The salient features of the economies of China and India provide sharp contrasts. Jing Ulrich, the chairman of JPMorgan’s China Equities, points out: “Private enterprise plays a greater role in India’s economy than China’s. China’s gross domestic product is about three times larger than India’s and its exports are eight times larger. China’s $US4.8 trillion in savings dwarfs India’s $US215 billion.
“China’s large savings pool provided the investment funds for the rapid build-up of its export-oriented infrastructure. But this has been a mixed blessing. The surplus of capital led to overcapacity and contributed to poor returns on investment. In contrast, Indian companies used their funds judiciously and enjoyed higher returns. A scarcity of savings also explains why India has focused in services, which are less capital intensive.”
