Economic Rise of China and India
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1._the_past_and_the_present.pptxECON 2213 1. The Past and the Present
GDP
Between 1960 and 2010, China’s GDP rose almost by a factor of 100, from US$61 billion to US$5878 billion; India’s GDP rose almost 50 times, from US$36 billion to US$1729 billion.
To compare, U.S. GDP was US$521 billion in 1960 and US$14582 billion in 2010, so it rose by a factor of 28.
GNI per capita
China’s Gross National Income per capita rose from $250 in 1980 to $7570 in 2010 (a 30-fold increase).
India’s GNI per capita rose from $430 in 1980 to $3560 in 2010 (an 8-fold increase).
U.S. GNI per capita was $12,130 in 1980 and $47,020 in 2010 (a 4-fold increase).
GDP growth
China’s annual GDP growth was over 10% on average between 2000 and 2010.
Over the same period, India’s annual GDP growth was 7.4%, but almost 9% in the 2005-2010 period.
U.S. GDP growth averaged less than 2% during 2000-2010.
Population
The Chinese population stood at 1.34 billion in 2010. India’s population that year was 1.17 billion.
The U.S. population is a little over 300 million.
Exports
As a share of GDP:
China’s exports rose from 2.6% in 1970 to 26.7% in 2009.
India’s exports rose from 3.8% in 1970 to 19.6% in 2009.
U.S. exports were 5.8% in 1970 and 11.2% in 2009.
In dollar terms (constant 2000 US$):
China’s exports were $37 billion in 1978 and $1143 billion in 2009.
India’s exports were $9 billion in 1978 and $191 billion in 2009.
U.S. exports were $266 billion in 1978 and $1371 billion in 2009.
Life expectancy
China’s life expectancy rose from 46.6 years in 1960 to 73.3 years in 2009.
India’s life expectancy rose from 42.2 years in 1960 to 64.1 years in 2009.
U.S. life expectancy was 69.8 years in 1960 and 78.7 years in 2009.
Poverty
In 1981, 84% of China’s population lived on less than $1.25 per day; by 2005, the ratio dropped to 15.9%.
In 1978, 65.8% of India’s population lived on less than $1.25 per day; by 2005, the ratio dropped to 41.6%.
If we use the benchmark of $2 per day, China’s ratio was 36.3% in 2005, while India’s was 75.6%.
http://iresearch.worldbank.org/PovcalNet/povDuplic.html
Energy
China’s energy use rose from 391,708 kt of oil equivalent in 1971 to 2,116,427 kt of oil equivalent in 2008.
India’s energy use rose from 156,223 kt of oil equivalent in 1971 to 620,973 kt of oil equivalent in 2008.
The U.S. comparison: 1,587,470 kt of oil equivalent in 1971, 2,283,722 in 2008.
Governance
The World Bank’s World Governance Indicators include 6 dimensions of governance.
One dimension, voice and accountability, “captures perceptions of the extent to which a country's citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media.”
China’s voice and accountability measure in 2009 was in the 6th percentile (bottom 6% of all countries in the world). India’s voice and accountability measure in 2009 was in the 60th percentile (top 40% of all countries in the world).
China’s regions
China has 22 provinces, 5 autonomous regions, 4 municipalities, and 2 special administrative regions.
The provinces range in population from Guangdong (104 million) to Tibet (3 million).
India’s regions
India is divided into 28 states and 7 union territories.
The states range in population from Uttar Pradesh (200 million) to Sikkim (608,000).
http://en.wikipedia.org/wiki/List_of_states_and_union_territories_of_India_by_population
Geography of China
China’s area of 9,596,961 sq km puts it #4 in the world, about the size of the United States.
The climate ranges from sub-arctic in the north to tropical in the south.
The terrain consists of plains, deltas, and hills in the east, with mountains, high plateaus, and deserts in west.
China contains several mountain ranges, including the Himalayas (and Mount Everest).
The longest river in China is the Yangtze; the Yellow River is second.
Geography of India
India’s area of 3,287,263 sq km makes it the 7th largest country in the world in terms of area.
The climate is temperate in the north and tropical in the south.
The terrain varies from upland plains in the south, flat to rolling plains along the Ganges, deserts in the west, and mountains in the north.
The Ganges is the longest river originating in India.
The monsoon season runs from June to September, and determines agricultural production.
China’s history: Key dates
1434
1839
1898
1937
1949
1978
China’s history: Dynasties
Various parts of China were ruled by dynasties starting with the Xia Dynasty in 2100 BC.
The Qin Dynasty, led by Qin Shi Huang (where we get the word “China”), was the first to unify the country in 221 BC.
The Ming Dynasty (1368-1644 AD), in its earlier years, favoured trade and foreign exploration. This dynasty also focused on repairing and extending the Great Wall.
China’s history: Opium
The Qing or Manchu Dynasty (1644-1911) was the last imperial dynasty.
In the late 1700s, the British were paying for imports of tea with silver, since imports of British goods into China were tightly controlled.
To prevent the outflow of silver, Britain began to export opium (grown in India) to China in the early 1800s. Britain’s trade deficit quickly turned to a surplus.
The Qing government objected to the outflow of silver and, in 1839, confiscated and destroyed 20,000 chests containing over 1 million kg of opium.
China’s history: Opium wars
This led to the First Opium War of 1840-1842 between China and Britain.
China was out-matched in gunpowder and the British eventually occupied Hong Kong, Canton (Guangdong), and Shanghai.
