country has a better approach to economic development and will eventually emerge as the stronger. We recently asked three leading experts for their views on the subject; their essays may be accessed on the pages that follow or by clicking on the titles below.

—Jayant Sinha

India's entrepreneurial advantage
China has shackled its independent businesspeople. India has empowered them.

China: The best of all possible models
In an efficient market, the private sector is better than governments at allocating investment funds. But China isn't an efficient market, and India has relatively little investment funding.

Sector by sector
The strength of the Chinese and Indian economies will actually be decided at the industry level.
About the Authors

Jayant Sinha is a principal in McKinsey's Delhi office. Tarun Khanna is the Jorge Paulo Lemann professor at the Harvard Business School. Jonathan Woetzel is a director in McKinsey's Shanghai office. Diana Farrell is the director of the McKinsey Global Institute.
Notes

1 The United Nations Conference on Trade and Development (UNCTAD) database on foreign direct investment.

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