Comparing India with China

Homework 3. Comparing India with China

Think of what cause the difference in FDI and economic growth in two countries, India and China, considering institutional differences of two countries.

Please read the statistics below:

   - India’s share in global FDI remains poor at less than 1% compared with China’s share of12%. Indeed,

     China has received a cumulative inflow of US $480 billion since 1990 compared with US $33.1 billion

     in India.

   - A decade ago, India and China had roughly the same GDP per capita. But at US $440, India’s current

     GDP per capita is now only half that of China’s.

What cause such differences in these two countries? Primarily analyze the formal and informal institutions in India and China and then compare the differences of the two.

For instance, you may consider differences in

   - Political system: political paradigm, history, government intervention, democracy, corruption

   - Legal system: property right, labor laws, regulations, bankruptcy procedure

   - Economic system: tax system, governance, ownership, infrastructure, financial system

   - Culture

   - Business norms and ethics

After comparing these two countries’ institutional differences, please answer to this question: What do you evaluate India from the perspective of a potential foreign investor, comparing with China? Can India catch up or surpass China?

Please also refer to articles and sites below:

    - Global Edge: http://globaledge.msu.edu/, IB resources, Country Insights, and others (Economy,

                            Statistics, Culture, History, Government, Risks, Corporations, Trade, Rankings)

    - World Bank: 1) World Bank Data, http://data.worldbank.org/ , 420 indicators from the World

                                Development Indicators (WDI) covering 209 countries from 1960 to 2009

                            2) “Investment Climate Indicators”

                                Investment Climate in China,

                                      http://www.worldbank.org/html/prddr/trans/julaugsep03/pgs4-6.htm

                                Investment Climate in India, http://www.worldbank.org/in                

                            3) Country map: http://geo.worldbank.org/

    - Economist Intelligence Unit (EIU) Report: country analysis, country risk analysis, Viewswire

                              (politics, economy, business, finance, regulations), http://www.eiu.com/public/

    - World Economic Forum: Global Risks report, Global Competitiveness report,

                                                http://www.weforum.org/

    - CPI (Corruption Perception index): Transparency International

                                  http://www.transparency.org/policy_research/surveys_indices/cpi/2010

    - KOF Globalization index: http://globalization.kof.ethz.ch/

    - The A.T. Kearney/FOREIGN POLICY Globalization Index:

                                  http://www.atkearney.com/index.php/Publications/globalization-index.html

    - Yasheng Huang & Tarun Khanna, 2003, Foreign Policy, “Can India overtake China?” July 1.

Your answer should be no more than 1 page long, single-spaced, and no cover page. The due will be February 24 (on Monday) at the beginning of the class. You should turn in a hard copy of it.

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