China was forced to sign the Treaty of Nanjing, which opened China to trade in opium and other goods, and ceded Hong Kong Island to Britain.
A Second Opium War in 1856-1860 was fought over similar issues, but with the French brought in on the British side.
China’s history: “A century of humiliation”
This history—having its ports forcibly opened to foreign trade—continues to have an impact on China’s mindset and policies today.
Despite its economic size and growth, China still seems to think of itself as the underdog in world affairs.
China’s history: Reforms
The Hundred Days’ Reform was undertaken in 1898 but was unsuccessful, leading to the overthrow of the emperor.
An uprising of the Chinese Revolutionary Alliance in 1911 led to the collapse of Qing Dynasty a few months later.
Power transferred to the new Republic of China, with Sun Yat-sen as the first president.
However, the country remained fragmented and unstable.
China’s history: Civil unrest
In 1931, Japan invaded Manchuria in northern China, and invaded the mainland in 1937.
Sun Yat-sen’s protégé Chiang Kai-shek battled the new Communist party for control, while the Japanese occupied much of the country until 1945.
By 1949, Chiang retreated to Taiwan and Mao Zedong’s Communist party had achieved control of most of the country.
China’s history: Great Leap Forward
The People’s Republic of China was founded on October 1, 1949.
Like India, China initially closed itself off from the world and focused on industrialization, despite its comparative advantage in labour-intensive goods.
The “Great Leap Forward” of 1958-1961 focused on moving the country’s resources into heavy industry.
The resulting drop in agricultural production led to widespread famine and up to 45 million deaths due to starvation.
China’s history: Cultural Revolution
Criticism of Mao due to the Great Leap Forward increased the influence of more moderate party members such as Deng Xiaoping.
To preserve his power, Mao instituted the Cultural Revolution in 1966, which lasted for 10 years. To remove capitalist influences, millions of people were persecuted, tortured, or killed.
Schools and universities were closed for much of this time.
China’s history: Post-Mao
Mao Zedong died in 1976 and by 1978 Deng Xiaoping had achieved power and begun agricultural reforms.
The Tiananmen Square protests of 1989 were a nonviolent movement in favour of reform, but were brutally put down.
China’s history: Post-Mao
China regained sovereignty over Hong Kong in 1997 and Macau (formerly a Portuguese colony) in 1999.
China joined the WTO in 2001.
India’s history: Key dates
1498
1617
1757
1858
1947
1991
India’s history: Mughal Empire
Parts of India were ruled by regional powers throughout its history, including the “classical period” from the 3rd century BC until about 1300.
Invasions from central Asia gave rise to the Muslim Mughal Empire, which controlled the area of modern-day Afghanistan, Pakistan, India, and Bangladesh.
India’s history: Mughal Empire
In 1498, Vasco da Gama discovered a sea route from Europe to India, and the Portuguese started to trade, followed by the Dutch, the British, and the French.
The Mughal Empire declined after the early 18th century, with the Maratha Empire and other independent states vying for power.
India’s history: British East India Company
In 1617, the British East India Company was given permission by the Mughal Emperor to trade, with duty-free trade starting in 1717.
The ruler of Bengal objected to the use of the duty-free permits, but was defeated by the army of the East India Company in 1757.
India’s history: Crown rule
Over the next century, the British East India Company took over the administration of more and more of India, monopolizing trade and introducing a land-tax system.
The Indian Rebellion of 1857 started as a mutiny of Indian soldiers in the British East India Company’s army, and was quickly followed by other mutinies and civilian rebellions.
The British overcame the rebellion, and power was transferred from the last Mughal Emperor to the British Crown to rule India as a colony.
British Crown rule lasted from 1858 to 1947.
India’s history: Princely states
Not all of India was governed by Britain. Much of the country (the “princely states” or “native states”) was controlled by rulers.
There were 680 native states at the time of independence, most quite small.
India’s history: Independence
The British used “divide and rule” as their means of subduing the Indian population, particularly through encouraging division between the Muslim and Hindu parts of India.
In the early 20th century, the Indian (and Pakistan) independence movement began, with both militant and peaceful factions.
The Indian National Congress adopted Gandhi’s policy of nonviolent resistance, which was ultimately successful.
India history: Post-independence
India became an independent country in 1947; the Muslim-dominated part of British-ruled India became the nation of Pakistan (part of which later splintered into Bangladesh).
India’s political leaders reacted to independence by emphasizing a strong role of the state in running the economy.
Import substitution policies (high trade barriers and licences for imports) were intended to promote the growth of Indian heavy manufacturing, rather than promoting labour-intensive goods.
A balance-of-payments crisis in 1991 led to IMF requirements that India liberalize and reform its economy; India joined the WTO in 1995.
Maddison, Angus, “The West and the Rest in the World Economy: 1000–2030,” World Economics 9:4 (2008), 75-100.
Two outstanding puzzles
Puzzle #1: Why didn’t the Industrial Revolution start in China, rather than in Europe?
Puzzle #2: What are the long-term consequences of colonial rule?
Lin, Justin Yifu, “The Needham Puzzle: Why the Industrial Revolution Did Not Originate in China,” Economic Development and Cultural Change 43:2 (1995), 269-292.
From Mokyr (The Lever of Riches, 1990)
Iyer, Lakshmi, “Direct versus Indirect Colonial Rule in India: Long-Term Consequences,” Review of Economics and Statistics 92:4 (2010), 693-713.
